Statement of Rating Objects and Reasons for the 2020/2021 Year

In accordance with section 6.36 of the Local Government Act 1995 and the Council's "Notice of Intention to Levy Differential Rates and Minimum Payments" the following information details the objectives and reasons for those proposals.

The following rating principles are proposed in this Statement of Objects of, and Reasons for the differential rates and minimums for the 2020/21 rating year:

  • Gross Rental Values (GRV) apply to the following differential general rate categories; Residential, Commercial/Industrial and Heavy Industry
  • Unimproved Values (UV) apply to the following differential general rate categories; UV General, UV Commercial and Farmland
  • GRV and UV are determined by the Valuer General's Office (VGO)
  • GRV are re-valued every three (3) years with 1 July 2020 being the next revaluation year
  • UV are re‐valued annually
  • Properties are rated according to the predominant use of the land with each having a separate calculated rate in the dollar to achieve greater equity across all sectors
  • The City has utilised the GRV and UV provided by the VGO as at 1 April 2020 to determine the total rates revenue per differential rate type based on the proposed zero percent (0%) increase on the 2019/20 rates revenue. Based on this proposed rates revenue, the City has recalculated the rate in the dollar utilising the new values provided by the VGO. Proposed minimum rates to remain the same as 2019/20.
  • The proposed rates model will yield approximately $130 million in total rates revenue. This figure is inclusive of ex‐gratia rates, interims, concessions and write offs. It is proposed to continue with Specified Area Rates "Midland Drainage District and Hazelmere/Guildford Drainage District"
  • It is proposed to continue with Specified Area Rates "UV ‐ Hazelmere Industrial Roads and Drainage" and “GRV ‐ Hazelmere Industrial Roads and Drainage"
  • The proposed rates model will yield approx. $2.86 million in total specified area rates revenue

The overall objective of the proposed rates in the 2020/21 Budget is to provide for the net funding requirements of the City’s expenditure, after taking into account all other forms of revenue.

The formulation of a rating system is about achieving a means by which Council can raise sufficient revenue to pay for the services it provides. Throughout Australia, the basis of using property valuations has been found to be the most appropriate means of achieving rating equity; however, the achievement of a wholly equitable rating system for all properties, in all areas, is a difficult task if it is based on the property valuations alone. For this reason there is refinement options made available, such as differential rating, which the City of Swan has elected to use.

The VGO (a state government agency) values all rateable land within Western Australia and those values are forwarded to each Local Government. Two basis of valuations are applied for the calculation of rates ‐ Gross Rental Value (GRV) land used for non‐rural purposes; and Unimproved Value (UV) land used for rural purposes.

The Local Government Act 1995 sets out the basis on which differential general rates may be based as follows:

Section 6.32 (1) of the Local Government Act 1995 states:

(1) When adopting the annual budget, a local government –
     a. in order to make up the budget deficiency, is to impose a general rate on rateable land within its district, which rate may be imposed      either –
         i. uniformly; or
         ii. differentially

Differential Rates

6.33. Differential general rates
(1) A local government may impose differential general rates according to any, or a combination, of the following characteristics –
     a) the purpose for which the land is zoned, whether or not under a local planning scheme in force under the Planning and Development Act 2005;
    
b) a purpose for which the land is held or used as determined by the local government;
     c) whether or not the land is vacant land; or
    
d) any other characteristic or combination of characteristics prescribed.

(2) Regulations may –
     a) specify the characteristics under subsection (1) which a local government is to use; or
     b) limit the characteristics under subsection (1) which a local government is permitted to use.

(3) In imposing a differential general rate a local government is not to, without the approval of the Minister, impose a differential general rate which is more than twice the lowest differential general rate imposed by it.

(4) If during a financial year, the characteristics of any land which form the basis for the imposition of a differential general rate have changed, the local government is not to, on account of that change, amend the assessment of rates payable on that land in respect of that financial year but this subsection does not apply in any case where section 6.40(1) (a) applies.

(5) A differential general rate that a local government purported to impose under this Act before the Local Government Amendment Act 2009 section 39(1) (a) came into operation is to be taken to have been as valid as if the amendment made by that paragraph had been made before the purported imposition of that rate.

