Incoming Rate Rises of 26 - 44% May change our Village Retail Centres, exacerbate anti-council sentiment
The Council has released for feedback the 2021/2022 Draft Budget, which includes applying the maximum rate rise of 2% across the LGA for the 2021/2022 year. This comes atop the Rates Harmonisation announcement of March 24th which will see an increase of 42% for Business rates in Manly while there will be an increase of 24% for Pittwater Business rates.
Residential rates will see an increase of 12-26% for Manly – a decrease of 3% for Pittwater (and an increase of $36.00 or $5 for up to 700k value).
Warringah rates will go down in both cases, for Residential there will be a decrease by 5-6% and in Business rates there is a decrease of 4-10%.
On March 16th, 2021, Shelley Hancock, the Minister for Local Government, announced the NSW Government has introduced legislation to ensure a fairer and more flexible rating system for councils and ratepayers. The Bill also provides councils the option to make superannuation payments to the State’s 1,300 councillors.
Minister for Local Government Shelley Hancock said the Local Government Amendment (Rating) Bill 2021 would implement the Government’s response to IPART’s review of the rating system and a range of other changes.
“The package of reforms addressed in this Bill will ensure our rating system continues to be fair and equitable for both councils and ratepayers across the State,” Mrs Hancock said.
“Importantly, the Bill provides the option for 17 newly formed councils to harmonise their rates over the next four years, protecting ratepayers from excessive and sudden rate rises.
“The Bill also delivers on the NSW Government’s commitment to align rating income with population growth as part of the annual rate peg, enabling councils to provide better infrastructure and services to growing communities.”
“The introduction of the Local Government Amendment (Rating) Bill 2021 follows extensive consultation with the Local Government sector and the broader community, and delivers key reforms to strengthen local councils,” Mrs Hancock said.
The reform package includes:
- Allowing 17 councils created in 2016 to gradually harmonise rates over up to four years to help protect ratepayers from excessive and sudden rate rises;
- Allowing councils to levy special rates above the rate peg for infrastructure jointly funded with other levels of government, without IPART approval;
- Allowing councils to create more flexible residential, business and farmland rating subcategories to enable them to set fairer rates that better reflect access to services and infrastructure;
- Giving councils the option to make superannuation payments for councillors from July 2022;
- Maximising voter participation in council elections by allowing the timeframe for receipt of postal votes to be extended; and
- Extending the term of chairpersons of the State’s 10 country councils to two years, in line with council-elected mayors.
It also alters the overdue period for unpaid council rates or charges after which the council may sell the land concerned from 5 years to 3 years.
The ‘newly formed councils’ were those forcibly amalgamated on May 12th 2016 and includes Pittwater, Manly and Warringah under its current form.
The Local Government Amendment (Rating) Bill 2021 has passed the lower house and is currently in the upper house.
Either way, whether over 4 years or applied all at once on July 1st, Pittwater owners of business premises will see a rate rise of up to 32% over the next four years if the Council continues to apply the maximum rate peg rise annually of around 2%. Manly business premises ratepayers will be up for 50% more in rates payments – adding thousands of more dollars that must be found and handed to council for the same services each year.
As these extras costs will be passed on to those renting these places, amounting to thousands more annually in most cases, we may see more empty storefronts in Pittwater and Manly.
Currently 2248 businesses are advertised for sale in the Sydney Metro area. In our area Manly is showing the most with 16 listed, Brookvale has 11, Mona Vale 6, Narrabeen 5 and Avalon Beach 4.
Last weekend a check showed 190 retail leases being advertised, this weekend there are 198 properties available – so 8 more have been added just this week.
Our Manly 'girl on the ground' reports this week that she sees shop after shop is still empty and none have been taken up since. The businesses that 'ceased trading' the day the Christmas-New Years lockdowns occurred in our area have not returned either. These are big outfits, not just the small mum and dad run businesses.
As the state and federal freezes on landlords/tenants evictions along with stimulus measures and rental relief efforts introduced last year have wound up across the country, that may increase.
In a 2021 interview with Australia's Commercial Real Estate, commercial property adviser Tim Maunsell, of Maunsell Property Consultants, said businesses and landlords had so far been reluctant to enter into negotiations over new agreements.
“It’s all been put in the too-hard basket,” he said. “It’s a stalemate. Everyone is just waiting to see what will occur.”
Mr Maunsell said the situation was complicated by the fact that each tenancy had been affected differently throughout the pandemic.
“Supermarkets haven’t been negatively impacted at all while places like Flight Centre obviously have.”
Larger landlords were therefore unsure of what precedent to set for future agreements. “If they make a decision on one, they have to make a decision on 1000,” he said.
