BRISBANE CITY COUNCIL
COMMITTEE OF INQUIRY INTO VALUATION AND RATING
A Summary of the Committee's two-volume Report on its Deliberations and Findings.
BRISBANE COMMITTEE OF INQUIRY INTO VALUATION AND RATING
A Summary of the Committee's two-volume Report on its Deliberations and Findings.
SIR GORDON CHALK, KBE, LL D (Hon)
(Chairman) Deputy Premier and Treasurer of Queensland 1965/76
P D DAY LL B, Dip TCP, FRAPI Town Planner
R L HANCOCK FAIV, FREI, FSLE Managing Director, R L Hancock Pty Ltd Past President, Brisbane Chamber of Commerce
G T HOFFMAN B Bus, BA, AASA!CPA, FIMM Secretary, Local Government Association of Queensland Inc
R C JENSEN B Econ, M Ag Ec, A Ed, PhD Reader, Department of Economics , University of Queensland
G E KROLL QDAH, DURP, FAIV, FSLE Valuation Program Leader, Queensland Agricultural College and Senior Vice President, Australian Institute of Valuers & Land Administration
N MACPHERSON B Com, M Pub Ad, AASA, ACIS, FIMM, FRAIPA, LGC (Queensland) Deputy Town Clerk and Manager, Corporate Services Division, Brisbane City Council
J D TUCKER BA, M PubAd, MAPS Senior Lecturer, Department of Government, University of Queensland
This edition of the summary of the two volume report has been produced by the Land Value Taxation Campaign and it is distributed with the consent of Brisbane City Council.
Copies of the complete two-volume report and further information are available from:
Acting Principal Finance Officer / Rates
Brisbane City Council
69 Ann Street
Telephone (61) 7-225-4651 Fax (61) 7-229-1168
The documents will be sent by sea mail unless otherwise requested and paid for; please allow eight weeks for delivery.
1 APPOINTMENT AND BRIEFING
The Valuer-General's revaluation of Brisbane properties in 1986 resulted in an average increase in valuations of 163 percent over
previous valuations. Increases in some instances were as high as
400 percent. The extent of the increases gave rise to public
apprehension about the possible impact of the new valuations on
the rates levied by the City Council. Another concern was the fact
that Brisbane residents paid water and sewerage rates based on the
value of their properties regardless of the amount of water they
used. Within the Council there was concern about other anomalies,
as well as some uncertainty about whether and to what extent areas
of the city should be differentiated for rating purposes.
Accordingly in mid-1987 the Lord Mayor instituted the present inquiry.
The Lord Mayor invited the Committee to undertake a wide-ranging
review of the operation of the valuation and rating system in
Brisbane and report on the revenue-raising and revenue-earning
options which were open to Council. In effect the Committee's
charter required it to consider, in respect of Brisbane, a series
of basic questions:
(a) Was a rate levied on property an appropriate means of local
(b) If so, how should property be valued?
(c) What alternative or supplementary means of revenue-raising
(or revenue-earning) were available?
(d) In particular, how should services such as water supply and
sewerage be paid for?
(e) Were there any ways by which the means of revenue-raising could
contribute to expenditure-saving?
2. EXISTING VALUATION AND RATING PRACTICE
The City Council presently raises a substantial part of the revenue
it needs each year by levying rates on the value of land assessed
periodically by the Queensland Valuer-General. The Valuation of
Land Act requires the Valuer-General to assess the unimproved value
of land in the city area for this purpose, and the City of Brisbane
Act authorises the City Council to levy a general rate on all rateable
land. Council is also authorised to levy water and sewerage rates
and to levy charges for various services. In practice the operation
of these basic mechanisms is subject to qualifications, some of which
are unavoidably complex. Particularly in the case of water and
sewerage services, the circumstances of an enormous variety of
industrial, commercial and residential users require complicated
supply and pricing arrangements; and the situation is compounded
by the fact that the majority of Brisbane's residential properties
are not metered. Historically, water pricing arrangements have not
been specifically aimed at discouraging consumption.
Council's power to levy a general rate is qualified in the case of
land being used for primary production. The general rate levied on
such land must not exceed one-half of the general rate levied on
other land, and the potential value of rural land for more intensive
urban uses is not taken into account. Likewise the potential value
of land used exclusively for a single dwelling house is not assessed
for rating purposes. In general Crown lands are exempt from general
rates, as also are certain religious, charitable and educational
bodies. Pensioners in receipt of a full pension and in possession
of a health benefit card are eligible to have a proportion (currently
40 percent) of their total rates remitted, and their properties in
due course pass unencumbered to their successors in title. Council
may levy an additional separate rate on parts of the city which have
been specially benefited by works or services not normally provided.
