The QPR Blog

This seemed like a timely opportunity to provide an update on Council’s ongoing efforts to address the directives provided under the NSW Government’s Fit For the Future (FFTF) program.

The lead up to the initial submission deadline at the end of June was pretty hectic and things haven’t slowed much since. While the Independent Pricing and Regulatory Tribunal (IPART) is due to submit its assessment of the ‘health’ of each individual council to Cabinet on 16 October, the State Government has not committed to a date when it will announce what subsequent actions are to be taken, whether councils will be forced amalgamate or what support might be provided to councils proceeding to implement their respective improvement proposals.

Much has been made of the parlous financial state of NSW councils, but it must be said that in many cases this alarmist view is largely due to a lack of consistency in accounting procedures. The way in which a rural council, for example, manages the accounting associated with its roads and bridges can mean the difference between a council that appears financially sound and one that does not.

This issue aside, a significant element of Palerang Council’s FFTF response was the need to strengthen its revenue stream. This revenue stream primarily comprises government grants and council rates and charges. With the current freeze on indexation of some grants, and a complete lack of indexation on others, the pressure invariably falls on council rates and charges. While the relevant legislation allows water, sewer and waste charges to be levied as required to cover the cost of delivering those services, any rising costs associated with other council services, such as road maintenance, must be covered by council’s general rates.

Unfortunately, the rate pegging regime that exists in NSW, and the fact that Council’s costs invariably rise faster than the rate peg (which is determined by the Local Government Cost Index)—a significant proportion of Palerang Council’s expenditure relates to road maintenance, and the Road Cost Index can be up to twice the CPI—mean that a council’s effective rate revenue is in a steady state of decline. This situation is, however, addressed periodically via what is known as a Special Rate Variation (SRV). In the last 12 months, for example, 22 NSW councils were granted SRVs.

Any such increase in rates above the annual rate peg must be approved by IPART. The approval process is both structured and extensive. The council must identify how the additional revenue will be used—it can’t just apply for an arbitrary increase—and demonstrate that this use is consistent with its Community Strategic Plan. The council must also demonstrate that it has undertaken an engagement program with its ratepayers, and that the implications of the SRV have been clearly explained.

As was discussed in the FFTF literature distributed in May, Council is considering applying for a SRV. The size of any variation, should an application be successful, will depend on several factors, including input provided by the community through the associated engagement process.

While all this consultation, not to mention the prospect of ‘harsh austerity measures’, might be approaching the proportions of a modern Greek tragedy, community input plays an important role in helping Council work through these issues. No one really enjoys paying taxes, let alone tax increases, so it’s probably important that we do what we can to ensure that they’re managed as well as possible.

In the coming weeks, all residents will receive in the mail an information pack outlining a range of feedback mechanisms. Please take the time to participate in at least one of these feedback processes. Your input will help ensure that council’s efforts are appropriately focused on our community’s priorities.

Update (Jan 2016)

The OLG has directed that no council involved in a Merger Proposal will be eligible for an SRV in the 2015/2016 year. As a result, there will be no further action on an SRV until the current merger Proposal has been determined.