Sunday, August 17, 2014

Why does Manunda need roads anyway?

Subsequent to a recent post on benchmarking council rates there was some productive feedback and exchange with council. The difficulty is how to provide a rates benchmark to which the average punter can relate when there are often extreme differences in land valuations between councils. The relationship between land valuations and rates is frequently misunderstood and misrepresented.

While that is appreciated the council methodology still benchmarks land valuations rather than rates. The previous post related specifically to rates for the land category for a residential home on a block of urban land. This is the way I would do it and benchmarked against Townsville.

This expresses rates compared to the median for each council across a range up to twice the median value. Cairns is lower across the entire spectrum and this included the 15% "early payment" discount on the general rate component in Townsville. Cairns maybe however be less progressive and minimum rate structures generally are actually something I perceive as a problem.
The median for each council area is 1.0 irrespective of differences in land valuations between councils. Twice the Cairns median is above the median for any suburb and for perspective probably puts a property higher up the hill in a suburb like Freshwater with an outlook. Babinda is about half the median value.
The current median residential value for rates in Cairns is $143k while Townsville is $147k. The average indicated by Cairns is $165k while I think Townsville refers to $161k. This is probably what you would likely expect with a different distribution and Cairns skewing higher on the average with a longer tail above the median. The Cairns average is 1.15 x the median.
Fixed charges should also be taken into account although this doesn't make much difference relative to Townsville. Townsville is cheap on garbage and expensive on water access which evens out to within a few dollars. Comparisons on water usage are probably not much use really. If water per kL isn't cheaper in Cairns than elsewhere there would be something wrong. A comparison with Mackay is intended as soon as I get my head around some baffling components of the Mackay banding numbers.
That doesn't mean this category is the only consideration. My speciality of strata rates is mind boggling in complexity and would defy any comparable benchmarking of this kind. My own strata general rates would be about 25% less in Townsville. Perhaps revenue per rateable property by category would be appropriate along with revenue per category.
Finally as an aside, why should there be a progressive element in general rates related to land valuation at all? The principal argument actually relates to the virtues of land taxes of which I am an advocate. However for those living on more highly valued blocks in the suburbs who may complain about progressive rates you were done no favours this week by Joe Hockey: Fuel expenditure and vehicle ownership
To re-paraphrase Joe it would seem that more affluent people drive more and with bigger vehicles which contribute proportionally more to road use and damage. Consequently Joe has provided a reason why the more affluent should be paying higher rates on a cost recovery basis. I don't even know why Manunda needs roads anyway?

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