In levying a general rate Council may also differentiate between
sectors of the city designated with the concurrence of the Valuer-
The preceding graphs provide a broad overview of the origin and
distribution of Council's revenue and expenditure (and highlight the
relative significance of Council's transport operations). Council
revenue includes grants and subsidies from other levels of government,
and revenue from the development and sale of Council's own land. It
should also be noted that, as a condition of planning approval,
Council negotiates the contribution of works and services which
offset in some measure the increase in land value which planning
consent confers upon private landowners.
Recognising that there had been a number of previous inquiries
locally, interstate and overseas into property valuation and local
government rating, the Committee resolved that its recommendations -
whether or not they were accepted - should be logically consistent
and defensible in principle. At the outset, therefore, in pursuit of
the twin objectives of equity and efficiency, the Committee reviewed
(a) the role and functions of government recognised by economic theory
for fiscal purposes; (b) the economic classification of goods and
services required by the community; and (c) the basic principles of
taxation. The Committee appreciated that the nature and extent of
goods and services provided and the functions which a government
exercised were variables which in turn could have a bearing on the
principles of taxation adopted.
The Committee came to the conclusion that the benefit principle
rather than ability-to-pay was the most equitable and rational basis
of public revenue-raising. In other words, the Committee resolved not
to equate revenue-raising with simply taxing wealth. It was reinforced
in this view by its belief that the redistribution of income and
wealth was not a primary function of local government. It was
moreover impressed with the view that - in any community - the
legitimate generation of income and wealth through labour, skill and
enterprise should be encouraged rather than penalised.
By contrast, the ability-to-pay principle related levels of taxation
primarily to levels of income. It explicitly provided for redist-
ribution from upper to lower income groups in the community.
Carried to its logical conclusion, it implied equality of sacrifice,
which ultimately meant taxing all wealth and incomes down to the
lowest common denominator of sacrifice - a proposition which the
Committee was not disposed to endorse.
Nevertheless opinions within the Committee diverged about the
relative merits of the benefit and ability-to-pay principles in
achieving the goal of equity, and about whether revenue-raising
could ever be entirely benefit-related. The principles were not
mutually exclusive. Some taxes were seen to combine elements of
both principles, And while the redistribution of income and wealth
was primarily a policy function of national and state governments,
local government revenue-raising and expenditure inevitably had
some redistributive effects both between income groups and between
localities. Indeed, in the case of Brisbane, the amalgamation of
smaller local authorities into one large local government council
explicitly involved cross-subsidisation in the provision of
"standard" levels of service over a large area. A question,
therefore, was whether benefit-related revenue-raising mechanisms
could continue to achieve this objective.
Notwithstanding some divergence of views about these issues, in
respect of "public goods" , the Committee concluded that - as a
basic principle - in seeking to recover the cost of the works and
services it provided, a revenue-raising authority should - as far
as possible - charge the beneficiaries of such works and services to
the extent that such works and services and their beneficiaries could
be distinguished and were identifiable. Where works and services were
not, or could not be, separately identified and specifically charged
for, their cost should be recovered by a basic general charge which
should nevertheless conform, as far as possible, with the benefit
In respect of "merit goods" , the Committee adopted the view that
charges should be related primarily to the value of the service or
benefit provided (rather than to some arbitrarily determined level
of cost-recovery); while in the case of any local government works
or services which were effectively "market goods" , it took the
view that local government should adopt a realistic pricing policy
and be entitled to earn surpluses (which could be applied to the
cross-subsidisation of public and merit goods).
The Committee defined efficiency as requiring that revenue-raising
mechanisms should be cost-effective to administer, visible (in order
to maximise accountability), predictable, and difficult to evade,
and that they should not induce undue distortions in the economy.
At the same time, it recognised that there would be circumstances
in which, for various reasons, some citizens would be temporarily
or permanently unable to meet their obligation to contribute to
local government revenue. Local government would wish to offer
relief to citizens experiencing hardship or incapacity. Any system
of concessions, however, should be consistent with the benefit
To sum up, ideally what the Committee sought was a revenue mechanism
or a combination of mechanisms which would enable Council to recover
the cost of the works and services it provided as directly as possible
from those who used or benefited from them, but which also enables
works and services to be provided at a uniformly reasonable standard
throughout the community - leaving the redistribution of wealth to
other levels of government as a policy objective as they saw fit.
4. POSSIBLE OPTIONS
The Committee reviewed all the possible revenue-raising options. These
included property taxes of various kinds, a poll tax, local income tax,
sales taxes, taxes on particular goods and services, user charges for
certain services, betterment levies and developer contributions, and
grants from central government. In addition it reviewed the scope for
revenue-earning through commercial operations and joint ventures,
together with the scope for revenue-conserving through the more
rational operation of pricing policies, concessions and exemptions.
