SRD has been reporting on Victorian Council rating systems since 1991. We do this because it is simple to measure economic changes in response to rating systems. Commercial ratepayers find this reporting valuable for investment and development purposes. Residential ratepayers find the reporting valuable for obtaining equity in taxation conditions.

Victorias Rating Systems have historically undergone frequent changes beginning with radical local government legislation of 1920. Since then, there have been times when a council has changed from one method to another, from one year to the next. This has enabled extensive research to be undertaken, to determine the impact, if any, on the economy, and the change, if any, in ratepayer behaviour as a consequence of rating systems.

Councils mainly raise revenue from municipal rates. Rates are levied either on the site value only of the property, or on the total capital (market) value. Each method has resulted in different economic performance, which the Group has measured.

A newly elected Liberal State Government in 1992 brought with it a complete review of local government activities and reduced the number of Councils, Boroughs, Towns and Districts from 210 to 78. A review of accountability, administration and boundaries was probably overdue, and in time, some of the changes made will prove positive for the state.

When Council changes were proposed, the issue of rates proved the most contentious for both commercial and residential ratepayers and tenants. A requirement for all amalgamated councils in Victoria once formed, was to change over to a uniform system of rating. The required system for some was a new form of taxing improvements never before implemented in Victoria.

To finance the needs of local Government, councils may either tax a buildings and/or rate land. As a consequence of this the employment, building vacancies, renovations, building numbers are influenced and comparisons between councils and base rating systems therefore measure these differences. The Office of State Revenue, Valuer Generals Office, Grants Commission, Australian Bureau of Statistics and Councils themselves compile the data which SRD use for reporting.

Brief summary of research

Melbourne is an interesting city, particularly its local government. It has been the only city in the world that uses two different rating structures, side by side, to finance local government. One system rates land, the method known here as "site value", the other taxes buildings, (NAV/CIV). Also, there have been times when a council has changed from one method to the other, and from one year to the next. This has enabled extensive research to have been undertaken over the years.

Evidence and research compiled to date, indicates that when Victorian councils have changed from taxing improvements to rating land, the effect upon the municipality was observed to have been beneficial for the whole local community. In particular, site rating is found to

In every instance where councils have changed from taxing buildings to rating land, an immediate, measurable, and sustained increase in building activity and investment has taken place. No exception has yet been measured. Property owners have responded almost immediately by constructing new, more and better quality buildings of all types, when they know they will not suffer higher municipal taxes by doing so.

Site rating has been found to encourages extensive urban renewal particularly in inner suburban regions, undertaken notably by private enterprise without the need for government handouts.

The change from taxing buildings to rating land has always been adopted by ratepayer choice.