July 12, 2021
by Dafyd Martindale
South Burnett Regional Council could reduce its rates by up to 10 per cent if it follows the lead of other Councils and puts an end to what one Mayor has described as a “PR stunt”.
But it would have to overcome the scepticism of ratepayers who at first glance could see the move as introducing a 10 per cent rate rise.
Confused?
A simple way for Council to cut rates was recently demonstrated by Gympie Regional Council (GRC) when it handed down its 2021-22 Budget.
GRC announced that in addition to bringing down a 3.22 per cent average rate rise, it was also slashing its discount for early rates payments from 10 to 5 per cent.
Predictably, the announcement of this cut produced immediate howls of outrage from some Gympie residents who saw the halving of the discount as a hidden rate rise in disguise.
But Gympie Mayor Glen Hartwig – who came out to publicly defend the decision a few days later – made some good points South Burnett councillors might like to consider themselves next year.
Early payment discounts, Mayor Hartwig argued, are an illusion for those ratepayers who pay on time and a tax on the poor who can’t.
Here’s how he explains it:
To get a discount, Council charges you more than needed so they could give you some back. You feel good about receiving a discount; it might make you feel good about Council too. You could say that it’s a good PR exercise.
However, let’s say for example the cost of all the work Council needs to deliver is $100 million. We then work out the rates, fees and charges we need to impose to meet that $100 million.
If all the work we need deliver costs $100 million, and you want a discount of 10 per cent and we give it to you, we would only collect $90 million (ie $100 million minus 10 per cent equals $90 million)
That would mean that we would have $100 million in expenses and only collected $90 million to pay for it. You can see the problem.
So what does Council do to make you feel like you are getting a discount? We add $10 million to the expenses, send out rates notices for $110 million and give you back the $10 million we’ve already taken from you.
And for those who can’t pay their rates on time, they are penalised by 10 per cent. Ten per cent on top of an amount they already can’t afford.
So when Gympie ratepayers claim the 10 per cent discount, what they are really paying is what their rates bills would have been if no discount was offered.
The flip side of this coin is that it’s those who aren’t able to pay their bills on time – the battlers – who are being slugged with a 10 per cent hike on their rates.
To prove his case, Mayor Hartwig pointed to Bundaberg Regional Council.
In 2020 that Council slashed the early payments discount from 10 per cent to zero and instead of a 2 per cent rate rise, gave all ratepayers a one-time 8 per cent cut in their rates.
This year, the Sunshine Coast Regional Council also put an axe through its rates discount.
Mayor Hartwig argued that the “rates discount” was little more than a public relations exercise – an illusion to hoodwink ratepayers.
And hearing his argument it’s hard not to agree with him.
(It’s also hard to ignore that on his own argument, if Gympie hadn’t cut the discount GRC ratepayers would have been facing an 8.22 per cent rate hike this year … but that’s a story for another day)
Locally, the SBRC has offered a 10 per cent discount since it was formed in 2008, and the earlier Shire Councils offered much the same.
The argument most commonly advanced for the discount is that it encourages ratepayers to pay their bills on time, which provides a level of certainty for Council’s cash flow.
But at the SBRC’s Finance standing committee meeting on June 16, Councillors were told the Council now has the lowest outstanding rates balance on its books since 2018 and the lowest number of properties with outstanding rates since 2012.
This is largely due to a more aggressive policy on rates collections introduced during the past few years, something that seems unlikely to change in the future.
And as far as guaranteed cash flow goes, Council’s cash at bank also goes through a regular up-and-down cycle in parallel with its six-monthly rates bills.
This is a pattern I’ve seen repeated without exception over the past 10 years of reporting on local government.
This cycle sees Council sitting on an embarrassment of riches not long after rates notices go out that gradually whittles its way back to Budget cash flow estimates as the six monthly billing cycle wears on.
So the old arguments about why the SBRC has a discount no longer seem to hold much water.
Times have moved on and Gympie, Bundaberg and the Sunshine Coast Regional Councils have certainly moved on.
Perhaps it’s time our Council did, too.
