Tuesday, July 5, 2011

volatility, averages, and rates debates

Ex- Councillor Annette Sheppard complained (Cairns Post hardcopy) that the 3.4% average being quoted as a rate rise was misleading as many properties would rise by 7%. When Annette was a  Councillor some properties, including that owned by KS, faced massive rates increases way, way above the averages. The rates at KS bohemian retro Esplanade abode increaed by 40% p.a. in each of two  successive years ..... all under the Guv'nance of Annette and previous Mayor Burns (sic)!

It would be good to have a full property profile of all numbers for CRC. Cairns is probably among the most diverse of local areas in this regard. However, absent the non-disclosure of full relevant information, there will be problems with this in any year where there is a revaluation. Revaluations are now going to happen annually.

It has been three years since Cairns had a revaluation. This was going to happen last year but was rescheduled for specious political reasons by Anna Bligh. What matters for rates is not the absolute value of yor property, but the relative value within the Council area. When the valuations came out back in 2005 the high value areas skyrocketed as they were linked to a national market.

Areas elsewhere in Cairns (from info received directly from Council) started to follow soon after but that  hadn't met the cut off date at the end of October. There were massive divergences in rates increases and the Burns (sic) Council dropped the ball.

A subsequent Council community engagement effort was a farce. Certain written submitters were asked to present directly to Council and KS was among that 'elite'. Mayor Burns (sic) was ignorantly abusive to some presenters and left before KS got to the podium. Sno Bonneau was busy on his laptop.

Despite that, KS walked away on a high only to discover that his submission was the best received but the most ignored ...... sort of like the Henry Tax Review!

Regardless, there IS too much spin in the current Council PR. The contention that the transmission from Unimproved Value to Site Value makes any substantive difference in Cairns is simply wrong from Council and its PR.

If you have a residential house the rate in the dollar on your valuation went up $3.2%. A quick look at the Valuers overview indicates small rises for houses across Cairns during that period  so the average 3.4% should be about right. The minimum rate in Cairns is low by comparison with other Councils and has risen this year by above the average increase. However, all these numbers are too simplistic.

If you own a strata unit the rate in the dollar on your valuation went up 9.9%. At the same time high end Unit land values (such as Port  Douglas and CBD) plumetted so KS actually gets 10% cut in general rates this year! Yippee! At last! Problem is when Unit land valuatons skyrocketed we didn't get the same thing in reverse?

Depends on how your valuation went. What many DON'T know is that Cairns is among the few (only?) large coastal Councils that don't use averaging for Council rates. Most rates (Brisbane, Gold Coast etc), and Land Tax in Qld are the average of the previous three years. This smooths out these fluctuations. KS argued this case at our last episode of volatility some years ago and was ignored, except by then Council CEO David Farmer who congratulated him on the points made.

I am aware that this may not make sense to many, and requires a lot more detail (graphs and examples), and that would not surprise me as most / all Councillors don't also understand. The Cairns Post also this week quoted Ex- Deputy Mayor Terry James on the Council budget. KS retains an email from Terry claiming during that previous Council escalation that KS must have a penthouse on top of a high rise to be paying these rates!

Well no, the complete reverse actually, KS lives in a low rise older Esplanade building. The scarey thing is that Terry James as an experienced Councillor, Deputy Mayor, and involved in strata development, didn't have a damned clue how the ratings system worked for strata valuations. So what chance is there that other Councillors do?

Note: More to follow on Esplanade valuations when time allows on valuations, rates, and strata titles which will include a look at such the Jack & Newell,Trilogy, and Aquarius.

You can find valuation data here until end of month but objections have closed.


  1. That's interesting. You'd think it would be in the Council's best interests to introduce averaging because it means residents won't get annoyed with wildly fluctuating rates. I'm surprised they haven't figured this out. Or is the Council running such an antiquated system that updating it for averaging would be cost prohibitive?

  2. Thanks for comments Gene. At the presentation the Council officer responsible was present and did claim that 'carrying three numbers' in their system would be a problem. That is despite any other comparable large Council being able to do so.

    Prior to submissions there was a discussion paper from Council which included the advanatges and disadvantages of averaging. I submitted that the disadvantages in that document were all factually wrong or misleading. This was admitted by Council officers at my presentation. A subsequent formal complaint on this was rejected.

    Ir was quite clear that Council administration staff just didn't want to bother or had a problem despite averaging being probably more relevant to Cairns than any other Council in Queensland.

    I also think in the political context at the time this allowed rates for the average suburban residential block to be kept below rises in the Council cost base while minority sectors and elsewhere could be hit to make up the difference.