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Brisbane’s Inquiry into Land Value Rating



A Summary of the Committee’s two-volume Report on its Deliberations and Findings.


September 1989


A Summary of the Committee’s two-volume Report on its Deliberations and Findings.


(Chairman) Deputy Premier and Treasurer of Queensland 1965/76
P D DAY LL B, Dip TCP, FRAPI Town Planner

R L HANCOCK FAIV, FREI, FSLE Managing Director, R L Hancock Pty Ltd Past President, Brisbane Chamber of Commerce

G T HOFFMAN B Bus, BA, AASA!CPA, FIMM Secretary, Local Government Association of Queensland Inc

R C JENSEN B Econ, M Ag Ec, A Ed, PhD Reader, Department of Economics , University of Queensland

G E KROLL QDAH, DURP, FAIV, FSLE Valuation Program Leader, Queensland Agricultural College and Senior Vice President, Australian Institute of Valuers & Land Administration

N MACPHERSON B Com, M Pub Ad, AASA, ACIS, FIMM, FRAIPA, LGC (Queensland) Deputy Town Clerk and Manager, Corporate Services Division, Brisbane City Council

J D TUCKER BA, M PubAd, MAPS Senior Lecturer, Department of Government, University of Queensland

September 1989


This edition of the summary of the two volume report has been produced by the Land Value Taxation Campaign and it is distributed with the consent of Brisbane City Council.

Copies of the complete two-volume report and further information are available from:

Chris Mead
Acting Principal Finance Officer / Rates
Brisbane City Council
69 Ann Street
Australia 4001

Telephone (61) 7-225-4651 Fax (61) 7-229-1168

The documents will be sent by sea mail unless otherwise requested and paid for; please allow eight weeks for delivery.

July 1995


        The Valuer-General’s revaluation of Brisbane properties in 1986 resulted in an average increase in valuations of 163 percent over
        previous valuations. Increases in some instances were as high as
        400 percent. The extent of the increases gave rise to public
        apprehension about the possible impact of the new valuations on
        the rates levied by the City Council. Another concern was the fact
        that Brisbane residents paid water and sewerage rates based on the
        value of their properties regardless of the amount of water they
        used. Within the Council there was concern about other anomalies,
        as well as some uncertainty about whether and to what extent areas
        of the city should be differentiated for rating purposes.

        Accordingly in mid-1987 the Lord Mayor instituted the present inquiry.
        The Lord Mayor invited the Committee to undertake a wide-ranging
        review of the operation of the valuation and rating system in
        Brisbane and report on the revenue-raising and revenue-earning
        options which were open to Council. In effect the Committee’s
        charter required it to consider, in respect of Brisbane, a series
        of basic questions:

        (a)  Was a rate levied on property an appropriate means of local
        government revenue-raising?

        (b)  If so, how should property be valued?

        (c)  What alternative or supplementary means of revenue-raising
             (or revenue-earning) were available?

        (d)  In particular, how should services such as water supply and
             sewerage be paid for?

        (e)  Were there any ways by which the means of revenue-raising could
             contribute to expenditure-saving?


        The City Council presently raises a substantial part of the revenue
        it needs each year by levying rates on the value of land assessed
        periodically by the Queensland Valuer-General. The Valuation of
        Land Act requires the Valuer-General to assess the unimproved value
        of land in the city area for this purpose, and the City of Brisbane
        Act authorises the City Council to levy a general rate on all rateable
        land. Council is also authorised to levy water and sewerage rates
        and to levy charges for various services. In practice the operation
        of these basic mechanisms is subject to qualifications, some of which
        are unavoidably complex. Particularly in the case of water and
        sewerage services, the circumstances of an enormous variety of
        industrial, commercial and residential users require complicated
        supply and pricing arrangements; and the situation is compounded
        by the fact that the majority of Brisbane’s residential properties
        are not metered. Historically, water pricing arrangements have not
        been specifically aimed at discouraging consumption.

        Council’s power to levy a general rate is qualified in the case of
        land being used for primary production. The general rate levied on
        such land must not exceed one-half of the general rate levied on
        other land, and the potential value of rural land for more intensive
        urban uses is not taken into account. Likewise the potential value
        of land used exclusively for a single dwelling house is not assessed
        for rating purposes. In general Crown lands are exempt from general
        rates, as also are certain religious, charitable and educational
        bodies. Pensioners in receipt of a full pension and in possession
        of a health benefit card are eligible to have a proportion (currently
        40 percent) of their total rates remitted, and their properties in
        due course pass unencumbered to their successors in title. Council
        may levy an additional separate rate on parts of the city which have
        been specially benefited by works or services not normally provided.
        In levying a general rate Council may also differentiate between
        sectors of the city designated with the concurrence of the Valuer-

        The preceding graphs provide a broad overview of the origin and
        distribution of Council’s revenue and expenditure (and highlight the
        relative significance of Council’s transport operations). Council
        revenue includes grants and subsidies from other levels of government,
        and revenue from the development and sale of Council’s own land. It
        should also be noted that, as a condition of planning approval,
        Council negotiates the contribution of works and services which
        offset in some measure the increase in land value which planning
        consent confers upon private landowners.


