The ACT Valuation Office's own landlord has labelled the territory government's increases to commercial rates as "grossly unfair", after rates on the office's own block skyrocketed from $100,000 to $1.4 million in three years following a revaluation.
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Evri Group has owned 220 Northbourne Avenue in Braddon since 2000, and has had the ACT government as a long-time tenant.
Finance manager George Cassimatis told an ACT Legislative Assembly inquiry the group did the government a favour by putting off a planned redevelopment of its Macarthur Avenue intersection block until the government's new office building next to the ACT Assembly was built.
Then the Valuation Office turned around and revalued the block from $5.88 million to $24 million, pushing the group's rates bill from around $100,000 to $634,000. Their 2018 bill rose to $1 million and increased again to $1.4 million in 2019.
The valuation was later reduced to $21 million through an ACAT appeal, although the legal and expert report costs will soon outstrip the savings they made on their rates bill.
"It’s grossly unfair in my opinion that the government can do that," Mr Cassimatis said.
"We’ve done the government a favour and said 'you can stay here for a few more years until your building's done', and then they’ve turned around and said 'your rates have gone from here to here, thanks for that'."
During another day of evidence about the impact of the government's recent hikes to commercial land taxes on businesses and landlords, Mr Cassimatis said his company felt pressured to turn its Braddon office block into an apartment block, despite the market being flooded.
The group's hands are also tied until the government's lease expires in November 2020, meaning it has to wear the charge for another year.
“In effect the government is forcing us to redevelop the site. They’re telling us we have to build something there," Mr Cassimatis said.
"The only way you can save money is by lodging a DA, and they’re fast-tracking us to do a DA, which is not going to have a beneficial outcome for anyone."
Evri Group's submission said it was "odd" that the ACT Valuation Office seemed to be advising Evri Group on what they should develop on-site.
"ACT Valuation Office have indicated numerous times that we should develop 36,000 square metres of apartments and excavate a three-level basement car park. It has also been suggested that a mixed-use development is built on the site. Given there is not one single successful mixed-use precinct in along Northbourne Avenue, one has to wonder why the ACT Government wants Evri Group to build one on this site? It is a costly gamble to take," the document reads.
The group also said the valuation office had suggested it build 400 apartments on-site and provided advice on ceiling heights.
"If we want to develop a good quality apartment product that has ducted heating/cooling, then a floor-to-floor building height of three metres is recommended. ACT Valuation Office kept insisting that we could do this with 2.7 metre floor-to-floor heights. ACT Valuation Office should seek professional building advice to confirm this is achievable and actually provide the evidence to the ratepayer and justify their calculations."
It's not the only way the charge is putting businesses under pressure.
Australian Small Business and Family Enterprise Ombudsman and former Liberal chief minister Kate Carnell said the inflated bills came at a time when the market was relatively flat, and were directly hitting businesses' bottom lines.
"In the cases where it has been possible for landlords to pass on the significant increase in commercial rates to their tenants, the issue then becomes for small business a pretty flat environment in terms of hospitality, restaurants, and retail; the capacity to pass onto consumers is really low," Ms Carnell said.
"Nobody is running around at the moment saying in the ACT people are making a large amount of money in their retail or their restaurants or their cafes or whatever."
Ms Carnell also challenged ACT Chief Minister Andrew Barr's testimony last week that ACT businesses were better off because of the territory's high payroll-tax threshold.
"The majority of small businesses don't pay payroll tax even in NSW and with the NSW government announcements of reducing payroll tax that will become even more so, so I don’t accept that's an argument to suggest that it is reasonable to have commercial rates that can be 10 per cent of what they are in the ACT in Queanbeyan," Ms Carnell said.
"We compete directly and we have to take that pretty seriously."
The part-owner of the Duxton pub, David Quinn, told the inquiry that the savings he made on payroll tax - $34,000 - were nowhere close to the increase in his rates bill. The pub's rates have risen by $60,000 in five years.
"I'm still worse off," Mr Quinn said.
The ombudman's principal advisor, Anne Scott, also said the rate rises were having a flow-on effect to the amount of money banks were willing to loan businesses, and came at a time when the big four were already cracking down on lending practices.
"There’s a definite drop in the number of new loans that are being approved for small business," Ms Scott said.
She said it was largely small businesses coming to the end of their loan facility period that were finding the "door is shutting on them" because their revenue was no longer high enough.
"When we ... increase pressure on the business, either through the rates directly or the transfer of the rates to that business's overheads, then there’s even more reasons for the banks to not continue finance arrangements with that business," Ms Scott said.
"We’re seeing small businesses now, their loan facilities being closed to them which means their business will fold."
The inquiry continues on Friday.
