Call to end NSW rate capping

London, UK
NSW councils want to be financially unleashed


The Baird Government in New South Wales has again hit out at resistant councils opposing a strong push to cull their numbers across the state by around a third to 100 entities after Local Government Minister Paul Toole emphatically rejected a Legislative Council inquiry report that strongly criticised the merger push and called for an end to rate capping.

As councils across the state rush to thrash out voluntary options for amalgamations over the next fortnight, Mr Toole has attacked the Upper House report’s findings and said that the Committee “had chosen to ignore much of the evidence that supported council structural reform” in the state government’s formal response.

The Upper House report is highly unlikely to dissuade the Baird from pursuing its ‘merge or be merged’ reforms based on the Independent Pricing and Regulatory Tribunal’s ‘Fit for the Future’ assessment. But the report’s recommendations are certain to be seized upon by angry minor parties and independents preparing to block legislation.

So far the Shooters and Fishers, Greens, Christian Democrats, independent Alex Greenwich and the Labor opposition have all come out swinging against forcing mergers, making the government’s next moves unclear.

The most controversial recommendation in the Upper House report is a call for the state government to “evaluate the option of the removal of rate pegging and allow councils to determine their own rates conditional on the delivery of a local works plan outlining the expenditure associate with any proposed rate increases and demonstrated community support.”

Councils in NSW have for decades blamed rate capping as the source of many of their financial woes because the politically popular mechanism inhibits their ability to raise revenue directly to pay for infrastructure and major projects.

The bid to free-up new money, rather than cut costs, drew a swift and blunt rejection from Mr Toole, who labelled it a recipe for “higher rates, a growing infrastructure backlog and ultimately the collapse of some local councils.”

“Rates in NSW have been capped to protect the community from high rate rises. This report calls for that safeguard to be scrapped,” Mr Toole said.

Until the victory of Labor in the Victorian state election this year, New South Wales had been the only state to enforce rate capping on councils, which has been in place since 1978.

In late October 2015 the Daniel Andrews Labor government introduced legislation to peg council rate increases to the Consumer Price Index after running hard with the pledge during the election campaign.

Angry councils claim a big part of their financial woes is cost shifting by those further up the political food chain.

A notable recommendation of the NSW Upper House report into Local Government is that the state government there “eschews future cost shifting and commits to providing adequate funding to local government for any new services, assets or regulatory functions that it devolves to local councils.”

However the NSW Legislative Council report is not entirely dismissive on revenue and spending controls. One ambitious recommendation suggests that limits on donations to local government candidates and their campaign be capped during local government elections.

Another yet unresolved issue in the merger process is how much it will cost councils that are amalgamating to transition across and integrate stand-alone systems like financials, HR and payroll, asset and contract management and other administrative machinery and processes.

While the prospect of running fewer systems and products is outwardly appealing, by far one of the biggest risks for cost blowouts is the migration and integration of business software systems.

An added headache to that is as councils necessarily downsize their back office and administrative teams, decades of corporate memory essential for smooth transitions often walks out the door with a redundancy package.

The Legislative Council report strongly urges the Baird Government to think carefully how it treats senior management in councils amid any merger process.

It specifically recommends that “the NSW Government implement a program to assist and support senior staff affected by amalgamations, particularly those staff in regional areas who may need to relocate if their position is lost through an amalgamation.”

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