        Recognising that there had been a number of previous inquiries
        locally, interstate and overseas into property valuation and local
        government rating, the Committee resolved that its recommendations –
        whether or not they were accepted – should be logically consistent
        and defensible in principle. At the outset, therefore, in pursuit of
        the twin objectives of equity and efficiency, the Committee reviewed
        (a) the role and functions of government recognised by economic theory
        for fiscal purposes; (b) the economic classification of goods and
        services required by the community; and (c) the basic principles of
        taxation. The Committee appreciated that the nature and extent of
        goods and services provided and the functions which a government
        exercised were variables which in turn could have a bearing on the
        principles of taxation adopted.

        The Committee came to the conclusion that the benefit principle
        rather than ability-to-pay was the most equitable and rational basis
        of public revenue-raising. In other words, the Committee resolved not
        to equate revenue-raising with simply taxing wealth. It was reinforced
        in this view by its belief that the redistribution of income and
        wealth was not a primary function of local government. It was
        moreover impressed with the view that – in any community – the
        legitimate generation of income and wealth through labour, skill and
        enterprise should be encouraged rather than penalised.

        By contrast, the ability-to-pay principle related levels of taxation
        primarily to levels of income. It explicitly provided for redist-
        ribution from upper to lower income groups in the community.
        Carried to its logical conclusion, it implied equality of sacrifice,
        which ultimately meant taxing all wealth and incomes down to the
        lowest common denominator of sacrifice – a proposition which the
        Committee was not disposed to endorse.

        Nevertheless opinions within the Committee diverged about the
        relative merits of the benefit and ability-to-pay principles in
        achieving the goal of equity, and about whether revenue-raising
        could ever be entirely benefit-related. The principles were not
        mutually exclusive. Some taxes were seen to combine elements of
        both principles, And while the redistribution of income and wealth
        was primarily a policy function of national and state governments,
        local government revenue-raising and expenditure inevitably had
        some redistributive effects both between income groups and between
        localities. Indeed, in the case of Brisbane, the amalgamation of
        smaller local authorities into one large local government council
        explicitly involved cross-subsidisation in the provision of
        “standard” levels of service over a large area. A question,
        therefore, was whether benefit-related revenue-raising mechanisms
        could continue to achieve this objective.

        Notwithstanding some divergence of views about these issues, in
        respect of “public goods” [1], the Committee concluded that – as a
        basic principle – in seeking to recover the cost of the works and
        services it provided, a revenue-raising authority should – as far
        as possible – charge the beneficiaries of such works and services to
        the extent that such works and services and their beneficiaries could
        be distinguished and were identifiable. Where works and services were
        not, or could not be, separately identified and specifically charged
        for, their cost should be recovered by a basic general charge which
        should nevertheless conform, as far as possible, with the benefit

        In respect of “merit goods” [2], the Committee adopted the view that
        charges should be related primarily to the value of the service or
        benefit provided (rather than to some arbitrarily determined level
        of cost-recovery); while in the case of any local government works
        or services which were effectively “market goods” [3],  it took the
        view that local government should adopt a realistic pricing policy
        and be entitled to earn surpluses (which could be applied to the
        cross-subsidisation of public and merit goods).

        The Committee defined efficiency as requiring that revenue-raising
        mechanisms should be cost-effective to administer, visible (in order
        to maximise accountability), predictable, and difficult to evade,
        and that they should not induce undue distortions in the economy.
        At the same time, it recognised that there would be circumstances
        in which, for various reasons, some citizens would be temporarily
        or permanently unable to meet their obligation to contribute to
        local government revenue. Local government would wish to offer
        relief to citizens experiencing hardship or incapacity. Any system
        of concessions, however, should be consistent with the benefit

        To sum up, ideally what the Committee sought was a revenue mechanism
        or a combination of mechanisms which would enable Council to recover
        the cost of the works and services it provided as directly as possible
        from those who used or benefited from them, but which also enables
        works and services to be provided at a uniformly reasonable standard
        throughout the community – leaving the redistribution of wealth to
        other levels of government as a policy objective as they saw fit.


        The Committee reviewed all the possible revenue-raising options. These
        included property taxes of various kinds, a poll tax, local income tax,
        sales taxes, taxes on particular goods and services, user charges for
        certain services, betterment levies and developer contributions, and
        grants from central government. In addition it reviewed the scope for
        revenue-earning through commercial operations and joint ventures,
        together with the scope for revenue-conserving through the more
        rational operation of pricing policies, concessions and exemptions.
        It then tested all these possible options against various criteria of
        acceptability in terms of equity and efficiency, and their conformity
        with the benefit principle.


