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Manningham Council's Hidden Tax.

The plan to promote business at Tunstall Square.

Manningham council says it wants to help promote business at the Tunstall Square shopping center.

To do this, our council is collecting a special levy from the traders and store operators and will employ a part time marketing coordinator.

"Following the meeting of Council on 29 October 2013 and in accordance with section 163 of the Local Government Act 1989, Council provided notice of intention to declare a Special Charge (for marketing and promotions) in Tunstall Square (West) Shopping Center for the 5 year period from 1 January 2014 to 31 December 2018.

...

This report seeks endorsement of the statutory procedures to declare a Special Charge for the Tunstall Square (West) Shopping Center." (Council minutes 17 Dec 2013. Section 9.1)

This Special Charge Scheme for Tunstall Square has been running since 1995 and the council intends to renew it for another 5 years starting in 2014.

In the past, this levy has been used as follows:

"A Special Charge Scheme has operated in the west side of Tunstall Square Shopping Center since 1995. The previous Special Charge Scheme expired on 30 June 2013. That scheme raised a total of $248,399 over the past 5 years ($49,679.80 per annum) and has funded promotional initiatives, such as seasonal promotional campaigns, Christmas decorations for the center, festivals, urban art projects and regular roving performers. The Special Charge Scheme also funds the employment of a part-time marketing coordinator." (9.1, 1.2)

The scheme is going to continue basically unchanged for another 5 years.

 

Do the retailers support this scheme?

How much support does this scheme have with the traders of Tunstall Square? 106 letters were sent the the retailers and traders who operate shops at Tunstall Square. The council received two replies each of which they say 'noted support'.

"In response to the 106 letters sent, Council received two written responses. Both of these submissions noted support for the scheme. No objections have been received regarding the proposed scheme. Accordingly, a submissions hearing was not required." (Council minutes 17 Dec 2013. Section 9.1)

 

One letter was actually from an ex-trader at Tunstall Square who describes the benefits of the scheme as follows:

'... I have seen how with a coordinator to keep the traders united, organised as a group for promotions and community activities, and creating a special relationship with council and officers ...' (Tunstall Square Rate Renewal – Notice of Declaration)

This letter was from someone who no longer runs a shop at Tunstall Square. The reasons this person gives for continuing the scheme such as: uniting the retailers, creating a special relationship with council and organising the traders as a group for community activities and promotions can be helpful for business and might lead to increased sales if taken advantage of.

It is also worth pointing out that there is already a Tunstall Square Traders Association which could probably provide the same organisation and opportunities without needing council involvement or an additional levy.

 

A second letter the council received clearly supported the scheme and was from a not-for-profit organisation which has a shop at Tunstall Square. We need to keep in mind that not-for-profit organisations often have a special relationship with councils and sometimes are tied in to council programs. They sometimes receive financial and other support from the council. As such, they often see council programs as positive and give their support to them.

The non-for-profit organisation is Doncare. Doncare was mentioned in a 2009 Manningham Matters news letter as follows:

"Highlights of the capital works budget include: $9.235 million budget allocation towards the first stage of the Civic Precinct development which includes a library, cultural center, children’s services, maternal and child health and accommodation for Doncare and other community services ($34.953 million over three years)." (Manningham Matters, July 2009, page 2)

So Doncare receives quite a bit of money, infrastructure, and assistance from Manningham Council. Their view of the special levy needs to be assessed in light of this and cannot be taken as representative of the retail traders at Tunstall Square who do not receive anything like this level of assistance from Manningham council.

 

When looked at objectively, neither of these letters give real support for the scheme. The first should be dismissed as not being relevant and the second should be dismissed because of financial links to the council.

 

At the heart of this scheme is the suggestion that it promotes business in the shopping center. The feedback we need is from people who run shops for a living at Tunstall Square. And when it comes to assessing the benefit of the scheme, we need to measure, if possible, the impact this scheme has on the income or revenue of the traders.

