by Anne Schmid

JUNE 2006

This submission is made with particular reference to the proposed introduction of the waste collection charge.

I ask the question – Are user charges better than rates? What is the next charge going to be? Traditionally councils have relied on rates for their revenue and a push to obtain local revenue from sources other than local land values leaves councils vulnerable to vested interests, pressure groups and anti social forces.

I believe that unless we have local revenues collected from site values all words about community building and equity is merely rhetoric.

Councilors, ratepayers and council advisors must recognize that council services generally, whether a transport system, water reticulation, sewerage, or rubbish collection, enhance land values. Ethically it is on the land values so created that the annual rates should be calculated as in site value rating. CV rating corrupts this to a large extent as properties are rated on improvements as well as site value. User charges disconnects completely any recognition of the relationship between services and land value.

More and more of local government finance is coming from sources other than rates. If Councils are to rely more and more on grants and subsidies from Governments the future strength of local government is under threat. Local government is a good government because it is government close to the people and is a natural protection against centralism, bureaucracy and remote control. The shift to user charges is part of this trend away from rates. User charges takes away this strong, vital, practical link that council services have to land values.

And so what happens

“Uniform Annual Charges causes the lowest rated people to pay more as a percentage and the higher rated properties paying less. It is a fair assumption that the owners of the less valuable residences are less affluent than the owners of the highly valuable residences. Nevertheless in the interests of “fairness”, the burden of waste collection is being shifted from the economically strong to the economically weak. i.e. from the rich to the poor. Investigation will show that this is the general effect of all Uniform Annual Charges and it raises the question of whether this is not the real purpose of this plan.

Evidence from all over the world support the fact that user pays, differentials, and rating on improvements work against communities. This council is turning to outdated thinking in introducing user charges. Forward thinking planners are recognizing more and more the connection between government services and land values, especially in the provision of public transport, but other services as well.

And so when you take into account the effect that the waste charges have on property values the statement by the Mayor in last week’s LEADER newspaper can be seen quite differently and I quote from the Mayor, “As all residents receive the same domestic waste service a uniform charge to each property is considered to be a more equitable approach to funding this service. “ “It does not create additional revenue for council”. Clearly this cannot be considered to be a more equitable approach. It is a swing in favour of higher valued properties. Why does not Mayor David Cooper mention the fact that waste collection enhances land values, all land values including non residential, under used and vacant land. All ratepayers in Knox should contribute their fair share to waste collection. Therefore the equitable and proper source for paying for waste is via the rating system.

This year, only three years after this municipality changed from site rating to capital improved rating, it has seen fit to propose to place a waste charge on all residents. It is probable that this council would like us to move to become a user charge municipality. Residents who pay their waste charges will be subsidizing the land values of others who do not pay the charge. A great inequality is being dressed up to look like equity.

When the council makes these arrangements it is putting the council at risk for pushes from all quarters for further erosion of the rate base with differentials and a further call to user pays. The fact that Council is considering a dramatic shift in policy with a waste charge only three years after the change from site rating should ring alarm bells to all fair minded ratepayers. A turn to a “user pay” principle is an undemocratic shift in council policy

I object to the emphasis on lower rates.

Lower rates for which ratepayers?

The Mayor labours the point that Council does not receive extra funding under the waste charge but that the 3.3% budgeted rise in overall rates includes the waste charge. The question then still remains – Does a user charge policy bring better local government to the people? Are we going to do away with rates altogether? The payment of Annual Charges means that as a percentage, lower valued properties pay more and higher valued properties pay less in council rates and charges. For first home buyers, families and retirement villages user charges are an extra hurdle while it increases the speculative aspect for better off and underused properties. The first priority for a council should be to provide fair rates. This surely is the first step in responsible local government.

The Mayor, David Cooper, stated in the “Knox Leader” of June 6, 2006 “In previous years the collection and disposal costs of domestic rubbish was funded through the provision of rate revenue.” I ask the Mayor is he making a case for the abolition of rates altogether? If it is objectionable to have rates used for rubbish collection I wonder what other Council services the Council would like to see paid through “user pays.”

I ask another question:

If Knox Council were to do away with waste collection altogether, which property values would fall the most? If it is an annual charge do I have the option of bowing out altogether? Perhaps I could save money and dump my rubbish in the back corner.

What would that do to property values generally?

Do people with high property values get my point?

Do people benefiting from high land values get my point?

And so I challenge the Mayor and the assumption that some residents “were receiving their waste collection at a substituted rate”. Personally I am offended by this remark. In no way can it be substantiated.

I would like to ask the councilors on what basis is the claim made that user charges are preferable to rates?

For strong interrelating communities the first step is a uniform equitable rating system.

Throughout the budget document there is a sense that Knox wishes to build a strong interrelating community. I suggest that user pays runs counter to this.
Submission to Knox City Council 9th June 2006 References
“Victoria’s Municipal Rating System” Phil Anderson 1996 report
Rating in New Zealand Rolland O’Regan 1985
Taken for a Ride, Don Riley 2001

Anne Schmid

Note: The Knox Council did not go ahead with the proposal to introduce waste charges.