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IPART sets rate peg three months early

Geoff Helisma|

The Independent Pricing and Regulatory Tribunal (IPART) has set the maximum increase in collectable rates revenue (general income) for the 2020/21 financial year at 2.6 per cent.

The 2020-21 rate peg is down 0.1 per cent compared to the current year’s 2.7 per cent and the 2018/19 financial year’s 2.3 per cent.

An IPART media release says, “The main drivers of the increase for next year are higher employee costs and rising construction costs.

“Some of these increases have been offset by falling telecommunications, IT and energy costs.”

IPART’s chair, Dr Paul Paterson, said announcing the rate peg three months earlier than in previous years, “enables councils to better plan both their revenue and expenditure over the year ahead”.

“Since the rate peg applies to general income in total, and not to individual rate assessments, it is up to each council to determine whether to apply the allowed increase in full and how to allocate any increase between households, businesses and other ratepayer categories,” Dr Paterson said.

“Similarly, 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.”

Clarence Valley Council (CVC) has always increased its rates revenue in line with the rate peg since its inception in 2004.

Currently, the valley’s ratepayers are in the second year of cumulatively paying an extra 8 per cent per year (above the rate peg) until the end of 2020/21.

At the completion of the three-year special rate variation (SRV) period, ratepayers will be levied a permanent 25.97 per cent increase in rates.

Revenue-wise, CVC will be cumulatively better off by $10.3 million (above the rate peg) at the end of 2020/21.

Over a 10-year period, the extra $51.2 million collected above the rate peg must be spent on: roads maintenance and renewal; flood mitigation renewal; and, renewal of sports facilities, open spaces, buildings and swimming pools.

It is a condition of the IPART’s approval of the SRV that CVC indicates in its annual report how actual expenditure compares with the proposed program.

Meanwhile, the rate peg is set each year by measuring changes in the Local Government Cost Index (LGCI), which includes changes in 26 cost components, to establish the average costs faced by councils.

Councils will be invited to participate in updating the LGCI in November 2019.

The IPART says it has “recognised that councils are facing cost pressures from increases in the Emergency Services Levy (ESL), which is one of the cost components in the index”.

“Bringing forward councils’ ability to recoup costs associated with the ESL, to the year after they are incurred, instead of two years later, will help councils adjust to these costs,” Dr Paterson said.

However, despite the NSW Government deciding to cover the first year’s increase originally levied on the state’s councils – the levy increase would have amounted to CVC having to pay the NSW Government an extra $219,785 (23 percent extra), compared to the previous year’s levy.

However, CVC remains sceptical.

“We have no indication from the state government about the situation that will apply in the next financial year (2010/21) and, at the moment, unless advised otherwise, councils will be forced to wear it – [it will be] another example of cost shifting by the state government if they do that [increase the levy],” the mayor, Jim Simmons, wrote in a letter to the NSW Government in June.

Mayor Simmons pointed out that the “poor planning and implementation of the increase was inconsistent with the government’s commitment to work in partnership with the [local government] sector”.

A fact sheet on the rate peg is available on IPART’s website: www.ipart.nsw.gov.au.

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