General News
11 January, 2024
Council says delivery of local services and programs could suffer under imposed rate cap
While residents may see their rates rise again this year, they may also see a decrease in services as the Central Goldfields Shire Council reels from the announcement of a 2.75 percent cap on rate increases. The Victorian Government announced the...
While residents may see their rates rise again this year, they may also see a decrease in services as the Central Goldfields Shire Council reels from the announcement of a 2.75 percent cap on rate increases.
The Victorian Government announced the new rate cap for the 2024/25 financial year last month, which has many in local government scratching their heads at how councils can continue to deliver services and cover increasing costs without the supporting revenue.
The rate cap, introduced in 2016, is designed to ease cost of living pressures for Victorians and encourage sound financial management by local government through capping how much councils can increase rates each financial year.
While seemingly beneficial to ratepayers, the rate cap — set by the Essential Services Commission — is based on an estimate of the Consumer Price Index (CPI) which according to Central Goldfields Shire Council CEO Lucy Roffey does not align with actual costs incurred by council.
“The government bases the rate cap on the Department of Treasury and Finance’s forecast of CPI, not actual CPI, and the last three years they’ve got it wrong for a total of 13 percent,” she said.
“That’s 13 percent less revenue that we were able to raise through rates which is more than $1 million, which makes it really difficult for us to balance our books.
“Rate capping should be based on actual CPI, not forecast CPI, because that’s what’s killing us.
“We don’t build roads on bread and sugar, the types of things CPI is based on — we incur costs higher than average inflation.
“Fuel costs for running all our vehicles, insurances, construction costs, building materials — all of those costs have been much higher than CPI.”
Ms Roffey said council’s budget for 2024/25, likely to be released around June, will be a challenge, with the organisation likely having to review its financial commitments to community services and programs to make ends meet.
“Every budget process each year we have community groups who look to council to provide more support, assistance and help and this puts so pressure on us that it will be difficult to even do the basics,” she said.
“We provide so many different services across a whole range of areas and it’s often hard to find savings because our budgets are tight anyway.
“There are a range of things we have to do, we have statutory obligations and there are services we provide because the community wants us to provide those.
“We’re going to have to look pretty hard at that and decide if we need to cut back on some of the programs or services we provide.”
It’s not all doom and gloom however and as Ms Roffey explained, council will continue advocating to government for additional funding.
“We’ve been really successful over the last five years in advocating for a lot of projects and we’ve been successful in getting capital grants and operating grants as well,” she said.
“We’re continuing to work really hard on chasing grants, it’s been an important part of us being able to deliver projects.
“We’ll continue to advocate for funding to help fund all the important infrastructure projects and of course the aspirations of the community.”
The Municipal Association of Victoria (MAV), the peak body for the state’s 79 councils, is calling for a review into how the rate cap is set.
MAV president and Pyrenees Shire councillor David Clark said the government’s latest rate cap will be “challenging in the extreme” for local government.
“Councils are dealing with spiralling costs on multiple fronts,” he said.
“To decrease the rate cap at this time means many councils will be struggling to deliver the services and infrastructure our communities rightly demand.
“Local government has gone backwards by 30 percent compared to CPI since the introduction of the rate cap, all while the state and federal budgets increase far beyond this.
“For councils to be stuck at 2.75 percent is going to be challenging in the extreme.”
Cr Clark reiterated the MAV’s position that the capping system itself required an independent review and overhaul.
“The rate cap is a blunt instrument that provides no capacity to deal with the diverse needs of individual communities and the councils who service them,” he said.
“It does not take into account the vastly different needs of councils across the state. Some councils are still facing exhaustive repair bills from natural disasters, others are in desperate need of upgraded or new infrastructure.
“It defies logic to use a catch all cap for setting rates given the broad variety of challenges.
“A more flexible approach to a rate cap, recognising unique infrastructure challenges, cost shifting by the Victorian Government, and the true cost of council services would provide a more effective way forward for the sector than the current mechanism.”