The historical divide between our two political parties is one of the reasons commercial rates in the City of Ballarat outstrip those of comparable cities such as Geelong and Bendigo, says a leading real estate agent.
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Andrew Lewis, managing director of Colliers International, says there’s no doubt the higher rates imposed on commercial properties in Ballarat are an added impost to tenants especially and a disincentive to business generally.
Mr Lewis is one of several agents, business people, valuers, owner-occupiers and other people The Courier has spoken with regarding the vexed issue of commercial rates in the City of Ballarat and how despite the State Government’s rate-capping, increased property valuations are being used to drive up rate revenue.
The statewide property revaluations undertaken at the beginning of 2018 saw huge increases in the worth of assets across Victoria, and concurrent rate increases.
But were the valuations accurate, or were they simply a windfall for state and local government income? And what are the implications for the future of business in Ballarat if no-one can afford the rates?
Andrew Lewis: the real estate agent
Andrew Lewis is a managing director and branch manager at Colliers International real estate, with over 25 years’ experience in the industry.
He’s an advocate for rate change in the city, arguing the divide between commercial and residential is an historical anomaly, allowed to persist through council timidity toward change.
He says the higher commercial rate is a leftover from the times when Labor dominated the city’s council.
“They wanted the support of the residents, to keep their councillors in Town Hall, so they kept the residential rates down,” says Lewis.
“And they then thought, ‘Well who can we hit for the shortfall?’ And they thought they’d hit the capitalists, the businesses and landlords.”
“So now, when the Town Hall became Liberal, they didn’t want to upset the residents by equalising the rates, and so it’s stayed the way it is.”
Andrew Lewis says there’s a genuine need to address the historic rate inequity, not just for the CBD but across Ballarat.
“Sturt Street is changing, the retail model is changing. It may be there are more cafes and restaurants moving into the strip; less of the camera stores, the clothing retailers, the smaller shops. But the big box retailers, your bigger franchises in places like Latrobe Street – they need relief too.
“It’s not helpful for tenants and owner-occupiers, and yes the landlords. The tenants especially feel the expense.”
Adrian Doyle: the property valuer
Adrian Doyle is forthright in his opinions about solving the rates issue in Ballarat. The long-serving certified practising valuer believes the solution lies in the hands of the City of Ballarat, and it’s about adjusting the levers of valuations to achieve parity for all.
Doyle should know. He worked in local government for 14 years including five years at the City of Ballarat as manager of projects and property.
He says the concepts of council income through rates are relatively simple.
“Look council has a budget. Let’s say they need $10, for simplicity, to achieve everything they plan to do for a year,” Doyle says.
“They might get $3 of that from government grants, $1.50 from fines, 50c from somewhere else. So they’ve got $5 left they need to get off the ratepayers. The principal of equity in rating is that they do that on the value of your home, because if you own a home worth $1 million, you can afford to pay more rates than someone who owns one worth $100,000. That principle has been around since Adam was a boy; it was a principle of the Reform League here in Ballarat.”
He says the introduction of differential rating by the Cain Government in the 1980s was an important reform aimed at providing councils with the capability to make equitable changes to the amounts of rates different sectors needed to pay, such as reducing the costs on the agricultural sector, whose rates were disproportionately high.
“They started with just two or three differentials,” says Doyle.
“Now we can have 13, 14, maybe 15.”
Doyle says the application of differential rates is a method by which the city could reduce the burden on businesses, along with reductions in planning red tape and a firmer strategy about bringing residents into the CBD through making the reuse of buildings for new purposes, including as homes and apartments, easier.
“People can say, ‘oh the rents are cheap’, but it’s what we call the ‘total cost of occupation’ that matters to a business – levies, overheads, body corporate fees, rates, insurance, water. The costs are enormous.
“If council were worried that the commercial rates were too high – and they are, they’re sky-high – then they could use those differential rates to wind it down a bit. Now they still need that (hypothetical) $10 to fulfil their budget, so they have to put their other rates up a bit – or cut their expenditure. They need that other half, that $5 to run the city, but the obvious question is, and it needs to be explored – could we do it for $4.50?”
Doyle says the weight of residential numbers – around 70,000 ratepayers – will always override the around 1300 commercial ratepayers.
“Putting the rates up on residents? Politically, that’s unacceptable.”
Jose Fernandez: the business owner
Jose Fernandez is a Ballarat success story.
He’s built his restaurant Meigas (Galician for ‘witches’) up from a seven-table cafe in Bridge Mall to a popular venue in busy Armstrong Street North.
Now he’s looking to expand again, with a desire to explore the cuisine of his Argentinian upbringing in a new venue across the road from his current premises.
But, like many other business owners, Fernandez is feeling the pressure of high commercial rates in the City of Ballarat.
He says the rates for his business are higher than they would be for a similar building in Melbourne, and it makes him think twice about the cost of expansion.
Fernandez says the rates for his smaller restaurant in Bridge Mall were still about $3500 per annum, and he’s currently paying around $5000.
He’s explored the options for leasing the building across the road, but says he’s baulking at the added impost of rates, considering them too high for the services he receives.
“When I came up here to Armstrong Street, council said they were going to assist us in any way they could,” says Fernandez.
“I asked for barriers to be installed at the front of my restaurant, because I worried for my patrons being hit by cars running through (onto the footpath).
“I asked for this months ago, and I have heard nothing from them since.”
Like other business owners spoken to by The Courier, Fernandez is frustrated by what he says are a lack of services offered by council, such as rubbish collection.
“For what we pay,” says Fernandez, “they need to get the parking right, we need to have services like garbage collection.”
City of Ballarat: rates are no disincentive to business
The Courier invited the City of Ballarat to respond to our investigations into the commercial rates issue.
City of Ballarat provided a detailed response, attributed to CEO Justine Linley, in which the council outlined its position, acknowledging that rating is ‘a balancing act between affordable rating levels/rating categories versus increasing community/business needs and demands.’
“Rates – be they residential, recreational, commercial or industrial – are quite simply a property tax, just like every other tax levied by the state or federal governments.
“Yet the distribution of the tax dollar is very unfair.
“From every dollar raised by tax in Australia, of which rates is but one part, 82 cents goes to the federal government, 16 cents to the state government and only three per cent to local government.
“The City of Ballarat has a wide range of rate categories including commercial, industrial, residential, rural residential, farm and recreational. These categories are often referred to as “differentials...”
“In Ballarat the rating differentials, or categories, have largely remained unchanged for almost 20 years. In other words, the proportion of the overall pie paid by residents or paid by commercial businesses has remained the same.
“Commercial and industrial rates are charged at a slightly higher rate than residential rates in Ballarat. Yes, this category of rates is higher than those in our regional city neighbour of Bendigo. But equally, a resident in Bendigo pays on average almost $200 more each year on their residential rates than a resident in Ballarat. If we lower the commercial and industrial rate portion of the pie, we would need to increase the residential portion to balance this out.”
The council statement denies higher commercial rates in the City of Ballarat are a disincentive to business, pointing to figures which show a growth over the past year.
“More businesses are setting up in Ballarat each year. In 2017, there were 8319 businesses in Ballarat, 300 more than in 2016.”
“It is clear the City of Ballarat’s commercial and industrial rate is not deterring business from investing in the municipality at all, in fact the evidence is the contrary.”
Ballarat’s commercial property rates are roughly twice those of the City of Greater Geelong, and a third higher than the City of Greater Bendigo. Bridge Mall businesses also pay a levy.