It then tested all these possible options against various criteria of
acceptability in terms of equity and efficiency, and their conformity
with the benefit principle.
5. THE INQUIRY PROCESS
Meetings of the Committee or its research sub-committee were held on
average fortnightly. The Committee drew upon the ample literature
covering the theory and practice of valuation and rating and public
revenue-raising and revenue-earning, especially the reports of
previous inquiries, and reports on recent developments in the United
Kingdom. It assembled copies of all the relevant local and interstate
legislation. It addressed a comprehensive questionnaire about current
valuation and rating practice to 78 Australasian local governments and
in a number of cases it followed up the questionnaire with supple-
mentary inquiries. It invited public submissions by advertisement in
the Brisbane press. It sought and received advice and information
from officers of the Council, from acknowledged experts in various
professional areas, and from the Queensland Valuer-General.
While the Committee operated at arm's length from Council, it
nevertheless informed itself of current policy issues confronting
the Council. It submitted three interim reports to the lord Mayor.
Its interim recommendations regarding water and sewerage charges
were substantially adopted in Council's 1988-89 budget.
A feature of the inquiry was the commissioning of research to explore
and quantify the implications of possible options and develop models
to assist Council. Compared with earlier inquiries, two other features
distinguish the context in which the present inquiry was conducted.
One was the introduction of annual valuations by the Valuer-General
in 1986. Secondly, town planning controls defining permissible land
uses now warrant greater recognition as a determinant of the value
of land than has hitherto been the case.
6. CONCLUSIONS AND RECOMMENDATIONS
Conceptually and administratively public revenue-raising is an
extraordinarily complex and contentious field of inquiry. All
members of the Committee wished to improve the status and public
perception of local government. All members endorsed the need for
democratic and well-informed local government to be freed from
arbitrary restraints upon its resources and its capacity to respond
to the needs of an evolving society. Not surprisingly, however,
members differed in their philosophical perspective. Thus it will
be noted that the conclusions and recommendations which follow were
not unanimous in some instances, while in other instances the form
of expression may not necessarily be an exact representation of
individual members' views:
(1) In searching for a general revenue base the Committee noted that a
poll tax, i.e. a uniform tax on every (adult) resident of the city,
had a prima facie attraction. A poll tax appears to satisfy the
requirement that all citizens who benefit from living in the city
should contribute to the cost of building and maintaining it. Some
members were therefore impressed with the argument that, compared
with an alternative, a poll tax was a more direct method of recouping
the cost of personal (as distinct from property-related) services
provided local government. The Committee, however, is firmly of the
opinion that, as a general revenue base, a poll tax should be
rejected, because a uniform per capita tax would impose a
significantly greater actual and proportionate burden upon most
lower income-earners (and would therefore constitute an intrusion
by local government into the area of income redistribution which is
more properly the function of central government); and because of
the very considerable difficulties of costs which would be involved
in administering it.
(2) The Committee considered the implications of a local income tax.
Not all residents of the city earn their income in the city, however,
and not all those who earn income in the city are residents of the
city. Even assuming that a local income tax were constitutionally and
administratively feasible, the Committee is firmly of the opinion
that any form of income tax is incompatible with the benefit principle.
Income taxes tax income regardless of services used or benefit enjoyed.
While the Greater Brisbane concept required a measure of cross-
subsidisation between the wealthier and less well endowed areas of
the city, this objective could be achieved by other means. As
deliberate policy objective, redistribution of wealth was primarily
function of the central government. Accordingly the Committee
recommends that no form of local income tax should be contemplated.
(3) For similar reasons, the Committee recommends against any form of
broad-based consumption tax as a general revenue base. Such a tax
would be an undiscriminating revenue-raising device unrelated to the
benefits and costs of city services provided (as well as being
inherently inflationary and likely to divert trade away from the
(4) As a general revenue base, the conclusion of the majority of Committee
is that a tax or rate levied on property - provided it levied on land
and not upon the buildings or other visible improvements erected on
land - is the basic general revenue source which most nearly conforms
with the benefit principle. In the Committee's view every resident of
the city and every activity conducted in the city uses or occupies land
directly or indirectly, and a charge on the value of land used or
occupied is paid, directly or indirectly, by every citizen. If all land
in the city were valued frequently and in accordance with use of it
permitted by the city's town planning controls, a land value charge
should accurately reflect the benefit derived from its use or
occupation. Moreover, a charge on the value of land encourages
development and discourages the speculative withholding of vacant
land from productive use (whereas a charge on the value of buildings
other improvements tends to penalise enterprise and development.)