        Meetings of the Committee or its research sub-committee were held on
        average fortnightly. The Committee drew upon the ample literature
        covering the theory and practice of valuation and rating and public
        revenue-raising and revenue-earning, especially the reports of
        previous inquiries, and reports on recent developments in the United
        Kingdom. It assembled copies of all the relevant local and interstate
        legislation. It addressed a comprehensive questionnaire about current
        valuation and rating practice to 78 Australasian local governments and
        in a number of cases it followed up the questionnaire with supple-
        mentary inquiries. It invited public submissions by advertisement in
        the Brisbane press. It sought and received advice and information
        from officers of the Council, from acknowledged experts in various
        professional areas, and from the Queensland Valuer-General.

        While the Committee operated at arm’s length from Council, it
        nevertheless informed itself of current policy issues confronting
        the Council. It submitted three interim reports to the lord Mayor.
        Its interim recommendations regarding water and sewerage charges
        were substantially adopted in Council’s 1988-89 budget.

        A feature of the inquiry was the commissioning of research to explore
        and quantify the implications of possible options and develop models
        to assist Council. Compared with earlier inquiries, two other features
        distinguish the context in which the present inquiry was conducted.
        One was the introduction of annual valuations by the Valuer-General
        in 1986. Secondly, town planning controls defining permissible land
        uses now warrant greater recognition as a determinant of the value
        of land than has hitherto been the case.


        Conceptually and administratively public revenue-raising is an
        extraordinarily complex and contentious field of inquiry. All
        members of the Committee wished to improve the status and public
        perception of local government. All members endorsed the need for
        democratic and well-informed local government to be freed from
        arbitrary restraints upon its resources and its capacity to respond
        to the needs of an evolving society. Not surprisingly, however,
        members differed in their philosophical perspective. Thus it will
        be noted that the conclusions and recommendations which follow were
        not unanimous in some instances, while in other instances the form
        of expression may not necessarily be an exact representation of
        individual members’ views:

(1)     In searching for a general revenue base the Committee noted that a
        poll tax, i.e. a uniform tax on every (adult) resident of the city,
        had a prima facie attraction. A poll tax appears to satisfy the
        requirement that all citizens who benefit from living in the city
        should contribute to the cost of building and maintaining it. Some
        members were therefore impressed with the argument that, compared
        with an alternative, a poll tax was a more direct method of recouping
        the cost of personal (as distinct from property-related) services
        provided local government. The Committee, however, is firmly of the
        opinion that, as a general revenue base, a poll tax should be
        rejected, because a uniform per capita tax would impose a
        significantly greater actual and proportionate burden upon most
        lower income-earners (and would therefore constitute an intrusion
        by local government into the area of income redistribution which is
        more properly the function of central government); and because of
        the very considerable difficulties of costs which would be involved
        in administering it.

(2)     The Committee considered the implications of a local income tax.
        Not all residents of the city earn their income in the city, however,
        and not all those who earn income in the city are residents of the
        city. Even assuming that a local income tax were constitutionally and
        administratively feasible, the Committee is firmly of the opinion
        that any form of income tax is incompatible with the benefit principle.
        Income taxes tax income regardless of services used or benefit enjoyed.
        While the Greater Brisbane concept required a measure of cross-
        subsidisation between the wealthier and less well endowed areas of
        the city, this objective could be achieved by other means. As
        deliberate policy objective, redistribution of wealth was primarily
        function of the central government. Accordingly the Committee
        recommends that no form of local income tax should be contemplated.

(3)     For similar reasons, the Committee recommends against any form of
        broad-based consumption tax as a general revenue base. Such a tax
        would be an undiscriminating revenue-raising device unrelated to the
        benefits and costs of city services provided (as well as being
        inherently inflationary and likely to divert trade away from the

(4)     As a general revenue base, the conclusion of the majority of Committee
        is that a tax or rate levied on property – provided it levied on land
        and not upon the buildings or other visible improvements erected on
        land – is the basic general revenue source which most nearly conforms
        with the benefit principle. In the Committee’s view every resident of
        the city and every activity conducted in the city uses or occupies land
        directly or indirectly, and a charge on the value of land used or
        occupied is paid, directly or indirectly, by every citizen. If all land
        in the city were valued frequently and in accordance with use of it
        permitted by the city’s town planning controls, a land value charge
        should accurately reflect the benefit derived from its use or
        occupation. Moreover, a charge on the value of land encourages
        development and discourages the speculative withholding of vacant
        land from productive use (whereas a charge on the value of buildings
        other improvements tends to penalise enterprise and development.)

(5)     All members of the Committee agree that a charge on the value of land
        is relatively simple and inexpensive to administer and is impossible
        to evade. Some members also wish to place on record their view that
        land is a finite commodity and that a charge levied at the same rate
        on all uses of land does not affect the free market allocation of
        resources and cannot be passed on. The rental value of land, when
        capitalised, gives land its value, and to the extent that the
        community captures some of the rental value of land by way of a
        charge, a land value charge operates to depress the value of land
        and therefore its price.

