CORRESPONDENCE RATING SYSTEMS

Evening Star, Issue 21821, 10 September 1934, Page 11

CORRESPONDENCE

RATING SYSTEMS

TO THE fcDITOK . Sir, —I have read the numerous letters in support of a change in our system of rating with mingled feelings of amusement and disgust. As I am a native of Dunedin, and as my particular line of business has kept me in touch with the local property and financial markets for the last thirty years I can safely claim to have a practical knowledge of the ciuestiou at issue. If our present system of rating is so much at fault, why is it still the only system used throughout the whole of both England and Scotland? The Labour Party there have some of the : most able men in the Empire in their ranks; and if there is so much merit in the other system, surely they would have made some movement in, the direction of a change. Where in this city will the mayor find any owners of valuable sites who purchased for a song and now sit back enjoying the .tremendous inflation of values pictured by him—the owners against whom the change is particularly directed? To the best of my belief the last lona survivor of the few such lucky owners died before the Ascot corner was auctioned a few years ago. As a matter of fact, the great bulk of the valuable city sites have , changed hands time and again at ever-increas-ing cost, until to-day the market value of many of them is below the amount at which they last changed .hands. Strong objection has been taken to the present system on the grounds that an owner cannot improve his house without risking an increase in his rates. A lot of nonsense has appeared in the Press in support of this contention, and tome writers have suggested that .they take a risk even if they paint their houses. The legal position is that improvements are not rateable unless they increase the letting value of the property. If any citizen’s rates are increased by reason of improvements that do not increase the letting value all he has to do is to object, and, if the city valuer will not rectify his mistake, the magistrate will. The mayor and his somewhat mixed company contend that it is wrong in principle to tax improvements; but they appear ignorant of the fact that improvements do not escape even under the system they advocate, and that the term “unimproved value” is a misnomer. , ~ . Assuming that an owner has a block of vacant land suitable for subdivision, we find that (1) he has to incur the cost of a survey; (2) obtain the consent of the council; (3) incur the cost of the formation of the streets, the laying down of the channelling, and the installation of drainage according to the council’s and Drainage Board s requirements. These expenses are usually very heavy, and in the last instance that came to my notice they were estimated at half the market value of the whole area. When the allotments are offered for sale the total reserve must be an amount sufficient to cover (1) the price paid for the block; (2) all the expense incurred; (3) commission on sale, and (4) a reasonable profit; and, as the streets have had to be dedicated to the City Corporation without compensation, the reserve placed on the allotments must cover this loss as well, The price paid for each allotment then constitutes the so-called “ unimproved value ” for rating purposes. Incidentally, I would ask, what encouragement will the proposed change lend to anyone in search of a property suitable for subdivision if he has to pay full rates on the unimproved value from the date of purchase until final sale? Of course, according to the mayor and his amateur experts, the risW in the unimproved value of the

whole city is entirely “communitycreated wealth,” and no credit is given to the efforts of various syndicates such as the one that turned really a swamp into the popular township of Tainui. Before passing on from the question of “ unimproved values,” on which our rates- will be assessed if the proposal is' carried, let me explain that the same will be fixed entirely by the Government valuation office. At the same time lot, me assure your readers that the present values standing in the books of that office are by no means reliable, as is proved by the fact that the Stamp Office, for the purpose of- assessing death duties, insists on a certificate of the value of a deceased person’s property as at the date of his deathj and his executors must pay for a fresh valuation if the Stamp Office people so require. As there has not been a general revaluation for many years I can prepare many ratepayers for a shock it a fresh one is rendered necessary, as will be the case if the poll is carried. In many streets, especially where vacant sections have been scarce, fancy prices have been paid. The Valuation Office has a record of every sale and the price paid, and the highest price paid in t any street will naturally form the basis of valuation for that street. Notwithstanding the mayor’s assurances it is impossible to say what the result will be in any suburb or in any particular case therein.

We cannot overlook the fact that Dunedin has been developed under the present rating system. . Under it we have built a beautiful city, and at the same time fostered our various secondary industries that are the envy of the other centres. Why should we abandon a system that has proved beneficial in' favour of one that must inevitably cause dire uncertainty, confusion, and hardship, when we are already suffering the effects of the worst depression in our history? The advocates of change have made no serious attempt to show that our city as a whole would benefit. They have tried to convince one section of the community that portion of their rates would be shifted on to the shoulders of another section. Even in this they have absolutely failed, for the only certainty is that the wealthy owners of the chief business premises will benefit, and that the less fortunate will have to shoulder the added burden.—l am, etc.. Or. ah Jnxes. September 10.

