Fact check update: how high are Port Phillip rates compared to neighbouring councils?

8 September update: See below the updated chart for
2020-21 Port Phillip rates compared to rates plus fixed charges of neighbouring councils rates

Spoiler Alert: Port Phillip council has significantly higher rates than neighbouring councils. Read the full article to understand why using average rates per property cannot be used to compare councils, and why more relevant metrics reveal that the City of Port Phillip is a high taxing and comparatively inefficient council.

Some groups in our community are claiming that rates in Port Phillip are lower than neighbouring councils. Let’s fact check that! It is important that you have the facts for the upcoming October council elections.

Firstly, let’s look at how much council collects in income. Port Phillip collects $129 million in Rates & Charges, and $95 million in other charges such as fees, fines and grants, that’s much higher than neighbouring councils (Figure 1).

Figure 1: 2019-20 Budget. Total Council Income

So, what is the reason for this? There are a few reasons why Port Phillip might need to collect higher rates, let’s look at each:

1. Coverage area & length of local roads
2. Population
3. Total number of properties

1. Coverage area

The larger a municipality is, the more money needs to be spent on maintaining roads, footpaths, parks, street lights, stormwater pipes etc. Does this explain the high rates?

No, it doesn’t. Port Phillip has the smallest area and the shortest length of roads, but the highest rates. Port Phillip spends more than double some neighbouring councils based on these metrics. See Table 1.

2. Population

Council services are most fairly compared based on population. This is because council provides services like libraries, parks, activity centres, childcare, customer service centres, parking permits etc. based on how many people they need to service. Does this explain the high rates?

No it doesn’t. Port Phillip has higher rates & charges per resident than neighbouring councils (see Figure 2), and there is an interesting reason for that. City of Port Phillip employ more staff than neighbouring councils, and pay their staff more than neighbouring councils. The cost to ratepayers is huge at almost $100 million (see Figure 3):

Each resident in the City of Port Phillip pays $873 for council staff costs, whereas for the other three councils, the cost ranges from $450 to $592.
See Figure 4.

The City of Port Phillip say that because they choose to provide services that others may not, that this is an unfair comparison. And yes, we agree to an extent.

Port Phillip state that the extra staff they employ are for council-run childcare centres (85 staff), parking enforcement (45 staff), for street / beach cleaning, and for teams to run South Melbourne Market and major festivals like St Kilda Festival (70 staff). But even when these additional staff costs are removed, Port Phillip remains the most expensive and inefficient council compared to its neighbours.

3. Total number of properties

For a minority of services, like collecting rubbish, the number of properties does influence cost. But in the City of Port Phillip, waste management only accounts for 5.3% of the total spend, according to the Essential Services Commission.

Some groups with vested interests in keeping rates high (often because they have their hands in council’s pockets), have claimed that average rates per property should be used to compare the rates charged by different councils. Let’s look at why that is not a valid way to compare rates (and why those groups use this metric to deceive the public):

Reason 1 – Port Phillip has a higher number of residential properties

We know that most services council provides depend on the number of people they provide services to and the infrastructure they service (see sections above).

Port Phillip has a high number of residential properties. Or alternatively, you could say that there are less residents per property (see Figure 5):

Whether residents live in large properties together, or in small properties alone, this doesn’t change the total amount of rates being charged by a council; it only changes the average rates per property. That’s why average rates per property is a poor measure of whether council rates are comparatively high or low. The fact is, that given we have so many residential properties in a small area, rates should be a whole lot lower!

Reason 2 – Not all properties are the same

We have a progressive rates system whereby the level of rates you pay is proportional to your property value. While there are many small apartments paying rates similar to neighbouring councils, the brunt of high rates is borne by those with higher property values, many of whom may not have the propensity to pay (the value of your property does not always indicate your income).

The reason average rates per property in Port Phillip are the same, or even slightly lower than, neighbouring councils, is because of the positive skew distribution in property values. Port Phillip has a large number of apartments which are lower in value than the median (middlemost) property value. This results in a statistical deception – the average rates per property does not reflect why rates are so expensive overall, especially for many ratepayers in Port Phillip.

Conclusion

Port Phillip council has significantly higher rates than neighbouring councils based on all relevant metrics except average rates per property, which are not useful in making comparisons between councils. Groups with vested interests will try to convince you that there is no problem with Port Phillip council rates. Hopefully this article explains why you shouldn’t believe their deceptive claims!

What more can we say? If our rates were truly the same as neighbouring councils with the same level of services, our community group wouldn’t need to exist at all.

Disclaimer:

All figures stated in this article are taken from the 2019-2020 council budgets. Rates & Charges quoted include the fixed per property charges that almost all councils charge (75 of the 79 Victorian councils charge for waste services on a per property basis).

Sources:

Snap poll – We should not pay higher rates to live in Port Phillip municipality