So what about the other 104 people they sent letters to? The council also said that 75% of the traders gave their support for the scheme. However, we need to look carefully at what they said:

"Council received a written request from the Tunstall Square Traders Association to renew the Special Charge Scheme for the west side of Tunstall Square Shopping Center. This request represents majority trader support for the Scheme to continue (75% of traders signing an "in principle support” form for the scheme to continue)." (9.1, 1.4)

The Traders Association say that 75% of traders gave 'in principle' support for the scheme. Now what does 'in principle' support mean? What comes to mind when you hear 'in principle support'?

To me, it suggests that 75% of traders think the scheme is a good idea. However there are things they want to discuss and get right before they go ahead with it. That is, there are are practical aspects of the scheme that need to be sorted out before they give the go ahead.

 

However, our council did not see things this way. They took 'in principle support' to mean that the traders were eager for the scheme to continue unchanged. The council then billed the traders for the new scheme.

Normally in the business world, 'in principle support' means that there is a lot of work to be done before you get the go ahead to proceed. However,

"The Scheme is proposed to operate for a further five year period, commencing 1 January 2014 and ending on 31 December 2018." (9.1, 1.5)

 

So the suggestion that traders at Tunstall Square actually want this scheme to continue is questionable. What is clear however, is that the Manningham council is very keen to continue this scheme for another 5 years.

 

Consultation.

The renewed scheme will involve a lot of consultation with the traders and shop operators. For instance, there is a meeting of traders, also surveys are sent out to traders to assess the weaknesses of the prior scheme and opportunities for the new scheme. Also there are one-on-one meetings with each trader.

However, all this consultation is done after the scheme has been renewed. It is done when the bills have been mailed and the retailers are paid up and committed.

There is no opportunity for the traders to make sure the details of the scheme are right before they commit themselves to it. Instead they first need to commit themselves, then argue about the details afterwards from a much weaker bargaining position. All they can do once they are committed, is hope that the marketing coordinator and others in positions of power will listen to them, their ideas, needs and criticisms of the scheme.

 

Can a trader easily exit this scheme?

What if a trader decides that they can do a better job themselves of marketing and promoting their own business? What if they come to the conclusion that the scheme, from a business point of view, is a poor use of money? Is it easy for them to get out of this council scheme?

Of course it isn't.

First, if a trader objects to the scheme in writing, a submissions hearing is normally held. The discussions at this meeting are normally minuted and made available to the public. They may even be reported by the local newspaper. You may, if you wish, attend and put your case at the submissions hearing.

If you object to the scheme, you run the risk of not being in control of how your criticisms are presented, interpreted and the impression they may leave. This will especially be the case if the local newspaper publishes an article on the subject. You will find that you will have even less control over the impression your criticisms and objections may leave with readers of the newspaper.

Normally one would hope that the council minutes are discreet and responsible. However, as many of us know, this is not always the case with newspapers. You need to remember that you are opposing Christmas decorations, roving young entertainers, cultural events and arts festivals. Also you are opposing a scheme that many would argue benefits your shop's sales however you are not willing to contribute to the scheme's cost. There is a good chance that your objection may not come across well. And that could impact your business.

 

If the council decides your objection has no substance and proceeds with the scheme and includes you in it, your only other recourse is to take the matter to VCAT. At VCAT you can spend a lot more money getting out of the scheme than you would being part of it.

And you run the risk that VCAT will not find in your favour. Even if they did find in your favour, you could have another legal battle on your hands when the council renewed the scheme (with minor alterations) five years later.

Is VCAT likely to rule against you? VCAT could be of the opinion that local business should pay for cultural and entertainment activities in their immediate area especially if they stand to benefit financially, even in some small way. They could also be of the view that a person's desire to make a profit and cover costs in all situations is misguided.

 

In short, it is probably simply better to pay the levy than fight it. If you fight it, you run the risk of hurting your own business or incurring more expense. To traders who don't want to be part of the scheme, the council scheme becomes simply a cost of doing business in the City of Manningham.

 

The Money Trail.

Basically the traders at Tunstall Square are billed around $250,000 over a 5 year period.

The council takes possession of this money and will only release the money back to the Traders Association if they are satisfied with the marketing plan, forecasts, and so on that the Traders Association develop:

"The Tunstall Square Traders’ Association will manage the funds raised via an elected committee of traders and/or property owners. The funds will be managed in accordance with the binding funding agreement between the Traders’ Association and Council. Council will release the funds to the Traders’ Association upon receipt of quarterly financial statements, budget forecasts and marketing plans." (9.1, 2.1.6)

The council only releases money when they have marketing plans (and other documents) and can see how the money is going to be spent.