(6)     While not all members of the Committee share the same philosophical
        position in respect of the nature of land, or the same view of the
        impact of a land value charge, the Committee’s unanimous response to
        its first term of reference is that a rate levied on the value of
        unimproved land is an appropriate means of local government revenue-
        raising. The Committee’s conclusion in this regard is in line with
        the findings of other recent Australian inquiries. Most members,
        however, go further. In their view a rate on unimproved land value
        is not merely appropriate: it is the most efficient and equitable
        source of general revenue, both in principle and in practice.

(7)     Paragraphs (8) to (22), hereunder, deal with matters which flow from
        or are incidental to the Committee’s endorsement of a rate on
        unimproved land value as a general revenue source.

(8)     With the advent of annual valuations, coupled with increasingly
        comprehensive town planning controls, the Committee is satisfied
        that, at any given time, there is no reason why the Valuer-General’s
        valuations should not accurately reflect the value of all land in the
        city. Valuations are based on the open market’s assessment of the
        Vocational characteristics of land (including its size, frontage
        and shape); the availability of works and services; and its highest
        and best use. The Committee believes that henceforth there should be
        fewer anomalies and fewer “surprise” increases. Nevertheless the
        rights of objection and appeal should continue to be available to
        all landowners who wish to challenge the Valuer-General’s assessment,
        and the Committee considers that rights of objection and appeal in
        respect of both general and annual valuations should also be available
        to local government councils (which presently may object only to
        general valuations which they consider to be too low).

(9)     Certain anomalies, however, require to be addressed. Thus the
        Committee considers that, if rural land within the city area is
        zoned and used for rural purposes, it should be valued accordingly,
        in which case the present statutory requirement that the general
        rate on rural land should not exceed 50 percent of the general rate
        levied on urban land constitutes a double benefit which is no longer
        necessary and should be repealed.

(10)    If valuations accurately reflect the present value of all land, the
        Committee considers that there are only two situations in which
        disproportion between benefits conferred and costs recovered would
        justify a departure from a uniform general rate. One is where land
        benefited by specially provided extra works or services not generally
        provided by the Council (as in the case of the Queen Street and
        Chinatown Malls). In this case a separate (additional) rate is
        appropriate. The other situation is where it can be demonstrated
        that the Council is not recovering a proportionate share of the cost
        of works and services from identifiable sectors or categories of land
        uses. The Committee considers that a differential rate could be
        warranted in these circumstances.

(11)    In relation to differential rating the Committee commissioned the
        development of a model to enable the Council to monitor any disparity
        between the benefits conferred on sectors or categories of land use
        and the general rate revenue derived from them. It sought to discover
        for example, whether there was any disparity in this regard between
        the residential, commercial and industrial sectors. The Committee’
        research shows that there have been some disparities but that these
        appear to have been redressed in the most recent valuations. If in the
        course of monitoring relativities a disparity between sectors were to
        become apparent, a differential rate should be levied to ameliorate
        it. But, in the absence of any such evidence, the Committee is very
        firmly of the opinion that recourse to differential rating would
        undermine the credibility of the valuation and rating system.

(12)    The Committee draws attention to the fact that rates of income-producing
        properties are currently tax-deductible. Thus, while there is no
        present disparity which would justify differentiation between sectors
        on a pre-tax basis, the majority of members are of the opinion that
        Council could consider differential rating to equalise the after-tax
        incidence of rates (in which case higher rates of income-producing
        properties would in effect be funded in part by the Commonwealth).

(13)    Where property owners continue to reside on land which is zoned for
        a higher intensity use and is therefore valued accordingly, the
        Committee recognises that some dispensation from rates is warranted.
        However, the extent of the present dispensation (via section
        11(1)(vii) of the Valuation of land Act) is quite unwarranted. The
        majority of the Committee therefore recommend that, while the existing
        residential use continues, owners should be eligible to defer that
        proportion of rates attributable to the increased value. If a property
        is transferred to another residential occupier, the same dispensation
        should be permitted subject, however, to the rate due and payable
        being not less than the rate calculated on the value established by
        the sale price. It is further recommended that owners of farming land
        which has been zoned for urban use should similarly be eligible to
        apply for deferment while the land continues to be farmed. The
        existing residential or farming uses may of course continue
        indefinitely. If so, the Committee considers it reasonable that the
        deferred rates should not continue to accrue, but should be written
        off for any retrospective period in excess of five years.

(14)    The Committee considers that there is no valid reason why the rating
        of individual subdivided lots should be delayed. At present a
        developer retains the benefit of an en globo valuation until
        subdivided lots are sold. This reduces any incentive to sell, and
        encourages the withholding of land from the market for investment.
        The Committee considers that, consistent with its other recommend-
        ations in respect of concessions, this concession should not be
        conferred by the Valuation of Land Act. In the case of new
        subdivisions, therefore, the Committee recommends that every new
        subdivided lot should be separately valued and become rateable upon
        registration of the survey plan.