6.35. Minimum payment

(1) Subject to this section, a local government may impose on any rateable land in its district a minimum payment which is greater than the general rate which would otherwise be payable on that land.
(2) A minimum payment is to be a general minimum but, subject to subsection (3), a lesser minimum may be imposed in respect of any portion of the district.
(3) In applying subsection (2) the local government is to ensure the general minimum is imposed on not less than –
     a) 50 per cent of the total number of separately rated properties in the district; or
    
b) 50 per cent of the number of properties in each category referred to in subsection (6), on which a minimum payment is imposed.

(4) A minimum payment is not to be imposed on more than the prescribed percentage of ‐
     a) the number of separately rated properties in the district; or
    
b) the number of properties in each category referred to in subsection (6), unless the general minimum does not exceed the prescribed amount.

(5) If a local government imposes a differential general rate on any land on the basis that the land is vacant land it may, with the approval of the Minister, impose a minimum payment in a manner that does not comply with subsections (2), (3) and (4) for that land.

(6) For the purposes of this section a minimum payment is to be applied separately, in accordance with the principles set forth in subsections (2), (3) and (4) in respect of each of the following categories —

a) to land rated on gross rental value;
b) to land rated on unimproved value; and
c) to each differential rating category where a differential general rate is imposed.

2020/21 Budget Proposal

The following are the proposed Differential general rates and minimum payments and Specified Area Rates for the City of Swan for the 2020/21 financial year, to be effective from 1 July 2020.

 GRV Differential Rates Rate in dollar ($)  Minimum Payment 
 Residential 0.085499 $890 
 Commercial/Industrial 0.098247 $1,420 
 Heavy Industry 0.161131  $1,710 
UV Differential Rates  Rate in dollar ($) Minimum Payment 
 UV General 0.0038914 $890
 UV Commercial  0.0056130  $890
 Farmland 0.0028841 $890
Specified Area Rates  Rate in dollar ($) 
Midland Drainage District  0.006578
Hazelmere/Guildford Drainage District 0.006657
GRV Hazelmere Industrial Area Infrastructure 0.03896277
UV Hazelmere Industrial Area Infrastructure 0.00113950


Gross Rental Valuation (GRV)

It is proposed for the 2020/21 financial year that the City adopt the following differential rates Residential, Commercial/Industrial and Heavy Industry.

GRV properties are rated according to the predominant use of the land.

The rates in the dollar are based on the valuations as supplied by the VGO in respect of GRV effective 1 July 2020. It is to be noted that the GRV is based on a date of valuation being 1 August 2018.

The VGO is required to maintain valuations of all rateable land in Western Australia for rating and taxing purposes. These values are assessed every three years by the VGO, noting that 2020/21 is a revaluation year for GRV. Every property is valued as at date set by the VGO and this is referred to as the Date of Valuation. Rating valuations are therefore assessed at a snapshot in time, reflecting the property market for the local area at the same time. This ensures consistency and fairness in the allocation of rates.

As the GRV is currently assessed every three (3) years, despite possible changes to the rental market, the GRVs effective 1 July 2020 will remain fixed until the next general valuation (1 July 2023). GRV means the gross annual rental income that the land might reasonably be expected to realise if let on a tenancy from year to year upon condition that the landlord was liable for all rates, taxes and other charges thereon and the insurance and other outgoings necessary to maintain the value of the land.

The GRVs Summary for City of Swan 2020 is as follows:
Date of Valuation: 1 July 2020
GRV revaluation occurs every three (3) years with the next valuation date proposed is July 1, 2023.

 Category # of Assessments  Rateable Values  2019/2020 rate in dollar  2020/21 rate in dollar 
 @0% on 2019/20 rates yield
 Residential 54,047 866,854,045 0.075088 0.085499
 Commercial/Industrial 3,855 363,234,416 0.091652 0.098247
 Heavy Industry 47 34,172,378 0.150173 0.161131
 TOTALS 57,949 1,264,260,839    

Proposed to keep the above categories in the following ascending order:

  1. Residential
  2. Commercial/Industrial
  3. Heavy Industry

As the GRV are re-valued every 3 years and the 1 July 2020 being the revaluation year, the rate in the dollar ($) has to be recalculated to take into consideration the valuation change. The minimum rates for each category will remain the same as for 2019/20.

GRV

Residential

The Residential category is considered to be the base rate for calculation of all other GRV rates in the dollar. It relates to land where the predominant purpose for which the land is held or used is residential. The purpose of this differential rate is to ensure that all ratepayers in this category make an equitable contribution to the City’s revenue.