Throughout the pandemic, Mr Maunsell acted as a mediator between landlords and tenants in Sydney, Brisbane and Melbourne, negotiating reduced rent for affected businesses.
“The worst offenders were the bigger landlords, to be honest. I know they have to look after the shareholders but they didn’t really look after the little fellas,” he said. “The ‘ma and pop’ superannuation funds went out of their way to help tenants and avoid any vacancy.”
Mr Maunsell said some some landlords would be looking to recoup their losses, adding that he knew of one landlord whose monthly rental income fell from $50,000 to $12,000, which barely covered his outgoings.
The Australian Retail Outlook 2021, co-produced with Inside Retail, published February 15, 2021 offered retailers key insights into the year ahead as KPMG retail specialists delved into the key trends and forecasts included in the report.
The report also examined retail and commercial rentals. According to the results of this year’s Australian Retail Outlook survey, an overwhelming 80.57 per cent of retail executives believe that the relationship between retailers and landlords is under further strain. While some landlords may have been open to compromise, others took a hardnosed approach.
Shopping online is also taking away many of the services and goods people used to purchase from retail spaces and shopfronts in their local villages and business centres. According to Accent Group CEO Daniel Agostinelli, digital sales for the year grew by 142 per cent in the quarter ending June 30, 2020.
As the year went on, it became clear that omnichannel was the name of the game, and savvy retailers focused their energies on initiatives that could bridge the gap between online and offline, catering to the changing needs and desires of consumers. Virtual appointments, click-and-collect and reserve-in-store were some of the ways that retailers encouraged customers to shop with them during the year.
''While there will always be a place for great bricks-and-mortar experiences, it’s clear that consumers have now become accustomed to the convenience (and safety) of e-commerce. Even beyond COVID, customers may now be considering whether it’s worth their time to head to their local shopping centre or if it’s best to simply shop online.'' the report states
This too will have an affect on how our local retail centres may change over the next few years, even if the rate rise is chosen to be adopted over 4 years, and retailers are optimistic they can meet the high price per annum for renting a space, one seen in Avalon on the Avalon Parade main strip has a rental asking price of 75 thousand per annum + outgoings, those that can maintain a business are becoming similar. On Saturday May 8th the signage for yet another '$2 shop' was seen being erected in a local commercial centre - there are already 2 available.
One example of what else may come worth noting is a recent land values squabble where land is going up and up and up, sometimes overnight. This matter is a recent purchase of land by Ryde council from an owner, where land is being rezoned to fit in with housing targets, and that land acquiring up to three times its former value, overnight.
The Valuer General applied a value of up to three times what had been agreed to be paid for lots of land to be added into a park due to that rezoning, and instead of the 5 million price tag one lot of land came back with 15 million to be paid.
The matter ended up in the Land and Environment Court where judgement applied the original value of the land pre the housing targets rezoning changes – but it is one point worth keeping an eye on – where land is being rezoned or ‘activated’ to fulfil housing targets, the value increases rapidly, in fact, it can triple with a rezoning to facilitate medium or high density.
The 'new' councils created through being forcibly amalgamated in 2016 may also apply for an MR increase for 2021-22 (see OLG Circular 19-27). Councils requiring additional revenue are able to apply to IPART for increases above the rate peg, known as special variations. They are also able to apply to change the level of the minimum rate that they charge. IPART assesses applications against criteria established by the NSW Office of Local Government.
Councils applying for both minimum rate increases and special variations are City of Canterbury-Bankstown and Georges River Council. A further eight councils across NSW have applied to the Independent Pricing and Regulatory Tribunal (IPART) for a special variation to increase their income from rates above the rate peg in 2021-22, some by up to 53.5%, as announced on February 12th, 2021. They are Central Coast, City of Canterbury-Bankstown, Georges River, Armidale Regional, Cootamundra-Gundagai Regional, Federation, Liverpool Plains Shire and Tweed Shire Councils.
“Some of the proposed increases have already caused strong community reaction. There have been more than 3,850 submissions about the Central Coast Council’s application and 175 about Liverpool Plains Shire Council,” IPART Tribunal member Ms Deborah Cope said
Central Coast Council has applied for a 15% single year increase, retained permanently in the rate base, to ‘improve financial sustainability’.
IPART has set the rate peg for 2021-22 at 2.0%. The rate peg is the maximum percentage amount by which a council can increase its income from rates.
On Council’s decision to apply the maximum 2% amount again this year, Councillor David Walton stated at the April 2021 Council Meeting, which voted to apply this as part of the Draft Budget;
‘’The draft delivery Program contains many capital works programs that will benefit the Community through improved and upgraded infrastructure. We thank the NSW and Federal Governments for capital grants that help deliver these infrastructure improvements.
