Memorandum by City of York Council (SBR
19)
INTRODUCTION
1. City of York Council is a unitary local
authority situated in the county of North Yorkshire, with a resident
population of 186,800. This organisation has been asked to provide
a memorandum addressed to the Communities and Local Government
Committee which addresses the proposal in the Lyons report for
a supplementary business rate. A Chief Officer at the authority
has also been asked to attend the meeting of the Committee on
19 June to provide oral evidence.
EXECUTIVE SUMMARY
2. City of York Council is broadly supportive
of the proposal in the Lyons report for a Supplementary Business
Rate. This memorandum considers how this proposal could be accommodated
in the context of our current work to establish a Business Improvement
District. It also provides details of York's Business Pride Initiative.
Detailed financial analysis which considers how much a Supplementary
Business Rate in York could raise using different contribution
rates is also included. We consider the projects/infrastructure
that funding raised through this mechanism could support and provide
our thoughts on who would pay the levy. Finally, consideration
is given to billing and collection issues. Throughout this document
advice is given as to how City of York Council believes this initiative
could be most usefully introduced.
THE EFFECT
OF LYONS'
PROPOSALS ON
THE CITY
OF YORK
Do we feel a Supplementary Business Rate is supported
across the country?
3. We feel a Supplementary Business Rate
across the country should be supported in principle provided that:
(i) It is administered locally giving clear
local benefits for local businesses.
(ii) It is able to provide additional resources
for new infrastructure investment or projects which assist business.
(iii) Decision-making, issues of process
and at what stages if any a vote is required are transparent.
(iv) It is administered by a business-led
body, perhaps along the lines of the newly created "Business
Tax Partnership Management Team" that is already in place
in York for a potential city centre BID. This is chaired by the
private sector with local business ratepayers voting on the final
decision to support a BID. There could also be scope to include
the partnership within the LSP process overall, though the process
for this would need to be discussed and agreed.
(v) The Government gives a clear indication
of whether this is a voluntary scheme in which businesses vote
for a proposal on whether a Supplementary Business Rate would
be levied, or a compulsory scheme which also ensures full business
participation in the decision-making process.
(vi) There should be the power to vary the
business rate in certain parts of the council area. For example,
the local authority may wish to reduce NNDR within a specific
area in order to drive regeneration. Of course, the council would
have to bear the cost of this. There could be a range of plus
or minus 4p.
IMPACTS ON
A POSSIBLE
BUSINESS IMPROVEMENT
DISTRICT
4. Since York already has a BID process
underway this could impact on the potential Supplementary Business
Rate. Should the supplement not come into being then we feel that
York should proceed with the BID that is currently being developed
by York City Centre Partnership. Should the BID be approved it
will be in place for five years from 2009 to 2014. If the supplementary
business rate does come into being this is likely to be in 2010-11.
5. Should a BID be in place by 2010-011
transitional arrangements will need to be developed to ensure
participating businesses are not subject to supplementary taxes.
Should the Supplementary Business Rate be delayed, but is still
implemented within the lifespan of the BID, then this principle
still applies. The transitional arrangements should include the
involvement of the BID board in administrating a Supplementary
Business Rate to ensure that benefits/proposals consulted upon
locally are delivered and to aid consistency and reduce conflict
and confusion.
RELATIONSHIP/CONFLICT
ISSUES BETWEEN
SUPPLEMENTARY BUSINESS
RATES AND
BIDS
6. Whilst we can see that the concept of
a Supplementary Business Rate that enables a levy to be raised
for investment in local infrastructure projects is a logical extension
of the BIDs concept, the proposals as made, we believe, will almost
certainly end BIDs in this country as they are currently constructed.
The Supplementary Business Rate should be simpler and quicker
to introduce.
7. Although the report states that the supplement
should be local, additional, transparent, and agreed with the
local community, we believe that the proposals as set out in the
report are limited in at least two, if not three, of these areas.