TO THE EDITOR. Sir, —Letters such as those of ‘‘Lover of a Garden ” show how little some of your correspondents know of the subject they are writing about. Either that or they are deliberately trying to mislead your readers by stating what they know is incorrect. 1 would answer “ Lover of a Garden ” by stating that I have been the owner of a suburban residence in both Wellington and Dunedin, and therefore can claim that I am in a position to compare the conditions in Dunedin under the present system with those of Wellington under rating on the unimproved value. The picture that “ Lover of a Garden ” has painted as the outcome of unimproved rating is purely imaginary, and the dire results prophesied would not occur in Dunedin any more than they have in Wellington, where many lovely gardens are to be seen, and the children do not need to use the road for their playgrounds. I may state that my property in Wellington was about as valuable as the property I now own in one of the suburbs ot Dunedin, but my rates on the Wellington property were considerably less than the rates I am at present paying on my Dunedin property. I will therefore leave it to your readers to decide which system of rating is to be preferred, but would like to quote the answer made by the fool to the sage when told “ there are two sides to every question.” “ Yes,” said the fool, “ and there are two sides to a sheet of flypaper; but it makes a difference to the fly which side he chooses.” —I am, etc , J.R. September 10.

TO THE EDITOR. Sir, —The circulars issued by the advocates for a change of rating system could not be filled with more inaccuracies. lloslyn; “Every owner of a quarter of an acre and under will have the rates reduced.” A glaring misstatement.: "Let every, such owner, ascertain to-day’s values without improvements, and divide by twenty; that would be his unimproved rates. Compare with the present rates, and he has the answer. Central: “ Rating on improved values would result in 75 per cent, of the ratepayers having their rates reduced.'” Absolutely wrong. “ Centra] Ward over-rated £7,000, Caversham £12,000.” Just add all the reductions you are promised to see how inaccurate the statements are. “ Unimproved value will mean no increase in the rent of shops.” Absurd. “ The average reduction in rates will be at least. £3 per house.” If houses and shops are not contributing, if 76 per cent of central ratepayers have their rates reduced, where is the £22,000 increase to come from? (vide Mr Cox). The green and red circulars contradict each other so badly that the only effect of reading them is like mixing the contents 6t that famous powder contained in two separate coloured papers. When mixed in a glass of water it creates a great excitement. In this case the excitement will be one of protest against so many inaccuracies being contained in such a small circular. It is said “ You may fool all of the people for a time, you may fool some of the people all the time, but you cannot fool all the people all the time.” Some local history may support this. Ratepayers, come out and vote tomorrow to retain the system that has placed Dunedin in the proud position she holds to-day.—l am, etc., September 10. R. S. Black.

TO THE EDITOR. Sir,— Seeing that the policy of His Worship the Mayor and (Jr Silverstone has been one of appealing to the selfish instincts of the people, it will be as well to place the real position in front of your readers. First, the City Council, if it is to carry out essential work demanded by our citizens, must have the necessary revenue. The same amount must be got whichever system operates. Again, whatever system of rating is approved it should be applied in such a way that justice is meted out to all. The question the people have to decide is: Which of the two principles will give the desired result? Under the system now in vogue—annual value—the rates are levied both on the land and the buildings, if it is fairly and justly applied it becomes impossible for anyone to escape paying his just tax. If his land value increases through community expansion, or increased services are given by the city’s utilities, he is taxed and pays for such services. If, on the other hand, ho can afford to improve his property or builds a larger property, his taxes are increased. This allows of no escape either by the rich or the working classes. Thus under this principle-an-nual values —if it is properly and fairly applied ,all are taxed proportionately according to the value of their assets, land and buildings. The objection raised against the above method by the advocates of unimproved values is that labour and improvements are taxed. Under the system of rating on unimproved values they contend labour and improvements are not taxed. A little thinking will show how ridiculous such a statement must be. It must be obvious to the least intelligent of the community that land in itself could .not increase in value except by use. To use it and improve it must necessarily raise its value; thus we have different values for land. All taxes levied on land must therefore be a tax on the products of labour applied to the land. Improvements, whether on land or on buildings, are the product of labour. It becomes obvious that whichever system operates improvements, the product of labour, arc the only way in