(15)    In practice, irrespective of the value of their properties, all
        property owners are currently liable to pay a minimum general rate
        determined by Council. In the Committee’s view, however, while this
        practice may be partly dictated by administrative convenience, it
        represents a departure from principle at the lower end of the rating
        scale. If land values for all properties are assessed frequently
        and accurately, then the majority of the Committee believe that,
        in principle, the amount of the general rate payable should in all
        cases be that calculated on actual values. The Committee noted that
        minimum rates tended not to distinguish between large and small home
        units in multiple dwellings. The Committee also noted that, whereas
        dwelling units in buildings subject to the Building Units and Group
        Titles Act could be levied minimum rates, flats in otherwise similar
        buildings not subject to the Act could not be individually rated. It
        acknowledged that if a minimum rate were not levied, valuations of
        multiple dwelling unit sites were such that the apportionment of the
        land value among a large number of individual home units could lead
        to unreasonably low actual values for each unit. It might be possible
        to remedy this by changes to the valuation guidelines.

(16)    The Committee noted local government’s historical association with
        property-related works and services. Thus a rate on property may be
        seen as a particularly appropriate basic revenue source. However,
        the Committee’s affirmation of the merits of taxing the unimproved
        value of land as a basic source of public revenue does not rely on
        this traditional association, and does not imply that land value
        taxation should be confined to local government. While some merit
        was seen in land value taxation being regarded as a distinctive
        local government revenue source, in principle, in the Committee’s
        view, the unimproved value of land is a logical basis for revenue-
        raising irrespective of the level of government.

(17)    Unimproved value requires to be defined. Since the turn of the [20th]
        century local government rates in Queensland have been levied on
        the unimproved capital value (UCV) of properties, meaning the value
        of the land literally without any improvements of any kind (but with
        all existing amenities). There are difficulties and anomalies,
        however, associated with this definition of land. For example,
        improvements such as levelling, clearing and filling carried out
        many years previously become virtually impossible to identify. The
        Committee therefore prefers the concept of “site value”. This means
        the value of land including improvements which have merged with it
        over time because they have become permanent; require no maintenance;
        and for all practical purposes have become invisible. The Committee
        is therefore of the opinion that, for the purposes of assessing the
        rateable value of land in Brisbane, such improvements should be
        deemed to have merged with the land after ten years or upon its
        prior sale.

(18)    Reviewing generally the operation of the land valuation and rating
        system, the Committee believes it is inherently sound. The Committee
        wishes to emphasise, however, the critical importance of frequent and
        up-to-date valuations, and the need for annual valuations to come
        into effect as soon as possible after they have been made. Its
        recommendations are formulated on the assumption that valuations
        will continue to be (statistically) re-assessed at least annually,
        and that there will be frequent general revaluations to review
        relativities over time. The Committee noted that elsewhere in some
        instances valuation for rating purposes is undertaken by local
        government councils. In the Committee’s view, however, valuation
        and rating should be recognised as separate functions, neither of
        which should be manipulated for the purposes of the other. Thus the
        Committee endorses their allocation to separate bodies as is presently
        the case in Queensland.

(19)    Compared with PAYE taxation, the levying of a rate on property is a
        highly visible form of revenue-raising. This is a virtue, since it
        maximises a revenue-raising authority’s accountability for expenditure.
        The price of high visibility, however, may be disproportionate
        unpopularity, particularly if rates are collected in periodic lump
        sums. The Committee therefore recommends that Council work towards
        further spreading the payment of rates by instalments at less than
        quarterly intervals.

(20)    The Committee also recommends that information generally regarding the
        valuation and rating system be more widely disseminated. In particular,
        it believes that the fact that valuations are based on current market
        values needs to be more widely appreciated. While property owners may
        complain about high valuations, the Committee is not aware of any
        property owners who would willingly sell their properties for less
        than their market value.

(21)    In particular, the Committee believes that there needs to be greater
        recognition of the fact that population growth will inevitably – and
        quite properly – lead to increased land values, particularly in prime
        locations. This will pose problems, for example for elderly residents
        in these locations who may thus become in effect asset-rich but income-
        poor. These circumstances may warrant deferment – but not a waiver –
        of the obligation to pay rates on the true value of their properties.
        As the Committee emphasises in paragraph (34), the obligation should
        remain a charge on the land.

