News and resources

Rate cap double standard sets councils on path to service cuts​

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The State has ignored warnings from councils, the MAV, a Parliamentary Inquiry, the Auditor General and irrefutable evidence from independent assessments of rate cap regimes in other states to set a lower rate cap for councils in 2017.

The Minister has announced that average council rates can only rise by two per cent next year.

Cr Coral Ross, MAV Interim President said it was frustrating the Government continued its political propaganda about a ‘fair go’ when its Budget Update last week confirmed that State property taxes are set to increase by 5.2 per cent and State employee expenses are 7.8 per cent higher this year.

“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. It smacks of double standards.

“Under a two per cent rate cap, many councils will struggle to meet their community service and asset renewal obligations next year.

“Councils did well to protect communities from service cuts last year. However, this will inevitably become harder as the cost of delivering services and meeting local infrastructure renewal needs do not reflect the Consumer Price Index, which the Government had used to set its rate cap.

“The two per cent cap comes on top of decades of cost shifting from state governments and a 2.5 per cent cap last year. 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.

“The recent Parliamentary Inquiry report into rate capping confirmed a range of measures had been adopted by councils this year including organisational reviews and restructures, purchasing efficiencies, reducing fleet vehicles, and lower staff costs through EBA negotiations.

“Councils have also voiced serious concerns about their capacity to continue funding the current mix of community services and infrastructure.

“An Auditor General’s report last month warned that small rural councils in particular face long-term financial sustainability challenges in trying to meet their infrastructure renewal obligations.

“The report found that a fall in expected revenue for the next three years would reduce the funds that rural shires could invest in new and replacement assets, which could also adversely impact the services they can provide to communities,” she said.

Extensive evidence was presented this to the Parliamentary Inquiry into Rate Capping, and the Brown Review of the Essential Services Commission rate cap variation process. The Auditor General’s recent assessment of council finances raised concerns about lower rate revenue for rural shires, which mirrors independent and Government reports from NSW and the Northern Territory about community impacts of rate capping.

Cr Ross said there was an urgent need for rural local road funding to be reinstated, along with a commitment to reduce the cumbersome and costly process for councils seeking a rate cap variation.

“Where councils are applying to the Essential Services Commission for a variation to the rate cap, we expect the process to be improved in line with recommendations from the Brown Review and the Parliamentary Inquiry to ensure the process is more affordable for councils and their communities.

“The Country Roads and Bridges program provided vital funding to assist small shires to maintain their local roads. We urge the Government to reinstate this program to ensure our regions are sustainable,” she said.

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Contact Cr Coral Ross, Interim MAV President on 0438 005 225 or MAV Communications on 9667 5521.