Property Tax and Assessment News From Around the World- For Information Purposes Only* AUSTRALIA What s Inside October 2015

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1 AUSTRALIA What s Inside October 2015 WESTERN AUSTRALIA - Max Light Rail project should be built by the private sector, say public transport advocates WESTERN AUSTRALIA - Land Tax increase for certain landowners in WA VICTORIAN Government introduces council rate capping legislation with power to suspend councils QUEENSLAND - Gladstone land valuations highlight slump in market WESTERN AUSTRALIA - MAX LIGHT RAIL PROJECT SHOULD BE BUILT BY THE PRIVATE SECTOR, SAY PUBLIC TRANSPORT ADVOCATES Perth's stalled Max Light Rail project should be built by the private sector, two leading sustainability and public transport advocates have said. Former investment banker turned sustainability expert Jemma Green and long-time public transport champion Peter Newman said private enterprise could deliver a better transport solution than the WA Government. Under their model, the private sector pays the bill, but also determines how, when and where the light rail link will go. "The whole idea is that you engage the private sector to determine the best routing, because they're going to figure out the most attractive commercial proposition for building apartments, for commercial opportunities, for retail," Ms Green said. Some routes would seek to incorporate banks of land already owned by the Government. Others may require compulsory acquisition of private property. In all cases, the private sector would look for a route that pays off, and the Government would look for one that delivers the optimum rail service and urban renewal. "You don't go and tell the private sector what the routing is going to be - rather, you invite proposals from the private sector and then you figure out which one is the best," she said. Professor Peter Newman has been a life-long campaigner to end Perth's car addiction and is a strong supporter of building light rail in the city. He believes that while heavy rail passenger trains remain the province of governments in Australia, the private sector could deliver high-standard light rail to Perth commuters. "Light rail lends itself to urban development around it and that's the best way to pay for it," Professor Newman said. "Because the value of the land will go up and you just have to extract some of that value and put it back into the building of the train." IPTI Xtracts Page 1

2 Using rising land value to fund a public transport project is known as value capture. Transport Minister Dean Nalder made an oblique reference to using value capture when discussing the Northlink heavy transport road link. He was asked about how it could apply to a project like the Max Light Rail project, but declined to elaborate. But according to Jemma Green, there are two ways value capture can work to ease the financial burden on government - passively and actively. Passive value capture occurs when a government uses cash or debt to build a transport link and stations, and land around those stations increases in value. The return to government comes in the form of increased land tax income, which can be directed to meeting the cost of debt funding for the project. Active value capture is a more radical approach which relieves a government of the cost of funding the project, by handing it over to the private sector. The Government's original plan for Max Light Rail involved three lines from the Perth CBD, first to Mirrabooka and later to the Nedlands and Victoria Park. Under the active value capture scenario, the project would start from a blank sheet. The Government would seek expressions of interest for private construction of Max Light Rail over a route determined by the proponent. The private proponents would investigate the urban development potential of various routes, the optimum sites for stations supporting high density residential and commercial development, and the best route for attracting maximum patronage. The proposal would then be put to the Government and, if accepted, the light rail link would built and run by the private operator, which would develop and sell the land around it. "It's what they're doing in America and it's working out very well," Professor Newman said. "It is possible to do now because there is a big demand for public transport and especially big demand for housing around it." Ms Green said passive value capture had been commonly used by governments in the past but active value capture was now being embraced by cash-strapped governments looking for alternative ways to complete major transport projects. "It's been done successfully with the Canada Line in Vancouver and the East Valley Line in Edmonton are also in the process of doing so," she said. Ms Green, who is a research fellow at Curtin University and also operates a consultancy, said she was already talking with private groups interested in developing light rail in Perth. So light rail is not just the smoother ride and how to get people from A to B in a sexier piece of transport. This is really about how we rebuild our economy for the 21st century. IPTI Xtracts Page 2

3 She said the Government needed to be doing the same. In a statement, a spokeswoman for Mr Nalder said: "While the Minister is very supportive of value capture, it s too early in the MAX planning to progress this initiative or comment on this at this stage." Ms Green said there was particular interest in running light rail from the University of WA and Curtin University's Bentley campus to the CBD. She said a light rail system linking universities with the city and stretching to the suburbs would be critical to WA's next phase of economic growth. Connecting learning centres to the city's commercial heart was vital to strengthening and diversifying the economy beyond its resources base. "We need to look at how we economically diversify ourselves and build resilience into our economy," she said. "So light rail is not just the smoother ride and how to get people from A to B in a sexier piece of transport. This is really about how we rebuild our economy for the 21st century." WESTERN AUSTRALIA - LAND TAX INCREASE FOR CERTAIN LANDOWNERS IN WA The Land Tax Amendment Act 2015 (WA) (Act) was assented to on 24 September 2015, bringing in a new land tax scale for landowners in Western Australia. This new scale will broaden the land tax base and aims to increase land tax revenue by $826 million over four years. Key Changes The new land tax scale implemented in the Land Tax Act 2002 (WA) (LTA) will take effect from the land tax assessment year, and results in the following key changes: Introduction of a minimum flat rate of $300 for properties with an unimproved value of between $300,000 and $420,000; and Increases to all land tax rates (with the exception of the top rate) and adjustments to some thresholds at which the rates change. The changes are likely to have the greatest impact on landowners who own land with an unimproved value between $300,000 and $1,000,000, with some of those landowners expecting to receive their first land tax bill. Set out below is the land tax scale for 2015/2016 and subsequent financial years (as compared to the previous 2014/2015 scale) IPTI Xtracts Page 3