8. Firstly, in terms of geographical area,
local does not mean, and should not mean, co-terminus with local
authority boundaries. BIDs have demonstrated, both in this country
and in North America, that businesses that agree to pay an additional
levy do so to see an improvement or initiative directly connected
to their immediate environment. It is this that changes a BID
contribution from a tax to an investment for a business. BIDs
are focused in small geographic areas and the contributors can
see local action and success —the proposed supplementary
business rate may not offer that.
9. The greatest positive that has emerged
from BIDs is the level of engagement with the business community
in identifying what any levy would do and how it should be quantified.
There is real business ownership and involvement and where this
has not been done properly, the BID has been voted down. There
is no doubt that businesses want to invest in the BID where a
successful ballot has been held. Lyons' proposals with the "local
business community having a strong voice in the final decision
..." are not the same as the current BID system. Approval
without a vote is fundamentally different from the approach of
a BID. However it is simpler to achieve, particularly as the BID
process is greatly hampered by the fact that many businesses are
not locally owned and require head office consideration and approval
of how to vote in a BID ballot.
10. In order to achieve the level of transparency
which Lyons advocates, we believe that in York we would use a
development of the current City Centre Partnership, which is presently
examining the potential for a BID. The distinction between such
a body and the local authority is that the City Centre Partnership
is independent and business-led. BIDs have to produce clear business
plans, annual reports and face a re-ballot. Transparency is therefore
an inherent characteristic of the BID process. We believe that
a good level of transparency and ownership by local businesses
will be required to help ensure the success of a Supplementary
Business Rate. Critics believe that the supplementary business
rate, though theoretically an extension of BIDs, fails its key
tests and will be perceived as partial localisation of business
rates. Although it should be said at this point that York would
welcome partial localisation of business rates.
THE YORK
BUSINESS PRIDE
INITIATIVE
11. In November 2003, City of York Council
launched a major campaign to involve local businesses in improving
the city. Councillor Steve Galloway (Leader of the council) and
Adam Sinclair (owner of local business Mulberry Hall) unveiled
the "York Business Pride" initiative to some of city's
most prominent business leaders and appealed to them to get involved.
12. The project was the next phase of the
Council's "York Pride" initiative, which seeks to radically
improve the city's environment at street level.
13. Businesses were able to get involved
in the scheme in five different ways, depending on the size of
the firm and the level of commitment they felt able to offer.
14. The most basic level of involvement
was York Street Pride. Local businesses were asked to nominate
one member of staff to be responsible for calling the council's
551551 helpline to report any "street level" problems
in their area.
15. Local companies could become York Business
Pride Patrons by making a financial contribution to the Business
Pride Challenge Fund. The fund was managed by an independent charitable
foundation and money was provided by both the business community
and the council.
16. Businesses could also get involved by
becoming a Business Pride Sponsor. Ideas for sponsorship include
supporting one of the council's street cleaning services, such
as the gum-busting machine, or an annual awards ceremony.
17. Business leaders were able to put themselves
forward as candidates for the York Business Pride Board, which
developed and co-ordinated business initiatives across the city;
or, at the most basic level, local companies could "commit
to take pride in their premises" by keeping their shop or
business clean and tidy. The initiative brought real improvements
in the appearance and cleanliness of the city.
18. The Business Pride Initiative was created
for a specific period of time and came to an end in April 2007.
The initiative improved the general Street Scene in York with
contributions going towards Christmas Lights, York in bloom, de-cluttering
the street environment and gum busting.
How much could a Supplementary Business Rate raise
in York?
19. The Lyons' Report suggested a 1p levy
would raise approximately £2.4 million per annum in York.
Financial modelling in Annex 1 considers different scenarios for
Supplementary Business Rates (1p/2p/3p/4p in the pound) in York
and provides projected yield figures for each amount.
What projects/Infrastructure could the Supplementary
Business Rate Support?
20. Lyons recommends that the revenues from
a supplement should be hypothecated to the purposes agreed through
consultation.
21. We need to ensure that supplements contribute
to, rather than detract from, the local economy. We propose that
authorities should be required to make an assessment of the impact
of a supplement on the local economy and the potential economic
benefits of the spending they propose to finance from the revenues
generated.
