By Paul Hemsley

Local Government Association of Queensland (LGAQ) President Margaret de Wit has urged Queensland councils to factor in how a potential 3.3 per cent rise in council costs will hit them when they decide how they set their rates during the 2013-14 financial year.

The likely cost hikes come as Queensland councils face the added financial burden of natural disasters that have not received funding from the federal government to match the amounts needed alongside the price of amalgamations.

A consequence of the added costs is that councils – and potentially ratepayers – could wear the additional costs.

The cost hikes were revealed through the Council Cost Index, research commissioned by the LGAQ, that factors in elements like road and bridge building as well as fuel costs that are not illuminated by conventional inflation measures like the Consumer Price Index (CPI).

As ugly as the potential for a 3.3 per cent rise in council costs sounds, the increase appears modest when viewed against previous announcements of cost rises in 2009 and 2011.

The massive floods that inundated Queensland in early 2011 led to warnings of substantial hikes for average costs to that were tipped to increase by 7.5 per cent to cover the expenses of road and bridge reconstruction and flood damage.

The LGAQ also advised councils in Queensland to consider a rate hike of up to eight per cent in 2009 to cover the council amalgamation costs as a result of the Peter Beattie government’s extensive local government reform process in 2008.

Ms de Wit said the big problem for councils in Queensland and across Australia is that councils either have to increase rates or somehow manage with less money to provide the services expected of them.

“State and federal governments are devolving more functions to councils, the councils can’t keep on absorbing the costs of doing that and the challenge is providing for the increased expectations of communities which cover the increased cost and that cost has to be covered somehow,” Ms de Wit said.

“I don’t see how any council in Queensland can absorb the sort of cost increases that we are experiencing.”

She said the Queensland Treasury Corporation told councils several years ago to be very careful about limiting rate rises to CPI because the general inflation rate would not necessarily reflect the true cost of delivering services.

Ms de Wit told Government News that the councils that amalgamated in 2008 are “probably still in catch-up mode now” because the cost to amalgamate was so high but the state government of the day refused to acknowledge the “huge cost impost” on the councils.

As an example of the high costs involved with amalgamating, Ms de Wit said in one case eight councils were amalgamated into one, which resulted in eight different accounting systems in one council. This created difficulty in creating uniformity across new council areas, she said.

Four areas including Noosa, Livingstone, Mareeba and Port Douglas have met the criteria to de-amalgamate from their councils, which will go to a local referendum on the 9th March 2013.

Ms de Wit said if the de-amalgamations are successful, there will be a cost involved in breaking-up councils which the de-amalgamated areas will need to wear.

“So you’ve got to have your elections to start a new council, you have to set up premises again, it’s a very big job to de-amalgamate,” she said.

The floods that hit the state in 2011 and more recently in 2013 have also had a big impact on how councils deal with their costs because the federal government’s compensation has not met the amounts needed that councils require for repairing damaged and destroyed roads and infrastructure.

Ms de Wit said “it’s worse than ever up here” because no matter how much the federal government compensates councils for the flood, “we’re still out of pocket” as it has never met the full cost.

The state government complained in February 2013 that the federal government had only announced half the amount of money it needs to repair flood damaged infrastructure.

Community Recovery and Resilience Minister David Crisafulli said the state asked the federal government to match the $140 million needed to recover the flood affected areas but the federal government announced only $57 million.

Mr Castrilli said $40 million of that amount would apply only to council assets, which he described as “most disappointing”.