Victoria’s local councils are up in arms over a two per cent rate cap set for next year and say they may have to slash services.
The rate cap is 0.5 per cent lower than that set in 2016-2017 by the Andrews government, which reintroduced rate capping for local government in the state this year.
The strict approach to council rate capping has long been mirrored in NSW.
NSW local councils were told by Independent Pricing and Regulatory Tribunal last month that they cannot increase their rates by more than 1.5 per cent because of low inflation and sluggish wage growth. The 19 new amalgamated NSW councils have been banned from seeking a special rate variation over the cap.
The peak body for Victorian local councils, the Municipal Association of Victoria (MAV), said the rate cap “smacks of double standards”.
MAV Interim President Coral Ross said state property taxes were set to rise by 5.2 per cent and state government wages were 7.8 per cent higher this year, according to last week’s budget update.
“Council rates are being restricted to less than half uncapped state property taxes, while the government is also stinging Victorians with out of control increases in state employee costs.” Ms Ross said.
“Under a two per cent rate cap, many councils will struggle to meet their community service and asset renewal obligations next year.”
City of Greater Geelong’s Chief Executive Kelvin Spiller told the Geelong Advertiser this week that rate capping was a big hurdle for councils.
“Expectations and demand for services and infrastructure are increasing while potential revenue sources are diminishing,” Mr Spiller said.
“The budget planning process for 2017-18 is underway but we are yet to determine whether we will need to apply for an exemption.”
Ms Ross said councils had managed to shield their communities from service cuts last year but this would become increasinglydifficult as the cost of service delivery and infrastructure renewal exceeded the Consumer Price Index, which is what the government uses to set its rate cap.
Councils had already responded to rate capping with organisational reviews and restructures, reducing fleet sizes, lowering staffing and procurement costs but there was no fat left to trim.
“There comes a point where councils will have to make difficult decisions about no longer being able to afford all the services their communities currently rely on,” she said.
The situation is particularly acute for rural councils, which usually have a lower rates base and a heavy infrastructure burden, such as repairing and replacing roads and bridges.
Ms Ross said “extensive evidence” had been presented to the parliamentary inquiry into rate capping and the Brown Review of the Essential Services Commission which said that rate capping would have a negative impact on asset renewal and replacement in rural areas.
MAV is calling for the state’s Labor government to reinstate funding for rural local roads under the Country Roads and Bridges program and to make it easier and cheaper for councils to apply to the Essential Services Commission for rate cap variations.
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