Council rates capped from mid-2016

Date: January 21, 2015 – 2:23AM
Luke Battersby
Council rates will be capped next year with the state government forcing councils to justify any increases above the rate of inflation.

The new Minister for Local Government, Natalie Hutchins, wrote to mayors and chief executives last week advising the cap would be introduced before the start of the 2016-17 financial year.

“[T]his should not be seen as an opportunity to raise rates above inflation prior to the implementation of the rates cap … Unnecessary rate rises in 2015-16 may affect your eligibility for future rate cap exemptions,” she warned.  “However, the public’s support for our election commitment is a clear message that they expect councils to provide […] services while keeping rates at an affordable level.”

Councils must now send their budgets to the Essential Services Commission for permission to raise rates above inflation under Labor’s new policy.

Inflation – as measured through the consumer price index [CPI] – was currently running at 2.3 per cent. Last financial year rates increased by an average of 4.23 per cent, to an average assessment of $1725.

However, president of the Municipal Association of Victoria, Bill McArthur, disagreed with the government’s decision to peg rates to the CPI, saying the costs of running a household were irrelevant to council’s costs.  He also noted the federal government had cut funding to Victorian councils by $124 million over three years.

“CPI is a measure of a common household basket of goods, they do not take into account construction costs … It does not measure the cost of community services or construction,” Mr McArthur said.

The MAV’s taskforce has met with the new government and wants to commission a “top tier consultancy” to create a cost index to “reinforce that CPI has no bearing on the changes to councils’ underlying costs”, Mr McArthur said.  However, the MAV would work with the government “to achieve a sustainable outcome”.

The current rate cap in NSW and a previous cap in Victoria had “devastating long term consequences, including a reduction in capital spending on necessary maintenance and assets”, such as roads, parks, sport facilities, footpaths and community centres, Mr McArthur said.

The Kennett government capped rates in 1995 after reducing the number of councils from 210 to 78 and forcing rates down by 20 per cent. It then imposed a cap of one percentage point below inflation, which was running at 1.5 per cent in 1996. The cap was lifted in 1997 to allow increases of up to 3 per cent – with Ministerial approval –  to help councils raise money to fund pension obligations. In 1999 the Bracks government scrapped the cap altogether.

Chief executive of the Victorian Local Governance Association, Andrew Hollows, said state government interference in local government raised questions about democratic independence.

“We are not saying there should not be some moderation on rates, that is fair enough. [But] don’t just look at rates, look at the whole picture,” he said.


11 Responses to “Rate Hikes”

  1. Anonymous Says:

    Huge tick for the Andrews Government for forcing local government to keep rate increases to CPI. The waste, inefficiency and incompetence within
    Glen Eira is mind boggling.

    1. Anonymous Says:

      I’m not sure that capping rates is the ideal answer, but I do agree with you wholeheartedly that there is so much waste in local government and particularly in Glen Eira. There should be a means for full investigation into how ratepayers’ hard earned money is spent and every cent should be justified. If this council can spend literally millions on lawyers and keep granting pay rises to ceo’s without sufficient evidence that it is warranted then the savings would be immense.

      1. Anonymous Says:

        Councils should have to work within the constraints of the CPI as do many government departments and retirees.

        Perhaps it will re-focus the council on the knitting ie the basic services. Perhaps culverts will be cleaned regularly. Street cleaning will be done regularly and well. The enormous street parking issues will be properly addressed.

        Instead of wasting millions on a failed park irrigation system that had to be replaced and intersection roadworks that do nothing to improve safety. And building unnecessary “monuments” such as GESAC, the Caulfield Park conference centre et al.

    2. anon Says:

      The waste will continue. It means that infrastructure repair will be cut back. Shallow thinking. Seen it all before. It is typical of Labor Governments. They will start cost shifting now and blame the councils

    3. anon Says:

      Incompetence would have peaked in the Southern Grampians Shire. On a real hot day they close their swimming pools. OH&S issue. To hot for the staff. I like to think that wouldn’t happen in Glen Eira.

  2. Reprobate Says:

    What a disaster in the making. It was a disaster when it was tried the last time too—infrastructure was allowed to crumble as maintenance and renewal was cut. What the f__k does the Essential Services Commission know about local government, who gets to appoint its members, who are they accountable to? They don’t represent me. But then nor does the State Government.

    If cutting inefficiency and waste was truly a State priority then they’d start with where the greatest expenditure occurs—State Government and all its statutory bodies and departments and advisors and contractors. It could even ensure the public gets value-for-money from the public assets it has leased at greatly discounted rates to bodies such as MRC. It could ensure developers make a fairer contribution to the costs of infrastructure that we the public have been unwittingly subsidising.

    One thing the article raises, which I absolutely agree with, is that CPI is an inappropriate basis for indexing the costs of local government. Rather than going for a soundbite to pander to a populist view, it should explain why it has rejected alternatives such as MAV’s LGCI.

    For those who think capping rates increases solves waste and inefficiency, remember that councils can increase fees and charges to make up the shortfall. This would impose a greater burden on low-income households as a proportion. Bet the Government would run fast from attempts to introduce road congestion charges or fees for access to public open space. Hmmm maybe Myki-driven parking meters in and around all “activity centres”.

    I’d welcome an opportunity to remove councillors [and state politicians] from office at a rate faster than the current ridiculous 4 years, if that’s what it takes to improve their governance.

    1. wake up australia Says:

      One efficiency gain would be to cut the bloated staffing levels at the town hall.

  3. anon Says:

    could the item on the cinema on the GERA wbsite be covered here. I didn’t realises till I read this that 1.1 hectares in the middle will be used for the serving of alcohol!. Give them the whole centre!

    1. Anon Says:

      Put in an objection – Delegated Planning Committee (i.e. not one Councillor present – handled by administration only) hearing is next Thursday, 29/1/15 @ 1.30 p.m.

      Absolutely appalling that this doesn’t get a Planning Conference nor appear on the Council agenda

  4. Anonymous Says:

    I don’t have a problem with rates being capped, what is going to happen to Council Services in the future Capital Budgets will be scrapped community services will be scrapped as it is now government is reining in grants so the money has to come from somewhere to pay the shortfall I can see this being a total disaster.

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