Today I presented to the Environment and Planning Standing Committee of the Legislative Council at Parliament House to contribute to the inquiry into Local Government Rate Capping Policy.

As part of its oversight of Local Government in Victoria, the committee is inquiring into the effect of the Victorian Government’s policy of rate capping on councils’ viability, service impacts on local communities and the impacts on local infrastructure.

Several councils have appeared to discuss these issues in a ’round-table’ forum.

Earlier this month the Committee released a report which found that the rate capping policy will seriously impede local governments’ capacity to develop and implement long-term financial plans.

While we agree that rates must be kept affordable, it is disappointing that the Victorian Government has imposed a cap on the annual increase in rate revenue that councils can generate. The increase has been capped to the Consumer Price Index forecast, which for the 2016-17 year is 2.5 percent.

The City of Boroondara continues to be well managed and financially sound which means we have been able to deliver the lowest rate increases in more than a decade in each of the last three years. And this was before there was talk of rate capping.

While our prudent management means that we can accommodate rate capping without cutting services in the medium term, the policy will inevitably have impacts on services and infrastructure in the longer term.

My key points to the committee today were:

  • Rate capping creates uncertainty around future rate revenue for Councils. This makes no sense when councils are required under the Local Government Act to develop long term strategic plans. How can we develop long term plans when we have no certainty over how much revenue we will have available? The timing of the advice of the rate cap in future years (December annually) also prevents the opportunity to conduct ‘real time’ consultation with our community as currently required under the Local Government Act.
  • Even the body that the State Government charges with responsibility for scrutinising council budgets – the Essential Services Commission – has agreed with councils’ view that a rate cap based on CPI alone is not sustainable.
  • Rate capping cannot be viewed in isolation from recent cost shifting to local government. Over recent years, local government has assumed responsibility for funding a range of services that were previously funded by either the Federal or State governments. A significant proportion of council rate revenue is now needed to meet shortfalls in State government funding for programs such as Maternal and Child Health, School Crossing Supervision, Library Services, Immunisation Services, Home and Community Care and Meals on Wheels. For Home and Community Care services and library services, this has amounted to $40 million over the last seven years
  • The increased reporting burden that has come with rate capping costs money. Additional administrative, IT and compliance procedures now need to be funded by local government at the expense of providing services to the community or reducing rates.

Local Government provides a vital service to Victoria. It maintains 34 percent of the public assets and 85 percent of the roads held on behalf of the community and yet raises only around three percent of the taxation revenue.

A more sensible approach would be to examine the entire costs of providing government services and to allocate appropriate funding to the level of government that provides them. The independence of local government is essential in enabling the long term delivery and maintenance of key local services and infrastructure.

With best wishes,

Councillor Jim Parke
Mayor of Boroondara

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