Ratepayers may not have too big an increase in their rates for 2017-18.
Ratepayers may not have too big an increase in their rates for 2017-18.

Finally - some good news for Northern Rivers ratepayers

CHRISTMAS has come for rate payers with the announcement that a rates increase will be limited to 1.5% in 2017-18.

Continuing low inflation and minimal growth in council costs has seen the rate peg go below last year's rate peg of 1.8%.

How rate peg is determined

The rate peg is determined by the Independent Pricing and Regulatory Tribunal (IPART) each year and sets the maximum general income NSW councils can collect.

The main component of general income is rates revenue, but it also includes some annual user charges.

It excludes stormwater, waste collection, water and sewerage charges.

Costs fallen over the year

"Ratepayers would benefit from the modest rate of public sector wages growth in recent years, as well as the continuing low inflationary environment," IPART Chair Peter Boxall said.

"This has seen the cost of some items used by councils fall, including fuel, gas and telecommunication services."

IPART determines the rate peg by measuring changes in the Local Government Cost Index (LGCI) that includes changes in the average costs faced by councils, and consideration of a factor to reflect improvements in productivity.

"The Local Government Cost Index increased by 1.47% in the year to September 2016," Dr Boxall said.

"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 the impact on individual rate assessments.

"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."

A financial noose

Local Government NSW President Keith Rhoades said the 1.5% rate peg was part of a financial noose which continued to tighten, effectively preventing councils from ever becoming financially sustainable.

"The 2017/18 rate peg of 1.5% is down on last year's cap of 1.8%, which was less than 2014's cap of 2.3%, which in turn was less than 2013's peg of 3.4%," he said.

"In the five years to 2014/15, it averaged 2.9% per annum - yet the cap for 2017/18 is half that."

Cr Rhoades said the rate peg also failed to allow councils to address the infrastructure renewal backlog.

Councils fall further behind

"That means every year councils slip further and further behind," he said.

"IPART has come to the 1.5% figure despite an increase of 2.3% in employee benefits and on-costs, and an increase of 2.7% in non-residential building construction costs, saying those price rises were partly offset by decreases in gas and fuel prices.

"But that just fails to recognise the ongoing squeeze on councils that comes from the combination of rate-pegging and cost-shifting, and deteriorating infrastructure.

"The latest figures show cost shifting by the NSW Government and the Australian Government in the financial year 2013/14 totalled around $670 million - almost 7% of local government's total income before capital amounts.

"And while the rate cap continues to tighten, costs for councils continue to grow.

"The reality is that rates have not kept pace with the cost of services and infrastructure that Local Government is expected to deliver."

Cr Rhoades said the rate peg forced many councils to seek special rates variations - essentially a time-limited increase in rates that allows them to provide needed infrastructure and services.

"The whole system is set up to make councils look inefficient and financially profligate, when the opposite is true," he said.

Councils wishing to apply for a special rate variation should aim to notify IPART by December 9, 2016.

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

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