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Next year’s rate peg announced

Geoff Helisma | The Independent Pricing and Regulatory Tribunal (IPART) has set the 2019-20 rate peg at 2.7 per cent. The rate peg sets the maximum increase to general income that councils can collect. Councils have discretion to increase general income up to the rate peg, by less than the rate peg, or not at all. Clarence Valley Council’s Special Rate Variation (SRV), approved in May this year, is 8 per cent each year for the next three years (inclusive of the rate peg), which amounts to a permanent increase of 25.97 per cent from 2021/22. It is a condition of IPART’s SRV approval that Clarence Valley Council (CVC) indicates in its annual report how actual expenditure compares with its proposed program. However, while the rate peg might vary on a year-to-year basis, CVC has budgeted to spend the entire SRV (including the annual rate peg) – over the next 10 years – on roads maintenance and renewal; flood mitigation renewal; and, renewal of sports facilities, open spaces, buildings and swimming pools. The IPART’s chair, Dr Peter Boxall, said next year’s rate peg is higher than it has been in recent years (2.3% in 2018-19 and 1.5% in 2017-18), primarily due to increases in labour and energy costs and higher construction costs for roads, drains, footpaths, kerbing and bridges. “The Local Government Cost Index increased by 2.7% to June 2018,” Dr Boxall said. The IPART said in a media release that it would continue to make the rate peg announcement in September instead of December, as was previously the case, to provide “councils with more time to prepare annual budgets and better engage with their communities on potential special variation applications”. The rate peg is based on the increase in the Local Government Cost Index (LGCI) up to June 2018. The LGCI measures price movements of a representative ‘basket’ of inputs that are used to deliver local council services, in a similar way to how the Australian Bureau of Statistics (ABS) measures the Consumer Price Index (CPI). The main components of the index and their percentage share of the overall index are: Employee benefits and on-costs (41.7%); Construction works – roads, drains, footpaths, kerbing, bridges (19.2%); Other expenses (8.9%); Other business services – including items such as contractor and consultancy costs (6.0%); Buildings – non-dwelling (4.1%); Plant and equipment – machinery (3.4%); Electricity (2.7%); and, Road, footpath, kerbing, bridge and drain building materials (2.4%). The IPART is required to set the rate peg each year under delegation from the NSW Minister for Local Government.