22. It is likely that businesses will focus
on infrastructure projects which will be of clear benefit to them.
Given that any scheme is likely to be city-wide in scope, a range
of projects are likely to emerge that will suit the aspirations
of businesses wishing to invest in the city's future.
23. At this stage potential projects might
include contributions towards:
(i) Transport improvements.
(ii) Tourism—Visitor Information
Centre.
(iii) Architectural lighting projects.
(iv) Street improvements (signing, street
furniture).
(vi) Training and skills development
projects.
(vii) IT and digital infrastructure
improvements.
(viii) Science City York related developments/infrastructure.
(x) Festivals and events development.
(xi) Enhancement of the city's retail
offer.
Who will pay the Levy?
24. Lyons highlights that small businesses
pay a higher proportion of turnover in rates than larger businesses,
and reflecting this the Government has recently introduced Small
Business Rate Relief to reduce bills for small businesses. There
is therefore a question as to whether small businesses should
receive any discount or exemption from a business rates supplement.
The smallest 90% of properties only represent a little over 30%
of rateable value, so a discount or exemption for smaller businesses
would not in most places substantially reduce the yield from a
supplement. On the other hand, it might well be considered unfair
by larger businesses that they should effectively have to subsidise
smaller businesses, simply on account of their size.
25. We believe that Central government should
set the overall framework and how national exemptions and reliefs
apply in relation to the supplement. In particular, it may wish
to protect the smallest businesses through setting a threshold
below which small businesses do not pay a supplement, or it may
want to set tiered contribution rates based on the size of the
business.
26. However, we believe it is important
that there is flexibility to manage these issues at a local level.
Local authorities and local businesses should be able to consider
whether additional discounts or exemptions from a supplement are
justified for small businesses, taking into account the purpose
of the supplement and local economic conditions. A number of BIDs
alter their levy depending on the size of the business involved.
In addition to business size, there are also issues to be considered
in terms of how a supplementary rate would apply to charities,
community sports clubs, other rate relief recipients, empty properties
etc.
BILLING AND
COLLECTION
27. The manner in which the supplementary
rate is billed and collected will have administrative implications
for billing authorities. For the purposes of billing the supplement
could be set by means of a system parameter. This might take the
form of an additional multiplier, in a similar way that authorities
currently maintain two multipliers—the non-domestic multiplier
and the small business non-domestic multiplier. Assuming that
all properties within the billing area are liable to pay the supplement
this would be a relatively straightforward matter. However, where
the supplement is only levied on certain types of properties or
for sub-districts this would require the authority to identify
the relevant properties either by a program script (eg all properties
within a rateable value range or all properties in a parish/work
group).
28. Consideration also needs to be given
as to whether or not the supplementary rate will be shown as an
additional item on the existing rate demand notice. Whilst the
production of a joint notice is administratively easier, and less
costly, it does obscure the distinction between the national and
local rate—the issue of transparency is highlighted in paragraph
8.45 of the Lyons Report.
29. More problematic than the billing issues
are those of collection and the allocation of payments received
from the customer. Where there is a single demand notice the customer
would be expected to pay monthly instalments based on the combined
amount of the national and local rate. When a payment is received
this will require the authority to internally allocate the payment
between the two rates. If the customer pays in full this would
be relatively simple. However, where the customer fails to make
payment there needs to be a mechanism to determine how much national
rate is outstanding and how much of the supplement remains unpaid.
Ultimately this could impact on the authority's ability to fund
local schemes.
30. The solution taken by the City of York's
software supplier to the billing and collection of BIDs may offer
an approach with regard to the supplementary rate. The authority
is provided with an additional property and account database enabling
it to issue separate demand notices. The BID levy is set by system
parameter and only those properties that are in the BID area have
records created in the additional database. This solution resolves
the issue of the allocation of payments as the customer is expected
to quote a separate payment reference number. The authority still
has an additional overhead in that it needs to ensure that changes
in the main business rates database are reflected in the supplementary
database (eg changes in occupation, rateable value etc) although
this can be done by means of interface programs between the two
data sets.