(5) All members of the Committee agree that a charge on the value of land
is relatively simple and inexpensive to administer and is impossible
to evade. Some members also wish to place on record their view that
land is a finite commodity and that a charge levied at the same rate
on all uses of land does not affect the free market allocation of
resources and cannot be passed on. The rental value of land, when
capitalised, gives land its value, and to the extent that the
community captures some of the rental value of land by way of a
charge, a land value charge operates to depress the value of land
and therefore its price.
(6) While not all members of the Committee share the same philosophical
position in respect of the nature of land, or the same view of the
impact of a land value charge, the Committee's unanimous response to
its first term of reference is that a rate levied on the value of
unimproved land is an appropriate means of local government revenue-
raising. The Committee's conclusion in this regard is in line with
the findings of other recent Australian inquiries. Most members,
however, go further. In their view a rate on unimproved land value
is not merely appropriate: it is the most efficient and equitable
source of general revenue, both in principle and in practice.
(7) Paragraphs (8) to (22), hereunder, deal with matters which flow from
or are incidental to the Committee's endorsement of a rate on
unimproved land value as a general revenue source.
(8) With the advent of annual valuations, coupled with increasingly
comprehensive town planning controls, the Committee is satisfied
that, at any given time, there is no reason why the Valuer-General's
valuations should not accurately reflect the value of all land in the
city. Valuations are based on the open market's assessment of the
Vocational characteristics of land (including its size, frontage
and shape); the availability of works and services; and its highest
and best use. The Committee believes that henceforth there should be
fewer anomalies and fewer "surprise" increases. Nevertheless the
rights of objection and appeal should continue to be available to
all landowners who wish to challenge the Valuer-General's assessment,
and the Committee considers that rights of objection and appeal in
respect of both general and annual valuations should also be available
to local government councils (which presently may object only to
general valuations which they consider to be too low).
(9) Certain anomalies, however, require to be addressed. Thus the
Committee considers that, if rural land within the city area is
zoned and used for rural purposes, it should be valued accordingly,
in which case the present statutory requirement that the general
rate on rural land should not exceed 50 percent of the general rate
levied on urban land constitutes a double benefit which is no longer
necessary and should be repealed.
(10) If valuations accurately reflect the present value of all land, the
Committee considers that there are only two situations in which
disproportion between benefits conferred and costs recovered would
justify a departure from a uniform general rate. One is where land
benefited by specially provided extra works or services not generally
provided by the Council (as in the case of the Queen Street and
Chinatown Malls). In this case a separate (additional) rate is
appropriate. The other situation is where it can be demonstrated
that the Council is not recovering a proportionate share of the cost
of works and services from identifiable sectors or categories of land
uses. The Committee considers that a differential rate could be
warranted in these circumstances.
(11) In relation to differential rating the Committee commissioned the
development of a model to enable the Council to monitor any disparity
between the benefits conferred on sectors or categories of land use
and the general rate revenue derived from them. It sought to discover
for example, whether there was any disparity in this regard between
the residential, commercial and industrial sectors. The Committee'
research shows that there have been some disparities but that these
appear to have been redressed in the most recent valuations. If in the
course of monitoring relativities a disparity between sectors were to
become apparent, a differential rate should be levied to ameliorate
it. But, in the absence of any such evidence, the Committee is very
firmly of the opinion that recourse to differential rating would
undermine the credibility of the valuation and rating system.
(12) The Committee draws attention to the fact that rates of income-producing
properties are currently tax-deductible. Thus, while there is no
present disparity which would justify differentiation between sectors
on a pre-tax basis, the majority of members are of the opinion that
Council could consider differential rating to equalise the after-tax
incidence of rates (in which case higher rates of income-producing
properties would in effect be funded in part by the Commonwealth).
(13) Where property owners continue to reside on land which is zoned for
a higher intensity use and is therefore valued accordingly, the
Committee recognises that some dispensation from rates is warranted.
However, the extent of the present dispensation (via section
11(1)(vii) of the Valuation of land Act) is quite unwarranted. The
majority of the Committee therefore recommend that, while the existing
residential use continues, owners should be eligible to defer that
proportion of rates attributable to the increased value. If a property
is transferred to another residential occupier, the same dispensation
should be permitted subject, however, to the rate due and payable
being not less than the rate calculated on the value established by
the sale price. It is further recommended that owners of farming land
which has been zoned for urban use should similarly be eligible to
apply for deferment while the land continues to be farmed. The
existing residential or farming uses may of course continue
indefinitely. If so, the Committee considers it reasonable that the
deferred rates should not continue to accrue, but should be written
off for any retrospective period in excess of five years.
(14) The Committee considers that there is no valid reason why the rating
of individual subdivided lots should be delayed. At present a
developer retains the benefit of an en globo valuation until
subdivided lots are sold. This reduces any incentive to sell, and
encourages the withholding of land from the market for investment.
