Following extensive community consultation, Council adopted Year Two of the 2021-31 Council Plan and 2022/23 Budget on Wednesday, June 29.
The board plan and budget is the roadmap for how we can best serve the community. That’s why we undertake a rigorous community engagement process on the council’s plan and budget each year, to ensure our community has a say in our city’s plans and vision for the year to come. come.
We have introduced key changes that will help us provide the services our community wants. These changes are summarized below and include our new rating strategy, waste management strategy, asset management plan and a transparent and separate waste management fee.
We’ve changed the way rate charges are calculated, from a property’s rental value to its sale value, to ensure a fair rate charge for residents, so people are charged a fair contribution for services, particularly given the evolution of property valuations. .
To achieve this, we are moving from the Net Annual Value (NAV) to the Capital Improved Value (CIV) rating system, with differential scoring and a separate and transparent waste load, to give the Board enough flexibility to deal effectively with these changes and rate lag issues. The CIV is a simpler mechanism based on the market value of the property and is compatible with most Victorian councils which already use the CIV system.
The change in our rating strategy (from NAV to CIV) changes the way tariff charges are calculated, from the rental value of a property to its sale value, i.e.:
- Annual net worth (NAV) is calculated based on the greater of the present value of a property’s net annual rent or five percent of the VIC.
- Improved Capital Value (CIV) is the total market (sale) value of the land plus buildings and other improvements.
These changes are being made for several reasons, including significant changes in the waste sector and in our community profile (with greater growth in residential properties, as well as assessment changes in specific property types resulting in disproportionate changes in rate distribution).
Our current NAV rating system has seen the rate distribution shift from non-residential properties (commercial and industrial properties) to residential properties by up to $0.9 million since 2016/17, due to changes in the property valuation.
Valuation for the year 2021/22 saw commercial and industrial properties on average benefit from a rate cut, while residential properties on average saw rates increase above the rate cap due to the valuation shift, meaning more of the rate burden has shifted to residential. We also expect this trend to continue in the 2022/23 valuation cycle – meaning that, without intervention, the rate burden would continue to shift towards residential properties.
Differential scoring alongside the move to CIV can be used to more effectively address issues associated with valuation changes. This is why we are introducing differential valuation by property category, with the following rates in dollars:
- residential rate in dollars 0.001615
- commercial rate in dollars 0.002062
- industrial rate in dollars 0.002073.
Differential pricing will be used to maintain fairness and relative consistency in the distribution of rates across property classes and a ratepayer’s ability to pay. A higher differential rate will be established for commercial and industrial properties compared to residential properties. This reflects a goal of maintaining fairness and relative consistency in the distribution of rates across property classes (which is built into the NAV rating system), as well as the taxation and higher rental yield benefits generally available to owners of these types of properties.
To manage the impacts of the change, any major differential pricing changes will be incremental and will take into account the general annual property valuation and demographic changes as part of the budgeting process and the setting of differential rates.
It is important to note that these changes do not impact the total fare revenue collected each year, which is determined by the annual budget process within the prescribed fare cap.