This would strike many people as the council wanting to control how the traders money is spent.

The council paints this as being financially responsible with money and that may be true, however it is also very overbearing. The council basically is in a position to veto the spending of the Trading Associations members own money. They are also in a position to insist that the Trading Association alter the marketing plan so the plan is more to their liking. This is a very powerful position to be in.

 

Where is the Councils Business Plan?

Manningham council portrays itself as being financially responsible when it comes determining how other people's money is spent, but the odd thing is that the council itself cannot come up with a comparable business plan that justifies what they themselves are doing.

Please allow me to explain.

Just how much benefit does this special levy return to the shops? From what I can find, the council has no idea. The council simply assumes that their scheme will benefit all the retailers.

The council's justification for having the scheme appears to be based entirely on assumptions. There has been no attempt, on the part of the council that I can find, to quantify the benefits to the shops, to justify the expense or to compare the expenses with forecast or actual increases in sales.

In short, Manningham councils special levy scheme for Tunstall Square traders appears not have a business case to support it. As far as I can tell, it is an unsubstantiated business proposal that would be rejected by any responsible businessman.

"Each rateable property and each business in the Scheme area that is required to pay the Tunstall Square (West) Special Charge will receive a special benefit through increased viability of the shopping center. Enhanced economic activity generated through the promotion of the center is likely to support successful businesses, secure tenants and increased property prices.

The Tunstall Square Special Charge Scheme will generate approximately $50,000 per year for a five year period. The Scheme will commence on 1 January 2014 and conclude on 31 December 2018." (9.1, 2.14 and 2.1.5)

The council simply assumes this scheme will enhance economic activity. There is no attempt made, that I can find, to justify the cost or quantify the benefits.

Note also that the council says their scheme is 'likely to support successful businesses'. So what is the public to conclude if your business does not benefit from this scheme? If you do not derive any benefit from the scheme, the council has pre-announced to all and sundry that you run an unsuccessful business and probably are incompetent as a business person. This would strike many as being manipulative and heavy handed.

 

Consider this justification.

"It is considered that all of the retail, commercial and professional properties and businesses located in Tunstall Square will derive a special benefit from the expenditure of the funds raised by the Special Charge". (9.1, 14.2)

So all you have in the end is 'it is considered by the council' that you will get a 'special benefit ' from this scheme.

What is this 'special benefit'? Is it money in the till? Is it Christmas decorations? Is it a street performer singing for a few minutes outside your shop? Who knows?

 

Basically the council once again is forcibly taking other people's money, without reasonable justification, and then insisting it be spend it in a way they agree to, otherwise the traders won't see their money. This is very one way and very heavy handed.


When you consider these points:

 

  • the council keeps the scheme going by appealing to very flimsy support, such as the two questionable letters;
  • the council assumes that 'in principle' agreement is a green flag to go ahead and unilaterally commits traders to the scheme;
  • the council makes it very difficult for a trader to exit from the scheme,
  • the council takes ownership of and largely controls the traders own money,

 

then I think it is fair to ask what is really going on here?

 

The Hidden Council tax.

The council documents regarding this scheme make it clear that only the traders at the shopping center will derive any benefit from this scheme.

Also they conclude that since only the traders (and no one else) will derive any benefit, then the traders should pay for the entire cost.

In the minutes of the council meeting of 17 Dec 2013 we find this:

"It is considered that the only persons to derive a ‘special benefit’ from the imposition of the proposed Special Charge are those persons who are liable or required to pay the Special Charge, whether they be the owners or the occupiers of the land and the commercial and business properties included in the Scheme area..." (19.1, 14.3)

 

But is this the whole story? Will anyone else derive benefit from this scheme?

You will have to go back through the records and dig around a bit to find out why this scheme exists. In fact, we need to go back quite a few years.