The Committee considers that, consistent with its other recommend-
ations in respect of concessions, this concession should not be
conferred by the Valuation of Land Act. In the case of new
subdivisions, therefore, the Committee recommends that every new
subdivided lot should be separately valued and become rateable upon
registration of the survey plan.
(15) In practice, irrespective of the value of their properties, all
property owners are currently liable to pay a minimum general rate
determined by Council. In the Committee's view, however, while this
practice may be partly dictated by administrative convenience, it
represents a departure from principle at the lower end of the rating
scale. If land values for all properties are assessed frequently
and accurately, then the majority of the Committee believe that,
in principle, the amount of the general rate payable should in all
cases be that calculated on actual values. The Committee noted that
minimum rates tended not to distinguish between large and small home
units in multiple dwellings. The Committee also noted that, whereas
dwelling units in buildings subject to the Building Units and Group
Titles Act could be levied minimum rates, flats in otherwise similar
buildings not subject to the Act could not be individually rated. It
acknowledged that if a minimum rate were not levied, valuations of
multiple dwelling unit sites were such that the apportionment of the
land value among a large number of individual home units could lead
to unreasonably low actual values for each unit. It might be possible
to remedy this by changes to the valuation guidelines.
(16) The Committee noted local government's historical association with
property-related works and services. Thus a rate on property may be
seen as a particularly appropriate basic revenue source. However,
the Committee's affirmation of the merits of taxing the unimproved
value of land as a basic source of public revenue does not rely on
this traditional association, and does not imply that land value
taxation should be confined to local government. While some merit
was seen in land value taxation being regarded as a distinctive
local government revenue source, in principle, in the Committee's
view, the unimproved value of land is a logical basis for revenue-
raising irrespective of the level of government.
(17) Unimproved value requires to be defined. Since the turn of the [20th]
century local government rates in Queensland have been levied on
the unimproved capital value (UCV) of properties, meaning the value
of the land literally without any improvements of any kind (but with
all existing amenities). There are difficulties and anomalies,
however, associated with this definition of land. For example,
improvements such as levelling, clearing and filling carried out
many years previously become virtually impossible to identify. The
Committee therefore prefers the concept of "site value". This means
the value of land including improvements which have merged with it
over time because they have become permanent; require no maintenance;
and for all practical purposes have become invisible. The Committee
is therefore of the opinion that, for the purposes of assessing the
rateable value of land in Brisbane, such improvements should be
deemed to have merged with the land after ten years or upon its
(18) Reviewing generally the operation of the land valuation and rating
system, the Committee believes it is inherently sound. The Committee
wishes to emphasise, however, the critical importance of frequent and
up-to-date valuations, and the need for annual valuations to come
into effect as soon as possible after they have been made. Its
recommendations are formulated on the assumption that valuations
will continue to be (statistically) re-assessed at least annually,
and that there will be frequent general revaluations to review
relativities over time. The Committee noted that elsewhere in some
instances valuation for rating purposes is undertaken by local
government councils. In the Committee's view, however, valuation
and rating should be recognised as separate functions, neither of
which should be manipulated for the purposes of the other. Thus the
Committee endorses their allocation to separate bodies as is presently
the case in Queensland.
(19) Compared with PAYE taxation, the levying of a rate on property is a
highly visible form of revenue-raising. This is a virtue, since it
maximises a revenue-raising authority's accountability for expenditure.
The price of high visibility, however, may be disproportionate
unpopularity, particularly if rates are collected in periodic lump
sums. The Committee therefore recommends that Council work towards
further spreading the payment of rates by instalments at less than
(20) The Committee also recommends that information generally regarding the
valuation and rating system be more widely disseminated. In particular,
it believes that the fact that valuations are based on current market
values needs to be more widely appreciated. While property owners may
complain about high valuations, the Committee is not aware of any
property owners who would willingly sell their properties for less
than their market value.
(21) In particular, the Committee believes that there needs to be greater
recognition of the fact that population growth will inevitably - and
quite properly - lead to increased land values, particularly in prime
locations. This will pose problems, for example for elderly residents
in these locations who may thus become in effect asset-rich but income-
poor. These circumstances may warrant deferment - but not a waiver -
of the obligation to pay rates on the true value of their properties.
As the Committee emphasises in paragraph (34), the obligation should
remain a charge on the land.