There is also some examples of innovation and the use of technological improvements that are driving efficiency savings, such as the LED street light replacement program and other renewable energy programs that are reducing some of our operational costs.
However, our total operational costs continue to grow at levels that continually drive the need to increase rates, user charges, and other taxes on our community. In this draft budget, Council will again require our community to pay increased rates of 2%, above Australia’s current rate of inflation at 1.1%. This is also on top of the impost of around 26% on the residents of the former Manly Council area from rates harmonisation and up to 42% rate increases for some businesses.
There is an alternative if Council were to further drive operational efficiencies and technological improvements, that reduce the need for continual increases of rates by this Council.
Again, although this draft delivery program proposes some good infrastructure improvements, the attached operation plan and budget, place too much of a financial burden on Northern Beaches rate payers and again has not delivered the dividend from the Council mergers, to the community, that should be paid, and was promised to be paid.’’ Councillor Walton stated.
Although the Council quite rightly reiterates the ‘Rates Harmonisation’ is another requirement levelled on them by the State Government, the way in which it has chosen to resolve this has attracted a backlash. Critics of the council structure decreed by the state government on May 12th 2016 have stated in recent weeks that it is becoming more obvious that this is simply a return to the old days of Warringah Shire Council milking money from Pittwater to spend in Warringah. Manly residents, historically immune from this, have also raised their objections, stating that under the ‘Rates Harmonisation’ scheme, articulated through the models devised by Council, they will be paying much more than Warringah residents for the same services.
When the Rates Harmonisation first came into Council to be discussed and voted on Timothy Irwin and Robert Bruce (Timothy speaking) used the Public Forum at that Council Meeting to point out Re: ‘ad valoreum’ – ‘’the document states Warringah pays more when in fact, in dollar terms, the average Manly or Pittwater resident actually pays more right now – these figures were not advertised in the promotional materials.
Manly residents will pay around 44% more for the same services as those in Warringah – is this ‘’fair and reasonable’’ – let’s find ways of making the burden more fair and equitable.’’
The model chosen by Council is being forwarded to the state government, as required, unchanged.
This means local investors in retail space may need to divest themselves of their assets as this range of factors are applied and this will leave the market open to larger corporates to take over much of the space held for so long by owners who actually live here and care about the community.
A check of larger retail spaces this week that were available months ago and are still on the market show the signage has changed from 'For Lease’ to ‘For Sale’.
One positive shift to overcome what may occur is exemplified in the February 26, 2021 announcement from the local Pittwater Chambers of commerce;
BETTER TOGETHER – Introducing Peninsula Business
Avalon Palm Beach Business Chamber and Newport and Mona Vale Chambers of Commerce are merging.
The Chambers announced this week that they will join forces to form Peninsula Business; kicking off 2021 with a calendar of grand plans to support Northern Beaches businesses at this critical time of change, survival & growth. It’s a strategic move that guarantees the amplification of Northern Beaches voices at Council and Government level, and potentially secures improved event approvals and the best possible funding for each of the three areas.
The Peninsula Business Executive Committee will comprise two members from each of the three former individual Chambers to ensure smooth coordination, equal delegation of duties and fair representation across the board and region. The same familiar faces will continue to support their local businesses, at a time when they need it most, and this proposed structure has the added benefits of maintaining the trademark close knit community feel of Avalon Palm Beach Business Chamber and the Newport and Mona Vale Chambers, while enabling them to work tirelessly in support of their members, with reduced red tape and pooled resources.
All while honouring the original membership fee structure.
Grand plans in the mix are regular networking events that will now include each registered business from all three Chambers, and a more sophisticated upskilling and small business educational program – again drawing from this wider pool of Chamber members. There will also be a co-ordinated calendar of events from Palm Beach to Narrabeen for a magnetic Northern Beaches tourism campaign unlike any we’ve ever seen in this area.
Next on the agenda: a commitment to pull together in lobbying the Government for optimum funding, as local businesses navigate their ‘new normal’ in 2021 – and prepare for any future disruptions and potential pivots.
It’s the dawn of an incredible era – a testament to the spirit of a community that recently stayed strong in the face of adversity, and wrote the book on being Better Together.
As seen in the recent North Avalon seniors protest, and the relaunched Protect Pittwater campaign to reinstate Pittwater Council, a council which seemed to be able to provide the services now currently run by the forcibly amalgamated Council without a 26% rise, residents are able to sniff out propaganda and pinpoint inaccuracies or omissions, whether coming from the Council or the State Government, and have ceased believing any of it.
However, while the votes are stacked against them in Council, Manly and Pittwater will continue to have no real say in their futures and will continue to bear witness to what many state is the wilful, deliberate and calculated destruction of these places while extracting from them more and more money for less and less.