(22)    The Committee has examined the policy of “rate-pegging” or “rate-
        capping” as practised by the Thatcher government in Britain and the
        Wran and Greiner governments in New South Wales. While rate-pegging
        has been conceived as a means of arbitrarily limiting the growth of
        local government taxation, it has had the opposite result in many
        cases. Rate-pegging has been demonstrably disastrous for the autonomy
        and electoral accountability of local government and has failed as an
        intended restraint upon local government revenue-raising. Indeed,
        distortion of the rating system has been so severe that in Britain a
        poll tax (or “community charge”) is now replacing domestic rates, and
        a similar proposal is under discussion in New South Wales. The
        Committee was disturbed by a recent media report that rate-pegging
        had been advocated in Queensland. The Committee records its strong
        opposition to any form of rate-pegging (or the `freezing’ or deferring
        of valuation changes).

(23)    In considering possible options which might be seen as supplementary
        revenue devices, the Committee does not favour charges levied on goods
        and services which are simply revenue-raising taxes unrelated to
        benefit received or to the cost of city services provided. In this
        category are charges such as sales taxes on selected goods, bed taxes,
        accommodation taxes and various forms of business taxes. The Committee
        is of the opinion that any consumption taxes levied on goods or
        services not provided by the Council are incompatible with the benefit
        principle (as well as being inherently inflationary and regressive).
        Indirect taxes are also “invisible”, and their accountability is
        thereby obscured. While there was some support for the view that local
        sales taxes could be a means of recovering some revenue from non-
        residents and visitors, the majority of the Committee consider that a
        tax on consumer goods could only be justified if it served to achieve
        some policy objective (such as, for example, traffic restraint, or the
        minimisation of pollution). The Committee recognises that, while
        tourists and non-residents use or benefit from city services, they
        contribute in other respects to its prosperity. A share in this
        prosperity should more properly be recouped for the city through the
        increased value of rateable land on which, for example, accommodation
        and entertainment facilities are erected.

(24)    Nevertheless the Committee considers that there are a number of
        identifiable works and services provided by Council which benefit or
        are used by identifiable people or activities. Where the extent of the
        benefit or use of these works and services can be identified, the
        Committee considers that their cost should be met (at least in part)
        by specific separate charges. Providing such works or services from a
        general rate on land is neither equitable nor efficient. In particular,
        the Committee considers that, while the availability of water and
        sewerage affects the value of land, the actual consumption of water
        has no necessary relationship to land value.

(25)    The Committee is strongly of the opinion that greater community
        recognition of the cost of reticulated water will determine whether
        and when the city’s water supply headworks will need to be augmented.
        Accordingly the Committee recommends that the consumption of water
        should be measured; that metering of residential properties (as well
        as commercial and industrial properties) should be introduced,
        voluntarily in the first instance; and that Council should move
        towards abandoning water rates levied on land value. The Committee’s
        report identifies a number of options which the Committee believes
        Council should investigate in relation to water pricing having regard
        to storage, treatment and reticulation costs and the special
        requirements of particular users. In respect of sewerage the Committee
        recommends a flat charge for all self-contained residential properties
        in lieu of the pedestal charge. (While recommendations in an interim
        report to the Lord Mayor were substantially implemented in Council’s
        1988-89 budget, the Committee believes that the fixed charge of the
        charge-plus-consumption package recommended by the Committee to
        encourage voluntary meter installation was not in fact sufficiently
        low to be an effective inducement).

(26)    The Committee is of the opinion that water supply and sewerage are
        not the only Council services the beneficiaries of which can be
        separately identified. It therefore recommends that Council should
        review all its services to ascertain whether their cost can be
        recovered wholly or partly from charges based on the extent of their
        benefit to identifiable beneficiaries. By way of example, the
        Committee is of the opinion that certain foreseeable specialist
        library services should be charged for and not absorbed in the cost
        of basic library services.

(27)    In particular, it believes that equity requires that Council’s road
        maintenance costs should not continue to be wholly met from general
        rate revenue (levied, irrespective of vehicle ownership, upon all
        property owners, some of whose properties are depreciated in value
        by road works) but that at least in part they should be apportioned
        among vehicle users. The Committee considers that the most equitable
        and practical way to do this would be by way of a motor vehicle fuel
        franchise levy, imposed within the municipal area in the first
        instance, and extended to the actual metropolitan area by negotiation
        with the surrounding local government councils.

(28)    While in the Committee’s opinion a motor vehicle fuel franchise levy
        is the most direct way of securing a contribution from motor vehicle
        users who enjoy the benefits of road maintenance and improvements, the
        Committee endorses Council’s announced intention to increase metered
        parking charges and impose a levy on inner city parking spaces [4]. Of
        these measures, only on-street parking charges are a direct charge
        for the benefit of road space provided by Council. Both, however,
        will operate to minimise the disbenefit of congestion caused by
        motor vehicle usage in the central city and indirectly compensate
        for the use of roads leading to the city.

