Rates hike could cripple businesses
Thursday, 15th August, 2013
By Andrew Robertson
Business property owners are warning that a plan by City Council to slash its reliance on mine rate revenue will close businesses and drive investors away.
Rates paid by business property owners increased by 20 per cent or more this financial year to make up for an $875,000 reduction in rates levied on the city’s mining companies.
Residential rates also increased by nine per cent under the plan which Council said is the first step in a strategy to better diversify its rate base and protect it against large variations caused by fluctuating property valuations.
But Globe Timber and Hardware store co-owner Selina LaRovere-Nagas said yesterday that the rate hike would mean her business would have to shelve any aspirations for growth or hiring more staff.
She said a hike in rates of just over 20 per cent this year, when combined with an almost tripling of rates in the five years prior, was the equivalent to a part-time employee.
“It just means less spending in wages,” she said.
“We’re happy to pay rates but it needs to be managed.”
Ms LaRovere-Nagas questioned the logic behind Council’s strategy to reduce its reliance on mine rate revenue now.
While she “completely understands” Council wanting to plan for a time when it can no longer rely on mine rates revenue, she argued it should be making the most of that revenue stream while it still can.
“It’s like us saying we’re not going to do business with someone because they are not going to be around in a few years.
“The logic isn’t there.”
Ratepayers would also be more accepting of the rate increases if Council had shown some evidence that it was cutting costs.
“We need to take responsibility as corporate citizens but council haven’t shown where they have ... tightened the belt.”
She warned the strategy could also backfire on Council if the rate shifting led to businesses closing their doors.
Many owners of shops and other business premises also appear set to wear the rate increase because their tenants do not have the capacity to pay more rent.
Former councillor John Simons, who owns properties in Argent Street, said businesses were doing it tough because consumers had less money to spend thanks to ever-rising electricity and water charges.
“Our population is going down and our cost of living is going through the roof,” he said.
“Most people will try very hard to stay in business but the stories I’m getting are it’s extremely hard.”
Mr Simons said he would absorb the latest rate increase which was “the biggest in some time”.
“I’ll get over it; I’ll work harder and cut back on costs.
“I’ve got to run a tighter ship.”
Another property owner said he would also be absorbing the rate increase on his properties, despite the reduction in yields.
Pat Schinella said unlike residential properties, commercial properties sold on their yields.
“It will stop the investors coming in because the yields won’t be there,” he said.
“Commercial prices will tumble.”
Still, Mr Schinella, whose rates increased by about 23 per cent, said increasing his rents was not an option.
“There’s no way I can put that on tenants.
“In this day and age people can’t absorb a 23-24 per cent increase in rent.”
He also disagreed with Council’s strategy.
“If the mines pull out completely I think the people of Broken Hill will understand and accept (increases).
“I think we should worry about it when the time comes.
“If it’s a mining town in 10 years do I get a credit?”