Unsustainable Rates Increases

Rates have been growing in excess of median income growth for at least the last ten years and the trend is for more of the same. The result is that households have less discretionary income (e.g. holiday money, entertainment, extras for your loved ones). Over time more ratepayers will be forced to sell their house and live more frugally. I submitted an analysis to Council years ago apparently without any material consideration.

The standard government response is that THEY need MORE of your money to do all these great things and somehow THEY are unable to cope with less. I ask you - Are you getting any more from government today than when you were young? For the typical ratepayer the answer is an overwhelming NO! Meanwhile YOU have to live with LESS of your own money and are literally forced to make the necessary cuts. I assure you that THEY won't stop taking MORE of your money until YOU vote for people that care about YOUR pocketbook! Of course they say they care about you. The reality is that they continue to pass budgets that increase rates faster than income growth, drive up debt, and they delay infrastructure maintenance.

The main problem is that government has no real incentive to improve efficiency and year after year they obtain budget increases, add more staff, and introduce more procedures and the associated systems to keep track of it all. Another problem is that your elected representatives apparently have no problem spending the rates of entire neighbourhoods on matters that offer little to no value to the typical ratepayer. Then we have companies and other organizations with a councillor and/or the councillor's family or friends involvement, obtaining Council funds. Lastly, we have what looks to be outright corruption.

Check out my Why page for further information regarding the unsustainable rates increases.

The Rate Increase Scam

You often hear the elected officials endeavouring to keep rate increases to the rate of inflation. This is a complete SCAM! What these esteemed officials neglect to publicly consider and communicate is that properties are periodically revalued. Inflation is already baked into the rating system BEFORE any increase!! In fact, over the last decades, most land values have risen beyond the inflation rate. Over time we are all getting slammed at more than twice the rate of inflation! It can be argued that the actual rate is technically derived at the end of the process. I view this semantically. Bottom line, the rate over time has risen along with the valuations. Note that Council conveniently avoids publishing the rate scaled over time. So I have created a chart to illustrate the point. You can visually see the rise in the general rate (for the typical homeowner) per $1,000 of land value. I note that the rate for the 2019/2020 plan year is actually lower. This is because most homeowners had a substantial valuation increase. Even with the substantial valuation rise, the typical homeowner's general rate per $1,000 is now over 24% higher than in 2008! We are getting slammed for both the rise in land value AND the higher rate. Over time, it matters little to the ratepayer whether the rate is derived at the end of the annual rating process or set at the outset. I personally could care less if Council states that the rate comes out of an IBM mainframe, back end, front end, dice roll, or a human orifice. OVER TIME, IT KEEPS GOING UP!!! Check out your property and see for yourself. You won't find the price increases (the general rate per $1,000 in land valuation) over time. Tax authorities, governments, lenders, banks, money managers, and insurance companies often employ one or more complex calculations to obscure situations where you are getting screwed! Also, take a look at my submitted analysis from a few years ago. Many are now three years further along on the path to being forced to sell their home OR young couples further away from home ownership. I advocate an effective rate cap that includes both the fixed and variable components. That way, our rate increases are limited to the rise in our land valuation, which is bad enough in my opinion!

What to Do?

Figure out where the money is going

The logical first step is to look underneath the financial hood as it were and conduct some analysis. Analyse forecast spending with actual spending in the 2010/2011 financial year. One can then get a better idea as to what questions to ask to further dig into the unsustainable growth. I would actually like to go back to the year 2000 or even prior to obtain a better picture. Council's general ledger reconfiguration back in 2010 creates comparison challenges.

I provided links to the data for two reasons. One - To provide the non-financial person a glimpse into what detailed financial data looks like. If you don't know a debit from a credit, a cost centre from a profit centre, a balance sheet from an income statement, or a general ledger account structure, just to name a few; you are at a huge disadvantage to begin figuring out what is really going on in a company. There is a reason why the ability to understand financial and reporting statements is a councillor core competence! Two - To invite other financial analysts to join me in a deep dive into the data.

Ask questions

The answers to numerous questions are required in order to obtain an accurate picture of where the money is going and perhaps more important, is the ratepayer receiving good value for the expenditure. If something costs a whole lot more today than ten years ago, without a large population increase, we should have a closer look at why. There could be one or more good reasons, or maybe we're spending money unwisely. In my experience as a management consultant across most sectors including government, I ASSURE you that there is waste in ANY company of size. I can also assure you that government is shocking when is comes to waste. First generation, private corporations are generally the most efficient. An expression I heard in Silicon Valley years ago - Fat margins pay for lots of sins. When you have a monopoly with the power to raise prices (i.e. rates) at gunpoint (i.e. confiscation of your property; the government), you're going to have waste!

Document and Publish the Waste and Unwise Spending

The path to efficient spending is blocked by those that benefit from the status quo. Some kick and scream (sometimes literally) and shout Evil and Heresy!

Cap Rates

As suggested above, we need an effective rates cap based on property valuations. There has to be some practical governor that prevents government from living beyond the means of the ratepayer. Little surprise that we continue to experience unsustainable rate increases. Many are certainly able to manage the relentless increases today. One year YOU may join those forced to sell their home.

Can You Actually Reduce Spending?

You have to pick your battles. Some waste and inefficiency, once illuminated, can be eliminated as even the most fervent advocates have difficulty finding support, whether analytically (most often not) or politically (much better chance). Sometimes shame works with the fat pig in the trough and the starving little piglet trying to nose in for a morsel. I am well aware of the games government plays when they're forced to cut back. They tend to cut back in areas that are most visible, concealing the waste behind the scenes. I have years of experience identifying waste. The endless meeting makers. The ingratiators. The thoroughly incompetent. The empire building department heads. I've encountered many and had many successfully removed. At its worst, you have fraud and corruption. At times, my job was to go in and clean up an organisational mess. We need people in government capable of drilling into the details, exposing the nonsense. With years as a management consultant, I have experience at effecting change without having direct control.