The objective of the proposed rate in the dollar of $0.085499, is to ensure that the proportion of total rates revenue derived from Residential properties remains essentially consistent with previous years, and for the ongoing maintenance and service provision of the City's assets and services primarily used by residential ratepayers.

The City has utilised the current values provided by the VGO as at 1 April 2020 to determine the total rates revenue per differential rate type based on the proposed zero percentage (0%) increase on the 2019/20 rates revenue. Based on this proposed rates revenue, the City has recalculated the rate in the dollar per differential rate category taking into consideration minimum rates utilising the new values provided by the VGO. Dependant on the valuations supplied, some ratepayers will be subject to more than the proposed increase in rates, whilst some will be subject to less than the proposed increase on rates.

 Proposed Rate in dollar: $0.085499
 Minimum Rate: $890
 Number of rateable assessments 2019/20: 53,025
 Number of rateable assessments 2020/21: 54,047
 Average rates per assessment 2019/20: $1,385
 Average rates per assessment 2020/21: $1,388 

Commercial/Industrial

The Commercial/Industrial differential rate category relates to land where the predominant purpose for which the land is held or used is commercial or industrial. The purpose of this differential rate is to ensure that all ratepayers in this category make an equitable contribution to the City’s revenue.

a) Commercial relates to land where the predominant purpose for which the land is held or used is commercial, including in that term the activities of buying and selling of goods and services in retail businesses, wholesale buying and selling, financial establishments, and a wide variety of services that can be broadly classified as 'business', but where no other more specific use or zone category (such as 'Industrial',) applies.

b) Industrial relates to land zoned for the purpose of Industrial use or development under the City of Swan LPS 17. In this context, the term relates to any of the Industrial zones in the City of Swan zoning Local Planning Scheme, other than the Extractive Industry zone. Land within one of the Industrial zones in the Local Planning Scheme may more appropriately fall into another definition or category which more specifically or appropriately applies, or where the City determines that another definition or category should apply to the characterisation of the subject land. To facilitate the making of a distinction between uses in other rate categories and use for industry, the definition of industrial premises relied on by the City (but not applied to the Industrial differential general rate which depends on zoning) is as follows:

'Industrial premises are premises used for the manufacture, dismantling, processing,

assembly, treating, testing, servicing, maintenance or repairing of goods, products, articles, materials, or substances, and in appropriate cases the following activities or uses associated with industry as described above, may include ‐

(i) The storage of goods;
(ii) The work of administration or accounting;
(iii) The selling of goods by wholesale or retail; or
(iv) The provision of amenities for employees, where any such activity or use is incidental to an industry as defined above, carried out on the same land.

The objective of the proposed rate in the dollar of $0.098247 is to ensure that the proportion of total rates revenue derived from Commercial/Industrial properties remains essentially consistent with previous years, and also includes the ongoing maintenance and service provision of the City's assets and services primarily used in commercial or industrial environment.

The City has utilised the current values provided by the VGO as at 1 April 2020 to determine the total rates revenue per differential rate type based on the proposed zero

percent (0%) increase on the 2019/20 rates revenue. Based on this proposed rates revenue, the City has recalculated the rate in the dollar per differential rate category taking into consideration minimum rates utilising the new values provided by the VGO. Dependant on the valuations supplied, some ratepayers will be subject to more than the proposed increase in rates, whilst some will be subject to less than the proposed increase on rates.

 Proposed Rate in dollar: $0.098247
 Minimum Rate: $1,420
 Number of rateable assessments 2019/2020: 3,861
 Number of rateable assessments 2020/2021: 3,855
 Average rates per assessment 2019/20: $9,285
 Average rates per assessment 2020/21: $9,306

Heavy Industry

The Heavy Industry differential rate category relates to land where the predominant purpose for which the land is held or used is:

a) Transport Depot and Heavy Haulage ‐ Transport Depot, or Transport Depot and Heavy Haulage, or Transport Depot and Heavy Haulage Vehicle Centre relates to land (including buildings) held or used for the predominant purpose of garaging, parking or storage of road transport or heavy haulage vehicles used or intended to be used for carrying goods, materials or persons for hire, rent or reward, or for any consideration; or used for the transfer of goods, materials or persons from one such motor vehicle to another such motor vehicle and including the maintenance, building and repair of such vehicles. Without limiting the generality of the foregoing, this differential general rate characteristic relates to land including buildings held or used for the parking or garaging of commercial vehicles, and land including buildings held or used for the maintenance and refueling of any vehicles referred to above, and the storage of goods brought to the premises by those vehicles.

