PCA wants to cost shift – onto you

Melbourne fire300x200

Glen Byrnes, NSW Executive Director of the Property Council of Australia has a Fairfax op-ed out on the Fire Services Levy that has me seething. You will be too when you understand the filthy game he is playing.

Victoria’s Fire Services Levy was a charge added to fire insurance, which meant uninsured property owners got a free ride – they didn’t pay for the level of fire cover provided and increased the cost to insured property owners.

So Victoria has just moved the FSL to a charge attached to council rates – which are based on Capital Improved Value (land and buildings).

Glen claims Victoria’s reforms are flawed because: “they didn’t truly broaden the base of contributors, they added taxes to low-risk property, and they used capital-improved value as the base.”

Fire services should be paid for by the beneficiaries: property owners. Deflecting costs to some wider ‘base of contributors’ is the first objective of the Property Council of Australia. Glen has the gall to suggest motorists should contribute because firefighters cut people out of smashed cars. Never mind the brigade sends their insurer a bill which more than covers the labor, the training and the equipment.

The FSL is not a tax. It is a property charge for particular services. And while uniform building regulations have made our lives safer and fires rarer, the need for fire services has not changed, whether some structures are deemed by their owners as ‘low-risk’ or not.

The overwhelming cost in fire fighting is the ‘stand by’ expense – of having a team of trained professionals ready to fight fires 24 hours a day. In urban areas, fire stations are scientifically placed six minutes apart so fire can be stopped before it gets away. In the end, the cost differential of extinguishing a fire in a large house versus a small one is tiny.

Fire services protect buildings. They give citizens the confidence to build – and to build bigger and better. Glen would like the FSL to be charged solely on buildings. But economics shows us that is not where the real revenue base lives.

Like all civic amenities, the benefit of the fire service is capitalized into land values. A quality fire service raises land prices regardless of whether a building is put up or not. A property levy that charges extra for a four bedroom two bathroom house over a simple two bedroom cottage is a disincentive to building. Yet both enjoy an identical level of protection.

If the FSL fell only on buildings, vacant sites and derelict structures would enjoy lower costs. I have criticized vagrant building, here and here, for the blight they cast on neighborhoods. Glen wants to make it even easier to withhold land from use and boost its price.

Economic reform is hard work. The electorate can only absorb a limited amount of change at a time, so getting it right is of utmost importance. The Property Council of Australia did not write their op-ed out of a sense of civic obligation. Their agenda is to shift costs away from their members: wealthy landowners. NSW Premier O’Farrell will probably let them, and thwart another useful reform.

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https://prosper.org.au/2013/06/09/pca-wants-to-cost-shift-onto-you/