(29)    The Committee reviewed the concept of betterment, i.e. the benefit
        conferred upon landowners by town planning approvals which increase
        the value of their land. It noted that rates on increased land values
        recoup a small part of this windfall increase, and that contributions
        to infrastructure required from developers as a condition of develop-
        ment approval offset a proportion of the increase. The Committee does
        not recommend a special betterment levy to recoup a proportion of
        this increased value. It believes, however, that in principle Council
        should be able to recoup, either by way of cash payments or the
        contribution of infrastructure, a greater share of the land value
        increments attributable to planning approvals, and that accordingly a
        clear-cut philosophy in relation to development contributions should
        be spelt out in town planning legislation; and, further, that there
        should be an equally clear-cut recognition in principle that any
        consequential costs imposed upon the community by development
        proposals (whether internal or external to the development) should
        be recoverable from the proponents of development (including, for
        example, the costs of traffic congestion).

(30)    The Committee noted that Council owned considerable land and was
        itself a land developer. In the Committee’s view, however, the
        practice of disposing of Council-owned land in freehold is depriving
        Council of the benefit of future increases in land value attributable
        to population growth and community development. At the cost of
        forgoing a once-only capital return on the land it sold, a majority
        of the Committee favour Council retaining the benefit of land value
        increments in perpetuity by disposing of land on a leasehold basis.
        In the case of residential land, disposal on a leasehold basis would
        substantially reduce the initial cost of home ownership to lessees
        without long-term cost to Council.

(31)    The Committee noted that, while overtures to central government in
        the past have rarely been successful, it was nevertheless open to
        local government to seek increased grants from state and federal
        government either in lieu of, or to supplement, general rate revenue.
        It can be argued that seeking increased grants implies a departure
        from the benefit principle and a reliance instead on a share of
        revenue raised by other governments on the basis of ability to pay.
        It could also tend to compromise local government’s aspirations to
        greater autonomy. Nevertheless there was some sympathy within the
        Committee for the view that, particularly in a capital city situation,
        grants from government were a justifiable compensation for the cost of
        providing services to non-residents, and would represent a contribution
        to greater vertical equalisation of revenue receipts as between levels
        of government. The case for transfer payments may need to be pressed
        in the light of the continuing tendency of higher levels of government
        to reduce such payments.

(32)    With regard to revenue-earning, the Committee is of the opinion that
        local government should not be precluded from engaging in commercial
        operations. It recognised, however, that there were risks. The history
        of municipal business ventures elsewhere has not been without blemish.
        In the Committee’s opinion there are likely to be few circumstances in
        which the scope for viable commercial operations has not already been
        recognised and exploited by private entrepreneurs. It considers,
        however, that Council should explore the scope for joint ventures in
        circumstances where neither the private sector nor the public sector
        can operate alone, and accordingly recommends that it should seek
        statutory authorisation to enable it to engage in joint ventures in
        these circumstances.

(33)    As for revenue-conserving, while systematic water pricing as
        recommended by the Committee would enable future major expenditure on
        water treatment and headwords to be deferred, the Committee considers
        Council’s present revenue could be conserved by reviewing rate
        concessions and exemptions. The Committee noted that Queensland
        councils varied in their attitude to rate concessions. In the
        Committee’s opinion Council’s present rate concessions – which are
        confined to full pensioners – could be extended to a wider range of
        deserving recipients if concessions were conferred by way of deferment
        of rates rather than by remission. The present remission scheme is
        discriminatory and inequitable and results in a substantial loss of
        revenue. This shortfall is being met by the city’s ratepayers
        (including part-pensioners and other ineligible persons experiencing
        hardship). The ultimate beneficiaries of the present remission scheme
        are pensioners’ successors in title who inherit unencumbered properties.
        The Committee therefore recommends that, without necessarily with-
        drawing any entitlements to remission which are currently being
        exercised, Council should offer deferment of rates as an optional
        alternative to remission, and gradually move towards replacing the
        present pensioner remission scheme by a deferral scheme open to a
        wider range of applicants. A study commissioned by the Committee
        illustrates the cash flow implications of deferring various proportions
        of rate revenue as well as the implications of various transitional
        combinations of remission and deferral.

(34)    In the Committee’s view deferment would accord with the fact that
        rates are properly a charge on property rather than a tax on persons.
        If Council so desired, deferment of rates could also be employed as
        an incentive to encourage the establishment or expansion of commercial
        or industrial enterprises in the city, and the Committee considers
        that Council should seek the necessary statutory authorisation to
        enable it to do this.

(35)    With regard to the controversial question of the exemption of state
        and federal governments from general rates levied by local government,
        the Committee noted the Self Committee’s [5] conclusion that, while most
        local government councils were probably net beneficiaries from
        reciprocal relief from state and federal taxes, capital cities such
        as Brisbane, with a high proportion of government properties, were
        disadvantaged. The Committee endorses the view that, as a first stage
        towards the abolition of Crown exemptions, rate exemptions enjoyed by
        government owned trading operations should be phased out (in the
        interests both of minimising the disadvantage to councils and
        minimising the advantage enjoyed by public sector commercial
        undertakings trading in competition with the private sector).