b) Noxious Industry ‐ relates to land where animal tissue (whether waste tissue or otherwise) is rendered into stable, value‐added materials. Rendering in this context can refer to any processing of animal by‐products into more useful materials, or more narrowly to the rendering of whole animal fatty tissue and purified fats like lard or tallow.

c) Extractive Industry ‐ relates to land held or used for the predominant purpose of an extractive industry, as involving the excavation or extraction of soil, limestone, rock, gravel, shale, sand or clay, or other materials of a like kind, and which activity does not amount to mining operations under the Mining Act 1978 (WA). Or at the option of the Council: Land zoned under the City of Swan LPS 17 for the purpose of Extractive Industry.

d) Brickworks or Concrete Plants relates to the following:
     i) Brickworks: Land held or used for the predominant purpose of a brickworks which, without restriction, may include one or more kilns, drying sheds, or buildings for manufacturing bricks, and may include a quarry for clay extraction if located on the same site as the manufacturing activity.
    
ii) Concrete plant: Land held or used for the predominant purpose of a concrete plant, which may also be known as a concrete batching plant, and may comprise a plant, operation or equipment that combines various ingredients to produce concrete. A concrete plant can have a variety of parts and accessories, including but not limited to mixers, cement batchers, aggregate batchers, conveyors, radial stackers, aggregate bins, cement bins, heaters, chillers, cement silos, batch plant controls, and dust collectors (to minimise environmental pollution).

The purpose of this differential rate is to ensure that all ratepayers in this category make an equitable contribution to the City’s revenue. More of the City's resources are allocated to Heavy Industry's compared to Commercial/Industrial properties.

The objective of the proposed rate in the dollar of $0.161131 is to ensure that the proportion of total rates revenue derived from Heavy Industry properties remains essentially consistent with previous years, and also includes the ongoing maintenance and service provision of the City's assets and services primarily used in a Heavy Industry environment, recognising the much higher demand generated through Heavy Industry activity.

The City has utilised the current values provided by the VGO as at 1 April 2020 to determine the total rates revenue per differential rate type based on the proposed zero percent (0%) increase on the 2019/20 rates revenue. Based on this proposed rates revenue, the City has recalculated the rate in the dollar per differential rate category taking into consideration minimum rates utilising the new values provided by the VGO. Dependant on the valuations supplied, some ratepayers will be subject to more than the proposed increase in rates, whilst some will be subject to less than the proposed increase on rates.

Proposed Rate in dollar: $0.161131
 Minimum Rate: $1,710
 Number of rateable assessments 2019/20: 47 
 Number of rateable assessments 2020/21: 47 
 Average rates per assessment 2019/20: $123,262
 Average rates per assessment 2020/21: $117,154 

Unimproved Valuation (UV)

It is proposed for the 2020/21 financial year that the City adopts the following differential rates UV General, UV Commercial and Farmland utilising valuations supplied by the VGO.

Properties are rated according to the predominate use of the land. UV differential rate types are used primarily for rural, farming, or mining activities.

The City has utilised the current values provided by the VGO as at 1 April 2020 to determine the total rates revenue per differential rate type based on the proposed zero percent (0%) increase on the 2019/20 rates revenue. Based on this proposed rates revenue, the City has recalculated the rate in the dollar per differential rate category taking into consideration minimum rates utilising the new values provided by the VGO. Dependant on the valuations supplied, some ratepayers will be subject to more than the proposed increase in rates, whilst some will be subject to less than the proposed increase on rates.

UVs are based on the site value of the land.

 Category # of Assessments  Rateable Values  2019/2020 rate in dollar  2020/21 rate in dollar 
 @0% on 2019/20 rates yield
UV General 3,491 1,971,080,200 0.0039565 0.0038914
UV Commercial 43 62,005,428 0.0056130 0.0056130
Farmland 516 436,120,000 0.0029003 0.0028841
TOTALS 4,050 2,469,205,628    

 Proposed to have the above categories in the following ascending order:

  1. UV General
  2. UV Commercial
  3. Farmland

UV

UV General

The UV General differential rate category relates to all UV properties where the predominant purpose for which the land is held or used is rural and that does not fall in the differential rate category of “UV Commercial” or “Farmland”. The purpose of this differential rate is to ensure that all ratepayers in this category make an equitable contribution to the City’s revenue.