31. Both the inclusive demand and separate
demand options would require some software changes which are likely
to be offered as chargeable items by software suppliers. These
costs would need to be taken into account when setting the level
of the supplementary rate.
32. It is important that billing authorities
are given sufficient powers to enforce collection of the supplementary
rate. We would seek to have similar powers in terms of the issuing
of reminder notices and progression to the Magistrates court as
contained in the Non-Domestic Rating (Collection & Enforcement)
(Local List) Regulations 1989.
CITY OF YORK COUNCIL—EFFECT OF PROPOSED
SUPPLEMENTARY RATE (LYONS ENQUIRY PROPOSALS)
Note: Date of extracted information is 31st March
2007
Gross Details
| Number of
Properties
| Rateable
Value | Effect of Additional Levies
|
| | | 1p
| 2p | 3p | 4p
|
| | | £
| £ | £
| £ |
| All Properties Totals
(Gross Figures)
|
5,680 |
204,900,941
|
2,049,009 |
4,098,019
|
6,147,028 |
8,196,038
|
Comparison with current 2006-07 Net Collectable: £71,595,776
Small Business
| Number | Rateable
Value
| Effect of Additional Levies
|
| | | 1p
| 2p | 3p | 4p
|
| | | £
| £ | £
| £ |
| SBR Qualifiers | 957 | 5,468,795
| £54,688 | £109,376
| £164,064 | £218,752
|
| Potential Remainder
Qualifiers |
918
|
6,231,915 |
62,319
|
124,638 |
186,957
| 249,277 |
| Non Qualifiers | 1,652 | 9,952,526
| 99,525 | 199,051 | 298,576
| 398,101 |
| Total | 3,527 | 21,653,236
| 216,532 | 433,065 | 649,597
| 866,129 |
Current Empty Exempt Properties
|
Number
| Rateable
Value | Effect of Additional Levies
|
| | | 1p
| 2p | 3p | 4p
|
| | | £
| £ | £
| £ |
| Industrial | 189 | 3,405,530
| 34,055 | 68,111 | 102,166
| 136,221 |
| Listed Buildings | 92 | 2,574,010
| 25,740 | 51,480 | 77,220
| 102,960 |
| Insolvency Cases | 6 | 102,500
| 1,025 | 2,050 | 3,075
| 4,100 |
| RV Limited < 2000
RV |
35
|
42,970 |
430 |
859 |
1,289 |
1,719
|
| Within Initial 3 Month
Free Period |
46 |
1,086,770 |
10,868
|
21,735 |
32,603 |
43,471 |
| Total | 368 | 7,211,780
| 72,118 | 144,236 | 216,353
| 288,471 |
| | |
| | | |
| Current 50% Empty
Relief Cases |
203
|
4,474,825 |
44,748
|
89,497 |
134,245
|
178,993 |
Current Charities & Other Reliefs
|
Number | Rateable
Value
| Effect of Additional Levies
|
| | | 1p
| 2p | 3p | 4p
|
| | | £
| £ | £
| £ |
| Charities 80% Only | 252 |
12,643,875 | 126,439 | 252,878
| 379,316 | 505,755 |
| Charities With Disc Relief Top Up |
81
|
2,917,790 |
29,178
|
58,356 |
87,534 |
116,712 |
| Community Sports
Clubs |
24
|
620,000 |
6,200 |
12,400 |
18,600 |
24,800
|
| Non-Profit Organisations—100% DRR |
11 |
66,760
|
668 |
1,335
|
2,003 |
2,670
|
| Rural Relief Qualifiers | 31
| 178,635 | 1,786 | 3,573
| 5,359 | 7,145 |
| Total | 399 | 16,427,060
| 164,271 | 328,541 | 492,812
| 657,082 |
| Total of All Reliefs/
Exemptions |
4,497
|
49,766,901 |
497,669
|
995,338 |
1,493,007
|
1,990,676 |
| | |
| | | |
| Supplementary Rate Potential Yield (After
Reliefs/Exemptions)
| | £1,551,340 |
3,102,681 | 4,654,021
|
| 6,205,362 | |
| | | |
|
|
