22 November, 2022
A Rating that is Fair and Equitable
THE impacts of COVID across industry sectors and on household budgets have been significant both financially and socially.
Our Cairns Regional Council has not been immune from these impacts, and perhaps even we have been more impacted, as we have sought to ease the burden on residents and rate payers by not applying CPI increases on rate increases for a number of years, in times of cost of living stresses. In addition, in respect to our asset management and capital works obligations around providing for essential services, we do not have the flexibility to put off or delay some of this work, having to wear increasing costs impacting on budgets and our forward planning.
Whilst our benchmarking against other Councils of a similar population and our surrounding Councils as evidenced in the tables supporting the 2022/2023 budget handed down on the June 22, 2022 and in our Rates Benchmarking agenda item in our meeting on the July 27, 2022, (available to our residents), clearly show our favourable position over many years, in respect to low rates and charges and low increases in the past, there is a challenge going forward.
Whilst residents and ratepayers have benefited from our below CPI rates and charges increases in times past, the effect of such, and the significant increases in procurement (concrete and steel alone have seen increases of 20 per cent in the short term), has seen our Council identify a shortfall of a needed $50M in our 10 year budget modelling, which is over and above current CPI increases.
The sum of $5M annually in addition to CPI increases, equates to a 4 per cent per annum rate increase on top of CPI increases. With current CPI increases at 6.2 per cent in the June quarter, 7.3per cent in the September quarter and heading to 8 per cent into 2023, you can see the challenges Council and our residents will have going forward. We have identified this, and we have been open and transparent about such. The amount of rate increases is always the subject of our budget discussions and workshops leading into each financial year and the adoption of our budget and no decision has been made on such at this time.
In the adoption of this year’s budget, where we identified a new rating category for non principle places of residences (NPPR), in my budget speech I said, “in these challenging economic times, we need to be innovative in our revenue raising whilst being respectful and mindful of the effect rates and charges will have.”
To ensure a fair and equitable spread of rates and charges and the revenue that needs to be generated, a new rating category for NNPR of between 15per cent and 25 per cent on the general rates component only, ($3 to $6 a week average) will see this additional revenue that is needed, generated. Otherwise, it requires a 4% increase across all current rating categories in addition to the CPI increases. So if a resident owns a home and an investment property and this new rating category for NPPR doesn’t come in, then it will be a 4 per cent increase needed on both properties currently owned.
Where we have identified about 30 per cent of property owners having NPPR, a fairer and more equitable spread is identified, benefitting the majority (70 per cent) of remaining property owners. Importantly, our Council under the legislation is permitted to apply different rating categories on the uses of the properties. This NPPR category is only for residential investment properties, not rural, commercial or multi-unit dwellings which have their own rating category.
Rentals in Cairns over the last twelve months have gone up approximately $100 per week, (Cairns Report November 2022) due to short supply and high demand. It will be a matter for landlords who have benefitted through this recent period of rent increases, as to whether they pass this cost on, or if they have a good relationship with their tenant, decide to absorb those costs and claim it as a tax deduction.
Where a majority of other Councils of our size across the State already have in place this rating category, for NPPR, as well as our other local Councils of Cassowary and Douglas Councils, are we being prudent and responsible to our residents in not considering this, where it lessens the burden across the majority of our property owners and rate payers?
Where it is an identified shortfall of budgeted costs that requires revenue to be sourced, it is not a tax grab, but a redistribution of revenue through a new rating category, that is fairer and more equitable and lessens the burden on the majority of our rate payers, in my view.
As it is only a proposal our Council is considering all feedback received, but it is important to understand the premise of why this new rating category is being considered.
The views expressed are those of Cr Brett Moller and not necessarily those of the Cairns Regional Council.