Council Rates - Purpose, Distortions & Fairness
The Beagle Editor, Your readers might be interested in the following that was delivered, via the Public Access forum, to Councillors on October 11th 2022. Council Rates - Purpose, Distortions & Fairness
To quote Council’s recent Delivery Program “ The role of local councils has come a long way since the days of roads, rates and rubbish.
In the whirlwind three months after the election new councillors were blooded and experienced the dark art of setting the annual rate levy.
Six months on as council settles into implementing the 2022/23 Operational Plan you may have started to reflect as to how the 3 R’s roads, rates, rubbish (To which I have always add a fourth R for reserves or the Town Common) became so confusing and convoluted.
Perhaps two examples could assist:-
1. The first was unashamedly the blunt master servant relationship between State and Local Governments.
Neville Wran was an artful politician who in the early 1980’s garnered the pensioner vote at election time by promising a rebate on their council rates. Needless to say he was re-elected as NSW Premier with a very large pensioner vote.
After the election, dust settled the detail was revealed, councils were told that they would fund 45% of the rebate from their own ratepayers and State government would only fund 55%.
That was it. Game set & match. Get stuffed local government, rude letter to follow.
With 4500, and growing, Eurobodalla has one of the highest % of pensioner ratepayers in a local government area. This almost $1million rebate impost hits the full fee paying Eurobodalla ratepayer.
2. The second example is more recent, crafted during the State economic rationalism / privatization ideological push.
Once Water and Sewerage Funds were “ring-fenced”, this created independent identities within the council financial structure.
These Funds stood on their own feet and it was one of the first items that Council’s financial auditor would examine to ensure that no costs or surpluses in or out had occurred without a damn good reason.
After all, farmers and rural residential ratepayers didn’t want any of their General Fund rate money going into Water or Sewerage Funds for the urban residential ‘townies’.
This strict legal requirement was turned on its head replete with all the jargon and weasel words of the privatisation era.
Suddenly water and sewerage funds could declare a dividend to be transferred into the general fund.
My take on this manoeuvre was to stop local government whingeing for more state government funding or removal of rate capping.
The State move appeared successful as local government embraced it with hardly a murmur.
Similar to electricity and gas providers the best way to achieve surpluses is to increase the availability charge and also, in the case of water, the usage charge.
Bega Valley, Eurobodalla and Shoalhaven are very similar in how they operate water & sewerage schemes. Similar costs could be expected.
Water access charges per standard residential connection for each council are: Shoalhaven $84, Bega Valley $260, Eurobodalla $360.
Water usage per kilolitre: Shoalhaven $1.90, Bega Valley $3.28, Eurobodalla $3.90.
Eurobodalla has consistently returned for many years about $1million plus in water and sewerage dividends to the general fund.
This dividend is achieved by overcharging.
I believe there are other deep-seated structural reasons why Eurobodalla has higher charges and it has nothing to do with our water and sewerage operations.
It is expected that when last year’s accounts are completed a report to Council will shortly appear proclaiming a dividend has been achieved due to best practice management and compliance with 6 criteria, none of which mention procedural fairness to all in the community.
Operating a monopoly and selling compulsory unavoidable life essential products may have some bearing on this stellar result.
Each year in previous Councils Clrs. McGinlay and Mayne voted against what they saw as overcharging ratepayers. Having the temerity to point out this flawed result was only ever, if at all, countered by the administration that it was ‘best practice.’
Paying higher than necessary water and sewerage rates is bad enough, however there is additional unfairness buried in this unprincipled practice contrary to Council’s Revenue Policy “to provide the fairest and most equitable distribution of the rate levy across the LGA.”
Eurobodalla has approx. 26,000 general fund ratepayers.
Of these 5000 are rural residential & farmland ratepayers paying general rates only. (i.e. there’re not connected to water or sewer)
Then there are the 4500 pensioners who receive rebated rates for general, water and sewerage rates.
Finally there are only 16,500 ratepayers paying the full general rate, water rate and sewerage rate.
These 16,500 are singled out to make this dividend contribution (approx. $60 each) to the general fund.
It is clearly unfair and inequitable that 5,000 rural residential & farmland ratepayers are not contributing a quid pro quo ($300,000) to the general fund yet enjoying the full benefits of the general fund.
Excluding pensioners, applying the pub test to this issue the response would be that 5,000 ratepayers are bludging on the blind-side.
I don’t suggest that 5,000 rural ratepayers are bludging, but currently there is no avenue to even up the imbalance.
As a regular cyclist on the rural road network within the shire I’ve been most impressed with the effectiveness of the dedicated rural roads maintenance unit.
This unit is not funded from a specific allocation in the general fund.
Stormwater is as much a problem on rural roads as urban roads. However, the stormwater levy is applied only to residential ratepayers.
Perhaps the stormwater levy should apply not just to urban areas but rural as well. Also, maybe a rural road maintenance levy.
Implementing a water and sewerage dividend arrangement has two components to consider.
Firstly, is it fair and equitable to all ratepayers?
Secondly, is the amount charged to water and sewerage users affordable?
Presumably if the amounts charged are below an unstated maximum the Independent Pricing and Regulatory Tribunal (IPART) gives a nod of approval, looking no further and council can claim “best practise”.
IPART doesn’t comment on societal fairness, that it leaves for others. Previous councils have ignored this component.
Councillors, when you come to congratulate the previous administration in achieving a healthy dividend in the water and sewerage funds and vote to transfer almost $1milllion to the general fund you might ask yourself, is this “the fairest and most equitable” thing to be doing.
As I said earlier setting the rate levy is a dark art. Finding the sweet spot is even harder.