Kiama council claims it will still meet all Fit for the Future benchmarks set by the state government, despite a decision to peg rates at 1.5 per cent.
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The Independent Pricing and Regulatory Tribunal last week announced councils would only be able to raise rates by 1.5 per cent for the 2017/18 year.
This is lower than last year’s rate peg of 1.8 per cent.
The rate peg is determined by IPART each year and sets the maximum general income NSW councils can collect.
The main component of general income is rates revenue.
IPART chair Peter Boxall said ratepayers would benefit from the modest rate of public sector wages growth in recent years, as well as the continuing low inflationary environment.
Kiama Mayor Mark Honey said the IPART decision was disappointing, but Kiama remained committed to its new Long Term Financial Plan.
“The good news for residents is that Kiama council remains in a strong financial position, despite the IPART decision,” Cr Honey said.
“We will have to tighten our belts but not to the degree other councils will have to.”
IPART determines the rate peg by measuring changes in the Local Government Cost Index that includes changes in the average costs faced by councils, and consideration of a factor to reflect improvements in productivity.
“If councils want to increase their revenue by more than the rate peg they will need to consult with their communities before applying to IPART for a special variation,” Dr Boxall said.
The Local Government NSW Association has warned the lower than usual rate rise amount could hit council budgets.
“IPART has come to the 1.5 per cent figure despite an increase of 2.3 per cent in employee benefits and on-costs, and an increase of 2.7 per cent in non-residential building construction costs,” LGNSW president Keith Rhoades said.
Cr Honey said the IPART decision would have an immediate $110,000 negative impact on the 2017/18 budget, with a cumulative impact of $1.3M over the 10 years of the LTFP.
He said budget savings would come from increased efficiencies and reducing expenditure on new capital.
“We are in a stronger position than many other councils which have a large infrastructure backlog.
“Importantly we will not be asking for a larger Special Rate Variation above what is already scheduled in the LTFP.
“That means for the 2017/18 financial year, rates will only go up 1.5 per cent, around $15 for the average ratepayer.
“Council will still only seek an SRV of three per cent above the rate peg from 2018/19 to 2020/21, for the purpose of asset renewal.”
Cr Honey said the IPART decision failed to properly recognise the costs of running a council.
“For example, the IPART decision underestimates payroll increases and overestimates the savings from cheaper petrol and gas,” he said.
“We will be spending $600,000 extra to pay our existing staff while saving, at best, about $50,000 on gas and petrol.
“The problems with IPART rate pegging in recent years comes on top of the longer term trend of the Australian and NSW governments of shifting the cost of providing services to local government.”