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IPART reduces rate peg % again: Will Council seek another rate hike


We are all now familiar with the Independent Pricing and Regulatory Tribunal (IPART). They have now said that 2017 rates will be pegged at 1.5% which will mean that Eurobodalla Council will be getting less rates than expected. So that either means putting up the rates again or that we have to tighten out belts and expect less. Government News reports: "The Independent Pricing and Regulatory Tribunal (IPART) has told NSW local councils to further rein in their spending by forbidding them from increasing their rates by more than 1.5 per cent next year, citing low inflation and minimal growth in costs." In an article written by Government News editor Marie Sansom on November 29, 2016 she explains: "The cap is set by examining the price changes for goods, materials and labour that councils typically use over the past year, called the Local Government Cost Index. It is similar to the Consumer Price Index for households.The measure spells further financial pain for the state’s councils, which have laboured under rate capping since 1978 and put up with a growing infrastructure backlog and cost shifting from other levels of government, leaving them struggling to contain costs while keeping services running." "Councils that wish to set rates above the rate peg must apply for a one-off special rate variation, which many councils use to fund a particular projects, such as a new aquatic centre.This is not a straightforward process. Councils must consult their communities and prove that any increase over the cap is justified, as well as show evidence of long-term financial planning and productivity improvements." You might remember that Eurobodalla Council blamed decades of rate-pegging for the infrastructure backlog we have where we don't have enough money to fix the things (such as roads, bridges and buildings) we own let alone build new things. Council told us that we had a very large infrastructure debt of around $35 million and it couldn't keep up with its responsibilities of maintaining and renewing roads, bridges and public buildings and stated the backlog would increase by more than $3 million every year unless we paid higher rates. The Mayor said in July 2014 :“Every year there's an increase in the backlog of work that we have to do to maintain the levels of service and standards our residents expect. This leads to a significant and growing annual infrastructure renewal gap that we estimate to be more than $3 million a year.” “ We will be considering how we can address the gap. Should we increase our rates revenue, reduce services or allow our infrastructure assets to continue to deteriorate" It is of interest that the Bay Post reported six months later, on January 8th, 2015: "EUROBODALLA Shire Council managed an income of more than $100 million in 2013-14, according to its annual report. Of this, 50 per cent came from rates and annual charges, 24 per cent from user fees, 15 per cent from grants, six per cent from capital grants and contributions and five per cent from investment revenue. The council budgeted for an $800,000 deficit, however posted a surplus of $3.5 million. It attributed this to additional capital grants and contributions, salary savings, stronger than expected returns from Southern Phone and general operations and maintenance cost savings. When it came to expenditure, $32.5 million was spent on employee costs, $27 million on depreciation, $21.5 million on materials and contracts, $8.9 million on other expenses, and $4 million on borrowing costs.Council also posted net losses from disposal of assets of $2.6 million.While the 2013-14 results were favourable, the annual report states that issues such as rate pegging, cost shifting, addressing the infrastructure gap and meeting community expectations continued to be a challenge." Council commissioned a consultant to carry out a phone survey asking Eurobodalla residents, businesses and ratepayers if they wanted to support a special rate rise. The community said NO. The consultant’s report showed 64 per cent of residents felt a rate increase would not be affordable for many residents and council should improve its financial management. Of those who did not agree with the rate rise, 23 per cent felt strongly about their decision.Council also received 113 submissions by letter or email on the proposal; 15 were in support and 92 were opposed. Two submissions gave conditional support and four submissions contained a number of questions that were to be answered by council. Also 11,000 people in Eurobodalla Shire signed a petition presenting it to the Member for Bega saying they did not want it. The previous Councillors decided 7 votes to 2 (Clr Innes and Leslight said NO ) to go ahead and request approval from the Independent Pricing and Regulatory Tribunal for a rate increase for residential, business and farm over three years. One of the Councillors who said NO is now the Mayor. It was IPART who deemed if NSW Councils were fit or unfit for the future and it was the IPART reports that contributed to the forced Council amalgamations around the State. Now IPART are on the move again. In May 2015 Eurobodalla ratepayers were advised that they would now face a 6.5 per cent rate increase for the next three years after Council’s special rate variation was approved by the Independent Pricing and