From the Newsroom

Clarence rate peg third highest in NSW – but still below inflation

Rodney Stevens

 

Clarence Valley ratepayers face a 5.4 per-cent rate rise next financial year, the third highest of 128 councils in the state, a figure driven by population growth that still doesn’t match inflation.

The Independent Pricing and Regulatory Tribunal IPART has set the 2023 2024 financial year rate peg for each council, ranging from 3.7 per-cent to 6.8 per-cent, with Clarence Valley Council’s CVC maximum rate peg set at 5.4 per-cent – using a methodology Local Government NSW says is broken.

IPART Chair Carmel Donnelly said the rate peg protects ratepayers from excessive increases in council rates by limiting the total amount by which councils can increase income from rates each year. 

“Higher inflation means that councils are facing increased costs in delivering services to the communities they serve,” she said.

“We have taken these increased costs into consideration while also trying to limit the level of rate increases that ratepayers are facing.”

Camden Council has the highest rate peg at 6.8 per-cent, followed by Maitland City Council at 5.9 per-cent, Clarence Valley Council 5.4 per-cent, Kiama Municipal Council 5.1 per-cent, and Port Macquarie Hastings and Greater Hume Shire Council’s at 4.7 per-cent.

IPART does not set the actual rates that households and businesses pay, which is a decision for councils and their communities. 

Councils must set those rates to ensure that the change in total rate income stays below the rate peg limit.

Councils can choose to increase rate income by the rate peg, less than the rate peg, or not at all.

If a limit less than the rate peg is applied, the council can catch up on that shortfall in income over any one or more of the next 10 years.

The rate peg is calculated based on the change in the Local Government Cost Index, a productivity factor, any special adjustments and, since 2022-23, a population factor for each council. 

Local Government NSW President Darriea Turley said setting the rate peg at a baseline of 3.7%, below current inflation which is expected to rise, was proof IPART’s rating methodology was broken.

IPART announced in August that it would review the rate cap methodology – a move welcomed by LGNSW.

“The review of the rate cap methodology cannot come soon enough, as the current system is not fit for purpose,” Cr Turley said.

“Not only is it incapable of pre-empting or reacting to a rapidly changing economic landscape, it is formulated using two-year-old data.”

Cr Turley said the rate cap for 2023/24 is based on the change in the average costs incurred by a typical council between the 2020/21 and 2021/22 financial year, which were years when most councils were living with restrictions brought about by the COVID-19 pandemic.

Clarence Valley Council Mayor Ian Tiley said the council will vote on whether it adopts the rate peg at the October meeting.

“Everyone (all councils) got 3.7 and we’ve been offered an extra 1.7 due to population growth, so 5.4 per-cent,” Cr Tiley said.

“The current inflation rate, and I just checked, is 6.8, so we’re still 1.4 (per-cent) behind inflation.

“The council will have to make a decision as to what increase, if any, they will take…I’d hope that we’d make a decision next council meeting.”

The upkeep and repair of roads is escalating costs for council, Cr Tiley said, as they also face increasing costs to maintain current assets and attempt to deliver new projects.

“Our cost increase factor because we use a lot of bituminous products is well above inflation, so we have to walk the tightrope of maintaining our range and level of services, whilst having to accept a rate peg limit that is well less than the inflation figure,” Cr Tiley said.

“The council has got priority lists for all manner of things, and you’ve got to try and tick some of them off each year, but if your rate pegging limit is well below inflation, you’ve got to maintain your current services before you can get into your infrastructure program.”

As inflation is increasing, Cr Tiley said the 5.4 per-cent rate peg won’t cover wage increases and deliver the infrastructure expected by new ratepayers to the region.

“Another factor is we’ve got people coming here retiring from cities where they had all of these facilities and they had a much stronger rating base, and they come here and expect the same level of servicing, which is just not financially possible,” he said.

“This is a recurring problem year-in year-out, you can never have enough money to do what the ratepayers want you to do.”