Rates sting hurts
BASS Coast Shire Council will consider reducing services or maintenance of assets to cope with the financial pressures of rate capping.
The State Government last week revealed rates would be limited at 2.5 per cent – more than half of council’s forecast rate increase for 2016-17 of 4.7 per cent.
Council will consult the community from late January about how it would like council to adapt to the income drop.
South Gippsland Shire Council is also concerned about the 2.5 per cent limit, but CEO Tim Tamlin expects council will be able to cope for up to three years, given council has budgeted for a rate increase of three per cent next financial year.
Bass Coast CEO Paul Buckley said, “If we work on 2.5 per cent, there will be a significant impact on services and expenditure.
“Under 4.7 per cent, we will have the capacity to invest in future capital works.”
Bass Coast has flagged the prospect of asking the Essential Services Commission for an exemption from 2.5 per cent but even if council does, the commission is unlikely to respond until April or May.
Council will therefore prepare two budgets: one based on a rate rise of 2.5 per cent and the other on 4.7 per cent.
“Do you cut services and/or reduce the level of services to enable investment in capital and do you restrict your capital, but most likely it will be a combination of these things,” Mr Buckley said.
“The real concern is over our ability to maintain assets at existing levels.”
Mr Tamlin expects council to lose $90 million in rates income over the next 15 years as a result of rate capping.
“We will be right in the next three to five years because we have done work to keep our costs down and work efficiently,” he said.
“After that time it is going to start to bite. After that we will have to look at efficiencies. Our financial capacity will be soaked up over that period.
“We may to borrow money or trim our infrastructure or reduce our services.”
Mr Tamlin disputed claims by Local Government Minister Natalie Hutchins that council rate rises has been uncontrollable.
“I did not know of any council that puts forward a budget to its community that has been uncontrolled,” he said.
Mr Tamlin said rates had risen largely due to cost shifting by State and Federal governments, citing library funding as an example.
The State Government previously funded 80 per cent and councils 20 per cent of library costs but those proportions had been reversed.
“Our costs have not gone up because we are putting on more staff. Our costs are going up because we’re putting on more services,” Mr Tamlin said.
He said councils in New South Wales had operated under rate capping and assets had been run down.
He expects that if rate caps were lifted, councils would increase rates by high levels – possibly double digits – to recover lost funding in a bid to improve assets and pay down debt they could accumulate due to rate capping.
“Surely local councils should be able to set their rates for the people that voted them into power and not have some third party make a decision on top of this,” Mr Tamlin said.
Ms Hutchins said the government’s Fair Go Rates system would protect ratepayers from uncontrolled rate rises.
She set the cap based on Melbourne’s Consumer Price Index for the next financial year, as forecast by the Victorian Treasury.
“The Fair Go Rates cap doesn’t stop councils taking on new projects. Instead it ensures councils are listening to local residents and responding to their needs,” she said.
“The Fair Go Rates cap will increase the transparency and accountability of councils across the state.”
Short URL: /?p=17154