4 Reasons for the Changes During the Land Tax Amendments Bill 2015 (Bill) second reading speech the Hon Peter Collier outlined the following rationale for the amendments: The revised scale seeks to be more consistent with land tax arrangements in other jurisdictions and more evenly distribute the land tax burden across all land taxpayers in WA. Under the current scale, the top 1.5% of taxpayers who own land with an unimproved value of $5.5 million or greater pay 74% of total land tax revenue in WA. Taxpayers who own land with an unimproved value between $300,000 and $1 million on the other hand, comprise 81% of all land taxpayers, but only contribute 3 per cent of land tax revenue. The new scale will see a more balanced distribution, such that the top 1.6% of taxpayers who own land with an unimproved value of $5.5 million or greater will contribute 66% of total land tax revenue, whilst taxpayers owning land with an unimproved value between $300,000 and $1 million will contribute 6.3% of land tax revenue. The new land tax scale was announced in the Western Australian state budget and is purportedly one of a number of proposed revenue and savings measures. Land tax revenue is estimated to increase by an estimated $184m in and $826m over the next four years. Whether further increases will occur is anyone s guess. Perhaps the clearest indication can be found in the second reading speech where the Hon Peter Collier outlined Western Australia s position against the other Australian States: Except for South Australia, all other states levy a minimum flat amount of land tax. The flat amount in other states averages $365. Despite the changes to the land tax scale, Western Australia s land tax will remain competitive with that in IPTI Xtracts Page 4

5 the other states. For example, for a landholding with an unimproved value of $1 million, land tax payable in Western Australia will be $1,750, compared to $2,975 in Victoria, $4,500 in Queensland and $11,588 in Tasmania In the example given, the land tax paid in Western Australia is lower than in some other States, which suggests that there is scope for further increases if indeed Western Australia s land tax (is to) remain competitive with that in the other States. VICTORIAN GOVERNMENT INTRODUCES COUNCIL RATE CAPPING LEGISLATION WITH POWER TO SUSPEND COUNCILS Victoria's Local Government Minister, Natalie Hutchins, says it is up to individual councils to decide if they cut services under a rate capping plan. The Government has introduced legislation into Parliament to legislation to peg local council rates to the Consumer Price Index from next year. It gives the Local Government Minister the power to suspend councils if they repeatedly breach the cap. Ms Hutchins said she expected the bill would be passed before the end of the year. "I've got to emphasise that we're not looking to cut the current budgets, we're just looking to limit how much into the future they can put their rates up," she said. "It's really a day that local ratepayers will be smiling and we're really hoping that with the bill passing the Parliament later this year that the uncontrolled rate rises that we've seen over the last 10 years [will stop]." Councils will be able to apply to the Essential Services Commission (ESC) for an exemption to the cap. However, Ms Hutchins said that could only happen with consensus from the community. "If they want to go above that cap then they need to apply to the ESC and they need to demonstrate that they have the support of their community for that particular project or service," she said. The Municipal Association of Victoria's chief executive, Rob Spence, said councils are still concerned about their ability to fund services. "I wouldn't say we're optimistic," he said. "We think that this has the potential to provide more flexibility. "It also has the potential to provide less, it could be more onerous, so it's because the model's shifted from the ESC model it's really hard to understand where the policy could go from one year to another. "From where we've been I think the model looks like an improvement in terms of the government, it looks like, providing the potential for some flexibility for councils in that the Minister is the one who sets the cap and the cap is based on a policy decision of government." IPTI Xtracts Page 5

6 QUEENSLAND - GLADSTONE LAND VALUATIONS HIGHLIGHT SLUMP IN MARKET Gladstone property owners will receive new land valuations in The region is one of 40 Queensland local government areas earmarked for the annual market surveys that influence council rates and budget decisions. The Valuer-General's office puts the current median value for residential land in the Gladstone Regional Council area at $157,500 and rural residential at $152,500. Valuer-General Neil Bray is unable to predict how the region will perform, but Natural Resources Department data show the region's valuations have fluctuated over the past five years. This year values dropped 14.6% because of a softening in the resources and mining sector, and the impact of oversupply and diminishing demand for housing. Values fell 5.4% in 2014 after rising 7.3% in In 2012 there was a strong increase of 19% and in 2011 values were up 15.7%. Mr Bray said the decision to value the region was based on consultation with the council, local groups and industry stakeholders, and evaluation of property market survey reports. He said valuers considered property sales since the last valuation and predicted movements in the market. "Other issues considered include the impact of natural events, the state of the economy, the effects of mining, planning and zoning changes, commodity prices and population growth," he said. Valuation notices will be issued by March 31. IPTI Xtracts Page 6