Regulatory Tribunal (IPART). The cumulative increase of the rate increase over the three years would be 20.78 per cent, compared to 9.2 per cent without it. The increase would then remain permanently in the rate base. While the improvements carried out to date have been appreciated by the community we can't lose sight of the fact that Council had justified the rate rise by crying poor that there was no money to maintain all the roads, bridges, buildings and amenities we had already remebering the previous Mayor saying "Should we increase our rates revenue, reduce services or allow our infrastructure assets to continue to deteriorate" NOTE: Of the $17 million raised in the rate hikes $10 million has been earmarked for NON URGENT projects. In an earlier Government News article by Marie Sansom on August 22, 2016 she reported that: "NSW apartment owners should pay higher council rates, pensioners should pay back rates concessions and there should be fewer exemptions, the Independent Pricing and Regulatory Tribunal (IPART) has said. The Tribunal’s draft review of the NSW local government rating system out today (Monday) makes some key recommendations that are likely to give the state’s local councils something to smile about.IPART has said that the review aims to make rates collection fairer and more efficient, keep services consistent and to make councils more sustainable long term and has insisted that it is not an attempt to increase the overall amount collected through local government rates. Another objective is to reduce council’s reliance on special rates variations, where they must apply to the Tribunal if they wish to set rates above the agreed rates cap.The review examines how rates are calculated, what exemptions are allowed and the rating categories used. Here are the main points of the draft review’s recommendations: • Dump some rate exemptions where land is used for commercial or residential purposes •Give councils the choice to set the variable component of rates based on the capital improved value (CIV) of land, not its unimproved value (UV). This means apartment owners are likely to pay higher rates where there is usually a high capital value relative to land value • Replace current pensioner concession scheme with a NSW government-funded rate deferral scheme • New rating categories if councils want them, including environmental and vacant land, business and farmland • Let councils set different rates for different parts of a local government area, to reflect access and demand for services and the cost of providing them • New councils (under mergers) to continue existing rates or set different rates for pre-merger areas once the four-year rate path freeze is over. • Change rate exemptions so they are based on land use, not ownership The NSW ratings system is central to the health of the state’s councils, who have long complained that rate-capping, in place since 1978, combined with cost-shifting and the freezing of Financial Assistance Grants, have eroded their financial health and their ability to maintain and replace vital infrastructure. Rates have been and will remain a critical battleground, with councils saying that too many organisations are claiming rate exemptions, apartment owners are living the high life at their expense and that they are stuck covering rate concessions from people on low incomes. But the idea of replacing pensioners’ rates concessions with a deferral scheme is liable to stir up a hornet’s nest of resentment among seniors and organisations representing them. The IPART proposal is to allow eligible pensioners to defer their rates payment up to the current level of concession (or another amount set by the state government) and instead pay it back when their property is sold and a surviving spouse no longer lives there. The amount would be charged interest at the state government’s 10-year borrowing rate plus an administrative fee." Source All of the above will now have to be considered by a newly formed Eurobodalla Council. The recently elected Councillors will need to be looking very seriously at the finances of Council and the impact of a rate revenue reduction. The recently formed Citizens Jury was assembled and asked "Is Council spending your money on the right things? If not, what should we change?" It is with interest that the Citizens Jury report to be tabled on December 13th, 2016 states: “Throughout this report we seek to convey a majority view that Council is broadly meeting the needs of the community and therefore is generally spending our money on the right things. ... It was difficult to express our recommendations in monetary terms ...” Council is a $100 million dollar a year business. Ratepayers, as “shareholders”, expect checks and balances, consultation, inclusion and transparency from the Council staff and, from their Councillors, the acumen to comprehend complex reports that deal with complex issues and make financial decisions that have very real consequences for residents and ratepayers. With discussions coming up on December 13th to remove Paid-Parking from Batemans Bay hopefully the decision and discussion will recognise the announced reduced limit set by IPART in rate pegging (and therefore income) and also take into consideration the continued reduction in Federal Grants that has also contributed in reducing Councils revenues.


#LeiParker #Opinion

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