which, our rates can be paid. Thus there is little in the cry ot taxing improvements made so often by the advocates of land values. Let us now see which of the two systems will give the fairest results. Let us see who will benefit by the incidence of taxation being altered. To examine the systems we will take for example two properties, their values being neither too high or too low. Further, it matters not whether they be house properties of business property. The point is to see who will benefit by an alteration in the system. Example 1: A has land valued £2OO, buildings £6OO, capital value £BOO. The rental value, based at 5 per cent, of capital value, is £4O. Rates levied at 4s 5d in the £ on rental value will be £8 16s Bd. B has land £2OO, buildings £1,500, capital value £1,700. Rates at 4s 5d in the £ are £lB 15s sd. Total revenue due to City Council from both properties is seen to be £27 12s Id.

Example 2: Same properties. A £BOO, B £1,700, taxes based on land only. Land values £2OO in each case. Rates at 10 5-8 d per £ of value. Hate levied then on both A and B is seen to be £8 17s Id. Total revenue to the council from both A and B is £l7 14s 2d, and results in a shortage to the council of £9 17s lid. This amount having to be made up, both A and B will have to pay an additional amount of £4 18s llfd each. A and B’s rates with this amount added become £l3 16s Oid each;- Thus it will -be seen, that under annual values A pays £8 16s 8d; under unimproved value he pays £l3 16s 6d, an increase of £4 19s 4sd. B’s rates under annual values are £lB 15s -sd, under 1 unimproved value £l3 16s Oid, or £4 19s 4Jd less. Thus. B, the wealthier of the two, is seen to benefit.

It behoves the workers to give a little thought to the above matter. Having done so they will see that the greater the value of improvement already on the land the less the owner’s rates will be. In effect, the immediate result would be to place an increased burden on the workers.

So far as rating principles are concerned, annual values must be preferred to unimproved values as a system that can give justice to all. Dissatisfaction among our citizens is not due to the system being wrong, but to the method of raising the revenue for the general account. Neither His Worship nor Cr Silverstone can deny the truth of the above statement. Neither can they prove that an alteration to unimproved value will rectify the evil. May I point out to “Ratepayer how grateful I am *to know that she clings to that statement of mine--i.e., “ Anything that is morally wrong is economically unsound.” This letter will explain to her the things she did not understand in my letter of September 1, and I trust she will be converted. Neither the mayor, Cr Silverstone, nor Mr Shaddock has attempted to answer the questions asked by me on September 1. The reason they have not answered the questions will be obvious to your readers.—l am, etc., C. M. Moss. September IU.

TO THE EDITOR. Sir,—l take up my pen in reply to “ Ex-relief Worker ” for his attack on our worthy mayor, Rev. E. T. Cox. To my mind he is the cleverest man to grace our mayoralty in this city’s history, and if he had been given the support which he asked for on the council there would have been a big change for the better in this fair (' ity. Unfortunately for “ Ex-relief worker the mayor is not an individualist. He evidently does not give one man a job or a pound or some left-off clothing at the expense of some other unfortunate. No, he tries to lift us all out of the rut, not one at the expense of the other. What did we as a community do to help him further his plans at the last election. We only gave him three men to assist instead of a dozen. There are any amount of persons like “ Exrelief ” still on the “ dole.” They go up to the Town Hall. No doubt their cases are deplorable, but you cannot expect Mr Cox to help you individunlly—he is there to try and help us as" a whole, and if lie had got the Finance Committee which he wanted there would have been a lot of people in this city that could sign themselves “ Ex-relief.” Fancy people putting expensive advertisements in the paper and distributing circulars which tell us a change would make us perhaps worse off than we are now. We can’t be.—l am, etc., Mac. September TO.

to the trruTon. Sir, —Mr P. W. Shackloek twits me with not accepting his challenge until a week after it was issued. That was perhaps a disappointment, but T had other more important matters requiring attention. Merely stating that anyone who looks at the City Council Year Book and municipal authorities hand book can see for himself is, I submit, no answer to my question. The unimproved valuation figures he quotes are out of date, for the most part fourteen years old. and therefore unreliable and misleading. When one grasps this luudamcnlal fact, the whole lovely structure of

Mr Shacklock’s arithmetic topples over. I will nominate Mr G. S. Kirby, the well-known public accountant of this city, as judge. The other portions of Mr Shacklock’s letter are mostly cheap criticism ot councillors who have served the city well for many years, and require no reply. My examples of quarter-acre properties in Cutten street that would be rated £ll to £l2 under unimproved as against £7 and £8 at present, were evidently hard pills for Mr Shacklock to swallow. He just ignored them.— I am, etc., John L. M’lndoe. September 10.