(36)    In the case of charitable and other non-governmental bodies the
        Committee considers that any exemptions from the general rate should
        not be a matter for statute, but for individual councils to determine
        as a matter of policy (taking into account the extent to which the
        whole or part of a claimant property is used for purposes other than
        its primary purpose). In order to avoid distortion of the rate base,
        the Committee further recommends that any such exemptions should
        operate by way of remission of rates due and payable rather than as
        exemptions from liability.

(37)    The Committee acknowledges that rate concessions apply only to
        property owners, whereas the hardship being experienced by many
        private rental residents is an increasing social problem. While
        tenants effectively pay the general rate indirectly as a component
        of their rent, there appears to be no way in which a concession to
        tenants can be made a charge on property in keeping with the basic
        mechanism of deferral which the Committee recommends for rate
        concessions. Any assistance paid directly to tenants assuming a
        mechanism with appropriate safeguards could be devised would be a
        direct cost to Council and would constitute a major extension of
        Council’s redistributive role.

(38)    Should Council decide to adopt them, the implementation of the
        Committee’s recommendations will in some cases require legislative
        amendments. In other cases implementation will merely require
        administrative action. Whatever the form of action required, the
        Committee commends to Council the practice of requiring its relevant
        departments to report annually on the specific steps being taken by
        them towards achieving the desired results.

(39)    Finally, it should be emphasised that the Committee has not been
        concerned with increasing Council’s revenue; its evaluation of
        possible revenue-raising options has been undertaken on a revenue-
        neutral basis. The aggregate level of local taxation at any given
        time is a matter for elected councils to determine and to accept
        responsibility for at the ballot box. The Committee’s concern has 
        been to ensure that, at whatever level of revenue, Council’s
        revenue-raising is equitable and efficient. And, in respect of
        concessions, its concern has been to ensure that Council’s revenue-
        raising mechanisms are able to respond more flexibly and sensitively
        to situations in which its citizens are experiencing hardship.


The Committee’s reasoning in support of the foregoing conclusions and
recommendations is amplified in Volume 1 of its report, together with
references to the legislative amendments which the implementation of certain
recommendations will entail. Volume 2 contains supporting information
including the results of the research studies which the Committee


1       Defined as those goods which generally could not be priced in the
        market sense, since their use could not be made subject to price
        payments in the same way as market goods, and which therefore had
        to be paid for from public revenue.

2       Defined as those which could be supplied by the market but which,
        for policy reasons, governments decided should be provided at a
        price less than their full cost.

3       Defined as those which could be supplied efficiently at socially
        acceptable prices by the market mechanism.

4       Council also announced its intention to impose rigid upper limits
        upon the amount of off-street parking permissible in inner city

5       The National Inquiry into Local Government Finance, 1985, chaired
        by Professor Peter Self.

Mr. Hancock dissents from the Committee’s conclusions (12) regarding
differentiating between the pre-tax and after-tax incidence of rates;
(28) regarding the proposed levy on inner city parking spaces; and
(29) regarding development contributions to infrastructure, and recovering
the consequential costs of development proposals.

26 September 1989



Assessed Annual Value (A.A.V.): the gross annual rental which might
reasonably be expected if premises were let on a tenancy from year to year.

Annual Value (A.V.):
a proportion (around three-quarters) of the gross
annual rental which might reasonably be expected if premises were let on
a tenancy from year to year upon the condition that the landlord was
liable for all rates, taxes and insurance; (it may additionally be
defined to be not less than five percent of the fee simple).

Capital Value (C.V.):
the capital sum that an unencumbered estate in fee
simple in land together with any improvements might be expected to realise
if offered for sale on reasonable terms and conditions at a point in time.

Gross Rental Value (G.R.V.):
the gross annual rental which might reasonably
be expected if premises were let on a tenancy from year to year upon the
condition that the landlord was liable for all rates, taxes and insurance.

Highest and Best Use: the lawful use to which land by its attributes and
location might best be adapted, and which is capable of yielding the
highest utility or benefit to the owner.

Land Value (L.V.) :
the capital sum which an estate in fee simple in land
unencumbered by any lease, mortgage or other charge might be expected to
realise if offered for sale on a given day on reasonable terms and conditions,
excluding the value of any visible or tangible improvements, but not excluding
the value of any improvements resulting from work done by the Crown or any
work of reclamation, drainage, filling, excavation, grading, levelling or clearing.
From the view point that capital value or market value is the sum of the value
of improvements and land value, any value not due to improvements is land
value. The works identified above are however to be included in the
assessment of land value.

Market Value:
the sum which a property could be expected to realise upon
purchase by a willing but not anxious buyer from a willing but not anxious
seller at a given point in time.

Site Value (S.V.): the capital sum which an estate in fee simple in land
unencumbered by any lease, mortgage or other charge might be expected to
realise if offered for sale at a given day on reasonable terms and
conditions, assuming that any site improvements other than merged
improvements had not been made. Site improvements include reclamation.