Rate pain likely on back of surging land values

Late last year, Rabobank data revealed farmland prices in Victoria and Tasmania were the most expensive in Australia.

One draft budget, already released, has factored in an agricultural land value increase of 14 per cent, although the Victorian Valuer-General's annual revaluations are yet to be released.

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Yarriamback has released its draft budget, estimating the value of agricultural land has gone up by nearly 14 per cent on the previous financial year, to $322,739 million.

The value of residential land is estimated to have increased by nearly 8pc to $344,467m.

Yarriamback shire mayor Kylie Zanker said it was likely the shire would again adopt a differential rate for the farm sector.

The differential for agricultural land was currently 62.5pc of the residential and commercial rate.

"It's not council saying 'cough up, we need you to pay more,' it comes on the valuations," Cr Zanker said.

"We are not saying 'no' to a differential, that is something the council is looking at.'

"We are mindful farmers are often asset rich and cash poor, so that's hard too."

Cr Zanker said most unpaid rates came from residential properties.

"It's hard, but who do you put the burden on?" she said.

"We are trying to juggle it and make it as fair and equitable for everybody."

She said the system was 'insanity.

"We are not disputing it is not a fair and equitable split, but how to you challenge that when no-one wants to listen?"

But Ararat Rural City Council mayor Jo Armstrong said that local authority had maintained a zero per cent rate increase, for four years.

Mayor Jo Armstrong said the council achieved this by cutting 1.5pc from last year's budget, on the back of a 1pc cut the year before.

"Consequently, the rating in the dollar charged has fallen without diminishing our service delivery."

Ararat Rural City's rating strategy focused on an equitable apportioning of the rates burden across land sectors.

Cr Armstrong said the council would again apply a differential across the rate in the dollar, multiplied by the capital improved value, as it went a long way towards addressing inequality..

"It is false to describe a differential factor as a discount, when clearly it is one part of a multi-factor calculation," Cr Armstrong said.

"Victoria's rating system is fundamentally flawed and poorly understood, but Ararat does its best with the legislated tools we have to work with.

"We aim to arrive at an equitable share of rate burden across sectors, so the farm differential will be the factor required to maintain that consistency."

Comparing rates between councils detracted from the heart of the issue with "Victoria's flawed metrocentric rating system: that is, the disproportionate impost on rural family and business budgets compared to our metropolitan counterparts' budgets."

Northern Grampians shire has told residents the percentage of the total rates paid by farmers in the past two or three years had started to rise.

In 2021-22, the average value of residential properties was $210,000, compared with $900,000 for farmland.

The council is proposing a floating differential rate, calculated on the historic average value of farmland in the shire between 2006 and 2020.

In a bid to reduce rates shock, council has proposed farms would only pay a fixed amount of 32.5pc of the shire's total rate burden.

Last year, the farm rate differential was set at 53pc of the general rate.

Mayor Tony Driscoll said the council had started public consultation on its draft revenue and rating plan.

"We are aware of the fluctuations in land values and the differential rating system," Cr Driscoll said.

"We are aware its a brutal system and we are trying to smooth out basically all the huge fluctuations."

The council was constrained by the rates cap, which restricted local authorities to a rates increase of only 1.75pc.

"Northern Grampians shire only raises another $300,000 (as a result of the rates cap) between all the various sectors, whether it be ag, whether it be industrial or residential," Cr Driscoll said.

Read more: Government insists rate capping is here to stay

"It's a really crazy system, it really is," Cr Driscoll said.

Council was 'painfully' aware of the wild fluctuations in valuations.

"Some sectors in the community think' my house price has gone up, my land price has gone up, the council must be rolling in money.

"The reality is, we are not."

"We are getting the valuations in now and we know what's going to happen - land prices have gone crazy, house prices in places like St Arnaud and Stawell have probably gone up by 20-25pc but rural land has probably gone up 50pc.

"The ag sector is still outstripping the other sectors."

A draft budget was likely to be released by the end of May.

And Horsham Rural City Council has also flagged further revisions to its differential rate.

Corporate services director Graeme Harrison said when setting a differential rate, council had to be mindful a concession granted to one sector must be paid for by all others.

"In recent years Council has increased the differential given to farmers, effectively increasing the concession, and, as part of the budget process, will consider the differential again for the 2022-2023 financial year," Mr Harrison said.

"Differentials are not just a mechanism to offset increasing capital growth in one sector over another but must be considered within the context of good practice taxation principles such as equity, efficiency and simplicity to name a few."

Last year, Council further reduced the farm differential from 67 59pc to lessen the impact of the overall trend of increasing farm values.

"It has the option of lowering the differential further in 2022-2023," Mr Harrison said.

The Victorian Farmers Federation has urged councils to curb the impact of rising values on farm rates.

Livestock, grain and pulse producer Karen Hyslop, Campbell's Bridge, north of Stawell, said rates had gone up in consecutive years.

They went up by $5000 on the family's 1600 hectare property, which is in Northern Grampians shire, last year.

"We need to keep the conversation happening at a local and state level in order to make change, " Ms Hyslop said .

"Council has the power to collect rates and the power to change the way they collect their rates.

"We all agree we need to pay rates but we don't agree to one sector continually having large increases."

She said annual valuations were causing ratepayers unnecessary rate shock, as some were facing huge fluctuations in rates.

"Local and state government need to be mindful that the distribution of rates are equitable and fair and endeavour to achieve the best possible outcome for every community having regard to the long term and cumulative effects of decisions.

"In our shire we have numerous examples of farm rate increases ranging from 15pc ( $31,324.24 to $36.060.61) and 22pc ($17,227.44 to $21,028.22) in one year.

"How is this fair?"

She said she would like to see the current system changed to a strategic model, that achieved fairness and consistency, in sharing the rates burden.

"Every year all rated sectors within a municipality get indexed at the same amount," she said.

"This will enable the rate burden to be fairly distributed across all ratepayers within a municipality."

"We pay about $30,000 a year in rates," Ms Hyslop said.

"I want people to get to think about their rates and realise they can have a voice and speak to councillors and just try and get that conversation going about why rates are going up and what is the council doing about it?"

Grain grower Ross Johns has properties in Nhill and Warracknabeal and pays rates in both Yarriambiack and Hindmarsh shires.

"The issue centres around the fact we have very rapidly increasing rates," Mr Johns said.

"I have lots of areas in the business I pay money for, but in this particular area the quality of our services, our rural roads and access o our paddocks is declining.

"So we are not just paying ever increasing rates, we are actually not getting a service we are paying for."

He said it was a perennial problem and no-one seemed to have looked at it in a fair and reasonable way.

"When I looked at rates in the likes of suburbs like Toorak and inner-city Melbourne, per millions of dollars of council valuations, their rates were around about half, whereas rural rates are a lot more expensive, for each million dollars of market value."

He said there did not appear to be any points in fixing the system, for any of the parties.

When former Local Government minister Adem Somyurek addressed the Victorian Farmers Federation several years ago, he didn't appear to have any interest in service delivery or addressing the issues.

'That, to me, was quite a large shock, because agriculture provides quite a large percentage of the state's revenue and as such deserves a reasonable level of service at reasonable price."

It was reasonable to levy rates on valuations, but he said he was concerned about the discrepancy between city and country.

"Such things as roads are not being funded by state governments, so it is falling back ratepayers."