(22) The Committee has examined the policy of "rate-pegging" or "rate-
capping" as practised by the Thatcher government in Britain and the
Wran and Greiner governments in New South Wales. While rate-pegging
has been conceived as a means of arbitrarily limiting the growth of
local government taxation, it has had the opposite result in many
cases. Rate-pegging has been demonstrably disastrous for the autonomy
and electoral accountability of local government and has failed as an
intended restraint upon local government revenue-raising. Indeed,
distortion of the rating system has been so severe that in Britain a
poll tax (or "community charge") is now replacing domestic rates, and
a similar proposal is under discussion in New South Wales. The
Committee was disturbed by a recent media report that rate-pegging
had been advocated in Queensland. The Committee records its strong
opposition to any form of rate-pegging (or the `freezing' or deferring
of valuation changes).
(23) In considering possible options which might be seen as supplementary
revenue devices, the Committee does not favour charges levied on goods
and services which are simply revenue-raising taxes unrelated to
benefit received or to the cost of city services provided. In this
category are charges such as sales taxes on selected goods, bed taxes,
accommodation taxes and various forms of business taxes. The Committee
is of the opinion that any consumption taxes levied on goods or
services not provided by the Council are incompatible with the benefit
principle (as well as being inherently inflationary and regressive).
Indirect taxes are also "invisible", and their accountability is
thereby obscured. While there was some support for the view that local
sales taxes could be a means of recovering some revenue from non-
residents and visitors, the majority of the Committee consider that a
tax on consumer goods could only be justified if it served to achieve
some policy objective (such as, for example, traffic restraint, or the
minimisation of pollution). The Committee recognises that, while
tourists and non-residents use or benefit from city services, they
contribute in other respects to its prosperity. A share in this
prosperity should more properly be recouped for the city through the
increased value of rateable land on which, for example, accommodation
and entertainment facilities are erected.
(24) Nevertheless the Committee considers that there are a number of
identifiable works and services provided by Council which benefit or
are used by identifiable people or activities. Where the extent of the
benefit or use of these works and services can be identified, the
Committee considers that their cost should be met (at least in part)
by specific separate charges. Providing such works or services from a
general rate on land is neither equitable nor efficient. In particular,
the Committee considers that, while the availability of water and
sewerage affects the value of land, the actual consumption of water
has no necessary relationship to land value.
(25) The Committee is strongly of the opinion that greater community
recognition of the cost of reticulated water will determine whether
and when the city's water supply headworks will need to be augmented.
Accordingly the Committee recommends that the consumption of water
should be measured; that metering of residential properties (as well
as commercial and industrial properties) should be introduced,
voluntarily in the first instance; and that Council should move
towards abandoning water rates levied on land value. The Committee's
report identifies a number of options which the Committee believes
Council should investigate in relation to water pricing having regard
to storage, treatment and reticulation costs and the special
requirements of particular users. In respect of sewerage the Committee
recommends a flat charge for all self-contained residential properties
in lieu of the pedestal charge. (While recommendations in an interim
report to the Lord Mayor were substantially implemented in Council's
1988-89 budget, the Committee believes that the fixed charge of the
charge-plus-consumption package recommended by the Committee to
encourage voluntary meter installation was not in fact sufficiently
low to be an effective inducement).
(26) The Committee is of the opinion that water supply and sewerage are
not the only Council services the beneficiaries of which can be
separately identified. It therefore recommends that Council should
review all its services to ascertain whether their cost can be
recovered wholly or partly from charges based on the extent of their
benefit to identifiable beneficiaries. By way of example, the
Committee is of the opinion that certain foreseeable specialist
library services should be charged for and not absorbed in the cost
of basic library services.
(27) In particular, it believes that equity requires that Council's road
maintenance costs should not continue to be wholly met from general
rate revenue (levied, irrespective of vehicle ownership, upon all
property owners, some of whose properties are depreciated in value
by road works) but that at least in part they should be apportioned
among vehicle users. The Committee considers that the most equitable
and practical way to do this would be by way of a motor vehicle fuel
franchise levy, imposed within the municipal area in the first
instance, and extended to the actual metropolitan area by negotiation
with the surrounding local government councils.
(28) While in the Committee's opinion a motor vehicle fuel franchise levy
is the most direct way of securing a contribution from motor vehicle
users who enjoy the benefits of road maintenance and improvements, the
Committee endorses Council's announced intention to increase metered
parking charges and impose a levy on inner city parking spaces . Of
these measures, only on-street parking charges are a direct charge
for the benefit of road space provided by Council. Both, however,
will operate to minimise the disbenefit of congestion caused by
motor vehicle usage in the central city and indirectly compensate
for the use of roads leading to the city.
