Does Infill Financially Benefit Local Governments?

It is sometimes said that local governments promote sub-divisions and high rise in order to fill their coffers. The logic is, the more dwellings there are, the more money coming in.  This is incorrect.

As mentioned before, in the budget process rates are set based on the planned expenditure for the coming financial year. So if it is anticipated that $40,000,000 is required for the coming financial year, the local government will generally seek to set rates at a level to bring in $40,000,000. This is then spread across all the ratepayers according to the Gross Rental Value which is set by the Valuer General’s Office.

A simplistic example is below.

If $40,000,000 is required and there are 30,000 dwellings; the average rates will be $1,333.

Assuming there has been a 5% increase in dwellings, it does not become $1,333 multiplied by 31,500 dwellings = $41,989,500. Instead the required $40,000,000 would be divided by 31,500 and average rates would be $1,270.

Infill does not equate to more money for the local government. Instead it should equate to lower rates for ratepayers.

Now, that said, why don’t rates ever drop then? That’s for a different blog.

 

Power to the people.

(Please be aware that these views are my own and have not been endorsed by the City of Bayswater.)

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