The objective of the proposed rate in the dollar of $0.0038914 is to ensure that the proportion of total rates revenue derived from UV General properties remains essentially consistent with previous years.

 Proposed Rate in dollar: $0.0038914
 Minimum Rate: $890
 Number of rateable assessments 2019/20: 3,521
 Number of rateable assessments 2020/21: 3,491
 Average rates per assessment 2019/20: $2,222
 Average rate per assessment 2020/21:  $2,203

UV Commercial

The UV Commercial differential rate category relates to relates to land where the predominant purpose for which the land is held or used is Vineyards with Commercial, Large Scale Vineyards, Quarries or Mining Tenements. The purpose of this differential rate is to ensure that all ratepayers in this category make an equitable contribution to the City’s revenue.

a) Vineyards with Commercial ‐ relates to a number of properties which can be described as 'vineyards with commercial' which exist throughout the Swan Valley and provide a significant attraction for visitors, and are considered to add significant appeal to the area. Appeal arises by the operation of cellar sales, and other activities such as eating facilities, retail facilities and areas such as art galleries. Such properties are considered to play a very important role in attracting tourism to the area, and therefore have significance to the district of the City and the Perth Metropolitan region generally.

b) Large Scale Vineyards ‐ Applies to two properties which produce a relatively smallamount of grapes on the property itself compared with the total volume of grapesprocessed on the property. In addition to a large scale production including bottlingfacilities, each property has a wine tasting area, eating facilities, areas set aside foroutside entertainment functions, and other areas for events such as meetings and socialactivities. Retail shopping facilities also exist for tourists which consist of vineyardproducts and local and other products.

c) Quarries ‐ refers to an industry which involves the extraction, quarrying or removal ofsand, gravel, clay, hard rock, stone or similar materials from the land, and may includethe treatment and storage of those materials, or the manufacture or products from thosematerials on, or adjacent to, the land from which the materials are extracted, but doesnot include Industry ‐ Mining. The definition of the 'Extractive Industry' within GRVdifferential categories is acknowledged to have the potential to overlap this Quarriesdefinition, and the distinction depends upon whether a GRV or UV valuation is applied tothe subject land.

d) Mining Tenements ‐ relates to land held or used to commercially extract minerals fromthe land and in this context the term 'minerals' refers to substances the extraction ormining of which is covered by the Mining Act 1978 (WA).

The objective of the proposed rate in the dollar of $0.0056130 is to ensure that the proportion of total rates revenue derived from UV Commercial properties remains essentially consistent with previous years.

Proposed Rate in dollar: $0.0056130
 Minimum Rate: $890
 Number of rateable assessments 2019/2020: 45
 Number of rateable assessments 2020/2021: 43 
 Average rates per assessment 2019/20: $7,695
 Average rates per assessment 2020/21: $8,361

Farmland

The Farmland rate category attracts the lowest differential rate in the dollar and it is considered to be the base rate for calculation of all other UV rates in the dollar. It relates to land where the predominant purpose for which the land is held or used is farmland. The purpose of this differential rate is to ensure that all ratepayers in this category make an equitable contribution to the City’s revenue.

The Farmland differential rate applies to all properties carrying on farming activities in line with the City's Farmland Guidelines. It is intended that this differential rate will foster and encourage specific food farming and horticultural activities.

The objective of the proposed rate in the dollar of $0.0028841 is to ensure that the proportion of total rates revenue derived from Farmland properties remains essentially consistent with previous years.

Proposed Rate in dollar:  $0.0028841
 Minimum Rate: $890
 Number of rateable assessments 2019/20: 514
Number of rateable assessments 2020/21: 516
 Average rates per assessment 2019/20: $2,432 
 Average rates per assessment 2020/21: $2,441

Minimum Rates

The City imposes a uniform general minimum for all rate categories under the UV. For GRV the Residential category forms the basis of minimum rates with Heavy Industry having the highest minimum. It is also recognition that every property receives some minimum level of benefit of works and services provided. The higher minimum is applied to Heavy Industry to ensure that the rates burden is distributed equitably between all property owners.

Submissions

Submissions from any elector or ratepayer with respect to the proposed rates should be forwarded to the City of Swan by 4.00pm on Tuesday 2 June 2020. Submissions should be addressed to:

City of Swan
Kym Leahy
PO Box 196
Midland WA 6936

And clearly marked "Submissions regarding 2020/21 Differential Rates”

M J Foley
Chief Executive Officer