(29) The Committee reviewed the concept of betterment, i.e. the benefit
conferred upon landowners by town planning approvals which increase
the value of their land. It noted that rates on increased land values
recoup a small part of this windfall increase, and that contributions
to infrastructure required from developers as a condition of develop-
ment approval offset a proportion of the increase. The Committee does
not recommend a special betterment levy to recoup a proportion of
this increased value. It believes, however, that in principle Council
should be able to recoup, either by way of cash payments or the
contribution of infrastructure, a greater share of the land value
increments attributable to planning approvals, and that accordingly a
clear-cut philosophy in relation to development contributions should
be spelt out in town planning legislation; and, further, that there
should be an equally clear-cut recognition in principle that any
consequential costs imposed upon the community by development
proposals (whether internal or external to the development) should
be recoverable from the proponents of development (including, for
example, the costs of traffic congestion).
(30) The Committee noted that Council owned considerable land and was
itself a land developer. In the Committee's view, however, the
practice of disposing of Council-owned land in freehold is depriving
Council of the benefit of future increases in land value attributable
to population growth and community development. At the cost of
forgoing a once-only capital return on the land it sold, a majority
of the Committee favour Council retaining the benefit of land value
increments in perpetuity by disposing of land on a leasehold basis.
In the case of residential land, disposal on a leasehold basis would
substantially reduce the initial cost of home ownership to lessees
without long-term cost to Council.
(31) The Committee noted that, while overtures to central government in
the past have rarely been successful, it was nevertheless open to
local government to seek increased grants from state and federal
government either in lieu of, or to supplement, general rate revenue.
It can be argued that seeking increased grants implies a departure
from the benefit principle and a reliance instead on a share of
revenue raised by other governments on the basis of ability to pay.
It could also tend to compromise local government's aspirations to
greater autonomy. Nevertheless there was some sympathy within the
Committee for the view that, particularly in a capital city situation,
grants from government were a justifiable compensation for the cost of
providing services to non-residents, and would represent a contribution
to greater vertical equalisation of revenue receipts as between levels
of government. The case for transfer payments may need to be pressed
in the light of the continuing tendency of higher levels of government
to reduce such payments.
(32) With regard to revenue-earning, the Committee is of the opinion that
local government should not be precluded from engaging in commercial
operations. It recognised, however, that there were risks. The history
of municipal business ventures elsewhere has not been without blemish.
In the Committee's opinion there are likely to be few circumstances in
which the scope for viable commercial operations has not already been
recognised and exploited by private entrepreneurs. It considers,
however, that Council should explore the scope for joint ventures in
circumstances where neither the private sector nor the public sector
can operate alone, and accordingly recommends that it should seek
statutory authorisation to enable it to engage in joint ventures in
(33) As for revenue-conserving, while systematic water pricing as
recommended by the Committee would enable future major expenditure on
water treatment and headwords to be deferred, the Committee considers
Council's present revenue could be conserved by reviewing rate
concessions and exemptions. The Committee noted that Queensland
councils varied in their attitude to rate concessions. In the
Committee's opinion Council's present rate concessions - which are
confined to full pensioners - could be extended to a wider range of
deserving recipients if concessions were conferred by way of deferment
of rates rather than by remission. The present remission scheme is
discriminatory and inequitable and results in a substantial loss of
revenue. This shortfall is being met by the city's ratepayers
(including part-pensioners and other ineligible persons experiencing
hardship). The ultimate beneficiaries of the present remission scheme
are pensioners' successors in title who inherit unencumbered properties.
The Committee therefore recommends that, without necessarily with-
drawing any entitlements to remission which are currently being
exercised, Council should offer deferment of rates as an optional
alternative to remission, and gradually move towards replacing the
present pensioner remission scheme by a deferral scheme open to a
wider range of applicants. A study commissioned by the Committee
illustrates the cash flow implications of deferring various proportions
of rate revenue as well as the implications of various transitional
combinations of remission and deferral.
(34) In the Committee's view deferment would accord with the fact that
rates are properly a charge on property rather than a tax on persons.
If Council so desired, deferment of rates could also be employed as
an incentive to encourage the establishment or expansion of commercial
or industrial enterprises in the city, and the Committee considers
that Council should seek the necessary statutory authorisation to
enable it to do this.
(35) With regard to the controversial question of the exemption of state
and federal governments from general rates levied by local government,
the Committee noted the Self Committee's  conclusion that, while most
local government councils were probably net beneficiaries from
reciprocal relief from state and federal taxes, capital cities such
as Brisbane, with a high proportion of government properties, were
disadvantaged. The Committee endorses the view that, as a first stage
towards the abolition of Crown exemptions, rate exemptions enjoyed by
government owned trading operations should be phased out (in the
interests both of minimising the disadvantage to councils and
minimising the advantage enjoyed by public sector commercial
undertakings trading in competition with the private sector).
