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Councillor Column – 19 March 2024 – Councillor Greg Armstrong

Mar 19, 2024

For Immediate Release 19 March 2024
Authorised by Councillor Greg Armstrong  

Rating Snapshot –

As the financial year draws to a close, I would like to take this opportunity to provide some background on rating, rates and charges and some of the limitations placed on Council revenues. Hilltops Council levies rates and charges in accordance with the provisions of the Local Government Act 1993.

Broadly, there are 3 types levied by Council, being General Rates and Charges including Domestic Waste Charges, Water Charges and Sewer Charges.

The income from General Rates and Charges is expended on everything that is not Water or Sewer.

The Act allows Council to levy rates as either an “ad valorem” or as a “base rate” plus “ad valorem”.

Ad Valorem is latin for “according to value” and is a method where a charge is made against a property based on the land value.

Land value used to be known as Unimproved Capital Value (UCV) as it does not include the value of any improvements or buildings on a property. Land values used for rating are determined by the NSW Valuer General and supplied to Council.

Hilltops Council uses the Ad Valorem method for the General Rate calculation.

An example of ad valorem rate calculation.

Where Council sets the General rate at 1cent in the dollar and a property had land value of  $80,000 then the ad valorem rate would be 80,000 X 1 cent  or  $800.

In contrast, for base rating systems the final General Rate charge is made up of two parts, the “base rate” part and an “ad valorem” part.

A base rate is used to recover direct costs of services and can be highly complex in its formulation.

An example of rating calculation with a base rate component;

Where Council sets the Residential Base rate at $400.00 and the ad valorem at one half of a cent then the same $80,000 land value property would attract a General Rate charge of  $400 + 80,000 X 0.5 cent or $800.

In both cases the ad valorem component is increased as land value increases but is more heavily impacted by land value in the straight ad valorem method.

On your rate notice you will notice that Water and Sewer Charges are not calculated by the ad valorem method.  Water and Sewer charges are made as fixed Charges and are not influenced by changes in land value. For Water and Sewer charges to be made on a property the services must be either connected or within the prescribed distance from the property and available for connection. This means that your property does not need to be actually connected to be liable for a charge.

Revenues raised by Water and Sewer charges are restricted and cannot be used in areas other than Water and Sewer. This ensures that all funds raised by Water Charges are spent on providing Water Services and all funds raised by Sewer Charges are spent on Sewer Services. Water and Sewer service are considered to be user-pays schemes.

Domestic Waste Charges are made for all properties in the local government area. Revenue raised by Domestic Waste Charges can only be used to provide domestic waste facilities and cannot subsidise other operations, similarly the General fund may not be used to subsidise Domestic Waste operations.

Thank you for your time – have a great weekend and travel safely.

Councillor Greg Armstrong  

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