URGENT Federal Government help is being sought after the Defence Department blew a $447,000 black hole in Benalla Council’s budget.
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The figure represents the shortfall the rural city faces after the Commonwealth revealed it would no longer pay council rates on its land housing Benalla’s Thales munitions factory.
In a letter to the council, the Defence Department’s property provider Cushman and Wakefield cited constitutional provisions for abandoning rates payments.
“Under the Commonwealth of Australia Constitution Act the Commonwealth has no liability to laws which impose a tax on Commonwealth property and as a result is not required to pay council rates,” property manager Peter Breen advised council chief Tony McIlroy.
The decision, which came days after Benalla adopted its 2016-17 budget, stunned Mr McIlroy.
“I was absolutely gutted,” Mr McIlroy said.
“This came out of the blue, the council was appalled there was no forewarning.”
A council meeting on Wednesday night saw a motion adopted to lobby the Defence Minister Marise Payne, member for Indi Cathy McGowan and Victorian Senator Bridget McKenzie to fight the department’s decision.
Federation Council, which has a Thales plant at Mulwala, suspects it may face the same scenario with administrator Mike Eden saying it stood to lose $32,000 in rates.
“We’ve budgeted for the $32K to come in and we’re going to have to pull our belts in or find money elsewhere,” he said.
Mr McIlroy said the $447,000 his council faced losing equated to 2.8 per cent of its rates revenue.
French-owned Thales sold the land on which its factory stands to the government last year.
Mr McIlroy said there was a precedent for the Commonwealth paying rates on the $65 million property, pointing to when it owned it under the ADI banner and it paid full rates in 2002.
However the council has received legal advice stating its best hope now would be negotiating ex gratia payments in lieu of rates.
Mr McIlroy noted Hume Council receives money for the Melbourne Airport which is on federal land.
Ms Gowan has vowed to take the issue to government ministers.
“This is of great concern as it will have a huge impact on the council’s financial capabilities,” Ms McGowan said.
Defence did not respond to The Border Mail’s inquiries.