TO THE EDITOR. Sir, —}f “ Honest Rating ” had given his name and the location of his property .1, could have ascertained the facts and given him probably a more accurate statement. 1 am in the position of having to deduce certain figures from the two years rate demands which he quotes, namely £l2 and £l4. As far as I can gather “ Honest Value’s ” property was first rated at £52 when he lived in it. When he let it to a tenant he must have asked 28s 6d a week—£74 a year. The valuer now knows the actual rent paid, and, deducting 20 per cent., arrives at the annual value of £SB. The owner fixes his own rates by the rent he charges. If he reduces his vent, his rate will come down.

“ Honest Rating’s ” fears that his annual value will again be raised if he repaints or does ordinary maintenance work on his property are absolutely groundless. • Even Cr Silverstono will tell him this is true. —I am, etc., John L. MMndoe. September 10.

TO THU EDITOR. Sir, —“ Lover of Gardens ” informs us that we shall be unable to employ a gardener if the unimproved rating system is carried on Tuesday, but does not tell us that there is not one single working man in Dunedin who has a garden large enough to employ a gardener, and those who have gardens where a gardener can be employed pay the enormous rate of wages ranging from 7s to 10s a day. Then., another correspondent says: “What about the sporting bodies? Sport does quite well in Wellington and Christchurch. The building contractors declare for the present system, and yet they are all keen looking for contracts,, and the system that would give most work in their line, they are opposed to. Is it because they do not understand the system, or is it that they do not want to understand it? “ iix-relief Worker” says St. Kilda has a huddled and cramped appearance, but what about Sydney, with over one million of a population? Is that city huddled and cramped? Our Chamber of Commerce, endorsed by yourself, says the present time is no time for a change. But the Chamber of Commerce never wants a change in any systeih, especially when the workers are going to derive a benefit. The question live working ratepayers must ask themselves is who does the advertising against the unimproved system, and where does 'the money come from to pay for those large advertisements? The working ratepayers do not subscribe the cash.—l am, etc., Bryan O’Donnell. September 10.

TO THE EDITOR. Sir,—Cr J. L. M'lndoe says that 1 have used perfectly correct figures to arrive at a wrong result. Is it yot a tactical error for Cr M'lndoe to even admit that my figures were correct? He then proceeds to set me right, by telling me how to arrive at the “ correct ” figures. i t is like teaching grandmother how to boil oatmeal. The inference contained in Cr M'lndoe’s letter is that I have over-esti-mated the basic rate, and by , using the method he suggests the rate would he lower, and consequently the individual ratepayer would pay less, is this so? 1 took £90,000 as being the rateable value if St. Kilda used the city rating system, and to raise a revenue of £24,288, a rate of 5s 4d would be required. This is not correct says Cr M'lndoe. 1 have undOr-estimated the amount by 30 per cent. Very well, I will accept his suggestion and we shall see where it leads us. An increase of 30 per cent, will make the rateable value £117,000 instead of £90,000, and. to raise the sum of £24,288, a rate of 4s 2d would have to be struck. Will this alter the final result to the individual ratepayer? 1 gave two examples in my letter—a £1,200 house with a rateable value of £6O and a rate of 5s 4d paying £l6 in rates, and a house of £1.500 with a £75 rateable value paying £2O. Now, using Cr M'Tudoe’s method and adding 30 pei cent, to the valuation, the £1,200 bouse .would have a rateable value of £7B, with the rate at 4s 2d in the £ instead of 5a 4d. This ratepayer would have to pay £l6 ss; the rateable value of the £1,500 house would be increased from £75 to £97, and at 4s 2d in the £ it would now pay £2O 4s 2d. Cr M'lndoe has unwittingly made the case worse for the ratepayer and for hia side. Let me assure Cr M'lndoe that I am worried over 30 per cent, for it is just this 30 per cent, of rates that the workers and many business people arc paying too much, that f want to shift on to the right shoulders. My liiend must

now realise that he made an error in entering the contest so late in the day, for he Tins certainly rushed in where angels fear to tread.—l am, etc., M. SILVERBTONE. September 8.