Activity centers have a special place in the state government's plan for Victoria. The state government told councils they need to increase the density of residential dwellings to accommodate Melbourne's forecast growth in population. Councils seek to achieve this goal by allowing higher density residential developments centered around 'activity centers', (that is shopping centers like Tunstall Square), and thereby increase population while minimizing the impact on other areas and possibly environmentally sensitive areas. 

Consider the following:

1.5 The Vision for Manningham’s Activity Centres

The vision for Manningham’s Activity Centers is that: Manningham’s Activity Centers will be highly accessible, visible and vibrant centers that have a distinctive marketing niche catering to the community’s diverse and changing needs. They will form part of an integrated network that encourages meeting the social, economic, cultural and environmental needs of healthy and more liveable neighbourhoods. Our Activity Centres will be the focus for services, facilities, transport, employment, social interaction and housing diversity. (Manningham Activity Center Strategy September 2005, Page 2)

It is important for our council that shopping centers, i.e. activity centers, become a vibrant, welcoming and growing place for people to meet, work, socialize, etc.

For example:

Manningham’s Activity Centers will be the major focus for increased higher-density residential development. (Manningham Activity Center Strategy September 2005, Page 1)

And again:

"2.1 State Context - Melbourne 2030

In October 2002, the State Government released Melbourne 2030, that provides a 30-year plan to manage growth and change across Metropolitan Melbourne. Essentially, Melbourne 2030 is a strategic document that addresses how Melbourne is to develop into the future. It aims to accommodate expected population growth in an ecologically and socially responsive manner, promoting the development of a compact city centered on public transport networks to minimize the reliance on private vehicles.

 

Melbourne 2030 encourages maximizing the use of existing infrastructure and facilities with the aim of creating a more livable, attractive and prosperous city. Therefore, Activity Centres have been identified as the most logical places to concentrate increased residential development, facilities, services, infrastructure and interaction.

 

The Melbourne 2030 Implementation Plan for Activity Centers directs all local councils to provide an integrated planning framework to set the future direction of their activity centers to ensure that centers meet current and future social, economic and environmental expectations." (Manningham Activity Centre Strategy September 2005, Page 6)

 

So, is the council right in saying that only the traders will benefit from this scheme?

The traders might stand to benefit, but that is not the whole story. Manningham council also stands to benefit from this scheme.

With this scheme, and others like it, Manningham council is enacting what the state government directed them to do.

This scheme, and others like it, is a step in developing shopping centers into vibrant cultural centers so they can become the focus of a dramatic increase in population density around about them.

The question to ask is this. Are the activities the council approves of, i.e. decorations, roving entertainers, web pages, festivals and art projects more likely to promote trade and commerce or are they more likely to promote the social and community aspects of the activity center? I think most would say they promote the later far more than they do the former. And I think that most would agree that these activities are designed more to meet council objectives more than they are the shop owners business objectives.

Also, it is quite possible that council employees themselves may also stand to benefit from this and similar schemes. The state government has set goals and objectives for councils to achieve. Council managers need to set in place plans to achieve these objectives. Also it would only be reasonable to think that promotions and bonuses may be linked to their performance and success in this area.

 

If you read the December minutes carefully in light of the 2005 strategy plan for activity centers, there are some places that hint back to this earlier directive from the state government.

"6.2. A Special Charge Scheme also provides for the empowerment of an activated Traders’ Association that can work with other businesses, Council and the community to deliver a range of initiatives that focus on generating increased activity and vibrancy to the Tunstall Square Shopping Centre."

and

"7.3. The renewal of this Special Charge Scheme at Tunstall Square (West) Shopping Centre is in accordance with Council’s overall vision and goal of ensuring that Manningham’s distinct local activity centres are vibrant places to meet and provide support for local businesses and traders."

 

So when our council says:

"14.3. It is considered that the only persons to derive a ‘special benefit’ from the imposition of the proposed Special Charge are those persons who are liable or required to pay the Special Charge, whether they be the owners or the occupiers of the land and the commercial and business properties included in the Scheme area (in circumstances where there are no other special benefits or community benefits accruing from the Special Charge)."

We can see this is not the whole story. There are many others who derive benefit from this scheme as well,  in particular the council itself.

What this scheme is, in a large part, is a hidden tax that adds to the cost of doing business in Manningham.

 

20 Feb 2014.

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