(36) In the case of charitable and other non-governmental bodies the
Committee considers that any exemptions from the general rate should
not be a matter for statute, but for individual councils to determine
as a matter of policy (taking into account the extent to which the
whole or part of a claimant property is used for purposes other than
its primary purpose). In order to avoid distortion of the rate base,
the Committee further recommends that any such exemptions should
operate by way of remission of rates due and payable rather than as
exemptions from liability.
(37) The Committee acknowledges that rate concessions apply only to
property owners, whereas the hardship being experienced by many
private rental residents is an increasing social problem. While
tenants effectively pay the general rate indirectly as a component
of their rent, there appears to be no way in which a concession to
tenants can be made a charge on property in keeping with the basic
mechanism of deferral which the Committee recommends for rate
concessions. Any assistance paid directly to tenants assuming a
mechanism with appropriate safeguards could be devised would be a
direct cost to Council and would constitute a major extension of
Council's redistributive role.
(38) Should Council decide to adopt them, the implementation of the
Committee's recommendations will in some cases require legislative
amendments. In other cases implementation will merely require
administrative action. Whatever the form of action required, the
Committee commends to Council the practice of requiring its relevant
departments to report annually on the specific steps being taken by
them towards achieving the desired results.
(39) Finally, it should be emphasised that the Committee has not been
concerned with increasing Council's revenue; its evaluation of
possible revenue-raising options has been undertaken on a revenue-
neutral basis. The aggregate level of local taxation at any given
time is a matter for elected councils to determine and to accept
responsibility for at the ballot box. The Committee's concern has
been to ensure that, at whatever level of revenue, Council's
revenue-raising is equitable and efficient. And, in respect of
concessions, its concern has been to ensure that Council's revenue-
raising mechanisms are able to respond more flexibly and sensitively
to situations in which its citizens are experiencing hardship.
The Committee's reasoning in support of the foregoing conclusions and
recommendations is amplified in Volume 1 of its report, together with
references to the legislative amendments which the implementation of certain
recommendations will entail. Volume 2 contains supporting information
including the results of the research studies which the Committee
1 Defined as those goods which generally could not be priced in the
market sense, since their use could not be made subject to price
payments in the same way as market goods, and which therefore had
to be paid for from public revenue.
2 Defined as those which could be supplied by the market but which,
for policy reasons, governments decided should be provided at a
price less than their full cost.
3 Defined as those which could be supplied efficiently at socially
acceptable prices by the market mechanism.
4 Council also announced its intention to impose rigid upper limits
upon the amount of off-street parking permissible in inner city
5 The National Inquiry into Local Government Finance, 1985, chaired
by Professor Peter Self.
Mr. Hancock dissents from the Committee's conclusions (12) regarding
differentiating between the pre-tax and after-tax incidence of rates;
(28) regarding the proposed levy on inner city parking spaces; and
(29) regarding development contributions to infrastructure, and recovering
the consequential costs of development proposals.
26 September 1989
GLOSSARY OF TERMS
Assessed Annual Value (A.A.V.): the gross annual rental which might
reasonably be expected if premises were let on a tenancy from year to year.
Annual Value (A.V.): a proportion (around three-quarters) of the gross
annual rental which might reasonably be expected if premises were let on
a tenancy from year to year upon the condition that the landlord was
liable for all rates, taxes and insurance; (it may additionally be
defined to be not less than five percent of the fee simple).
Capital Value (C.V.): the capital sum that an unencumbered estate in fee
simple in land together with any improvements might be expected to realise
if offered for sale on reasonable terms and conditions at a point in time.
Gross Rental Value (G.R.V.): the gross annual rental which might reasonably
be expected if premises were let on a tenancy from year to year upon the
condition that the landlord was liable for all rates, taxes and insurance.
Highest and Best Use: the lawful use to which land by its attributes and
location might best be adapted, and which is capable of yielding the
highest utility or benefit to the owner.
Land Value (L.V.) : the capital sum which an estate in fee simple in land
unencumbered by any lease, mortgage or other charge might be expected to
realise if offered for sale on a given day on reasonable terms and conditions,
excluding the value of any visible or tangible improvements, but not excluding
the value of any improvements resulting from work done by the Crown or any
work of reclamation, drainage, filling, excavation, grading, levelling or clearing.
From the view point that capital value or market value is the sum of the value
of improvements and land value, any value not due to improvements is land
value. The works identified above are however to be included in the
assessment of land value.
Market Value: the sum which a property could be expected to realise upon
purchase by a willing but not anxious buyer from a willing but not anxious
seller at a given point in time.
Site Value (S.V.): the capital sum which an estate in fee simple in land
unencumbered by any lease, mortgage or other charge might be expected to
realise if offered for sale at a given day on reasonable terms and
conditions, assuming that any site improvements other than merged
improvements had not been made. Site improvements include reclamation.