[Cr M'ludoe writes:—“The capital value of St. Kilda was mad© in 1925, and would therefore be a closer approximation to the annual value if made to-day, as provided in the Rating Act, than would be the case in the city, where the Government capital value in my comparison was made in 1921. My whole point was that Cr Silverstone was arguing on entirely false premises, and he has admitted it. For th© rest, his individual comparisons have no bearing on the point I raised.”—Ed. E.S.]

TO THE EDITOR. Sir, —There have been many letters written on this controversial subject, but so far I have not seen the Northeast Valley case quoted. Mr Theodore Arnold was town clerk of the Northeast Valley Borough Council at the time to which I refer, and he would be able to endorse my statements. The North-east Valley Borough Council, some years before the amalgamation, carried rating, on unimproved values, but on finding the hardships it was imposing upon the ratepayers, and the tendency towards creating slums, reversed its decision about three years later, and went back to the old way of rating.—l am, etc., M. W. Marriage. September 10.

TO THE EDITOR. Sir, —Much has been said, both in and out of Parliament, regarding' the necessity of encouraging our secondary industries, and here we have in Dunedin an attempt being made to so alter the system of rating, as not only to discourage those industries,, but actually tend-to abolish some at least of them. There is, as most of our ratepayers know, a proposal on foot to establish a large steel works in the dominion, and it is understood that Dunedin is regarded by the promoters as the most suitable place for their purposes. Should the proposal materialise, a large area of land will be required to accommodate it, and some 2,000 persons will be employed at the works. If the unimproved value system of rating is brought into force, the rates bn that' land will be increased very largely. The result would be, of course, to jeopardise the projects of that industry being established in Dunedin, a very serious matter.—l am, etc., Let Welt. Alone. September 8.

TO THE EDITOR. I Sir, —Mr R. S. Black says; “ Government valuations will’when made be approximately market value.” Let me inform him that he never made a more ridiculous statement. Although 1 do not sign my name, yon aae at liberty to give him or anyone else my name and address. My late father was in the Government Lands Department for forty-eight and a-half years (a record term of office), and was considered an authority on such matters in Dunedin, f have heard him in conversation with our present city valuers say that Government unimproved value was always far below “ market ” value. Mr Black’s remark only deceives those who are hesitating. Many of my own friends have been so doubtful as to the best way of voting that I have advised them to "go to the Government Valuation Department and find out their unimproved value, and vote as they think it will affect them. Surely this is an honest attempt to help friends! One friend stupidly went to the city valuer’s office, "and because she was told that her property (house and land) was worth about £BOO thought that her rates would be about £4O a year. I had great pleasure when one friend who pays £l6 under the present system found out to-day from the Government Valuation Department that her unimproved value was £l2O, so that her rates will be about £6 a year instead of £l6. ■As to “ market value,” most properties which have lately been put up for auction have failed to produce one single bid. Let Mr Black inquire from Mr Reynolds if I. am not correct. The present Government says it wishes land values to fall, so is it likely that a new valuation would make much difference, as Dunedin has not gone ahead? The city valuer has told me in reference to a property owned by my family that the value is no more to-day than twenty years ago. I would have most people realise that “ something ” is keeping Dunedin back. Is this “ something ” the present annual value system of rating?— l am. etc., Give It a Go.

September 10. > [Mr R. S. Black replies; “ Government valuation, where the rating system is based on that valuation, must be at market value, otherwise it would be inoequitable. and would cause strong measures being taken to see that all ratepayer's wore treated fairly. If the contention is that Government valuation is far below market value (possibly to protect the Government from having land offered to it at valuatipn), then it will apply that all properties should come down in value, or rather valuations, and the basic rates will have to be increased. (1) The city must have money to carry on. (2) The money so spent must increase the land, value. (3) The increased land value must increase the amount paid in rates. (4) The Government valuations in Dunedin to-day are out of date, and well below what they will be when brought up to date. (51, Dunedin is the envy of all New Zealand, and has lent large' sums to many boroughs that are rated under jlrp unimproved value.”—Ed. E.S."!

TO THE SUITOR. Sir, —It has been represented that in his report on rating systems Mr Lewin made it clear that if the unimproved system were carried the rates would be redistributed as between the outlying portions and the centre of the city. Mr Lewin did nothing of the kind. He reported. that if the new system were adopted the effect vyould be a most drastic redistribution of the burden of local taxation. But he did not attempt to say how that redistribution would work out as between different parts of the rateable area.—l am, etc., Read the Repobt. September 10.