Rate cap will affect services

A State Government imposed rate cap of two per cent on next year’s local government rates will affect services, according to Baw Baw Shire mayor Joe Gauci.

The State Government announced last week the cap on Victorian council rate rises would be set at two per cent, matching the Consumer Price Index (CPI) for 2017-18.

Cr Gauci said even though the cap was set at two per cent, compared to 2.5 per cent this year, he was not surprised rate capping would continue.

“It was an election promise and it looks as if it is here to stay for this government,” he said.

He said he was concerned that the problems the cap caused would not be fully realised for some years to come. “This is not sustainable long term,” he said.

Local Government Minister Natalie Hutchins said she had accepted the advice of the Essential Services Commission that there be one cap across the state, but did not accept the advice which recommended a cap of 2.15 per cent.

“In line with the Labor Government election commitment, it was decided the cap will be the same as CPI as forecast by the Department of Treasury and Finance.

“Victorians have told us they want more of a say in council decision-making, and now is the time for councils to speak with their communities about their budgets for next year,” she said.

Cr Gauci said the new council was currently formulating a council plan and would not begin formulating a budget until the plan was completed.

“We need to set some priorities and see what is affordable and what options we have within the budget.

“We will receive a briefing at the end of January and it will be full steam ahead.”

Cr Gauci said there would be difficult decisions to make.

“Maybe we will have to go back to the community and explain the choices we have and see where we can go from there,” he said.

Cr Gauci said it was a balancing act when council had to consider wage increases through enterprise bargaining agreements but at the same time wanting to fund infrastructure and projects such as streetscape and sporting grounds.

“We have to consider asset renewal as well. The gap just keeps getting wider unless we can secure more grants,” he said.

Cr Gauci said he agreed with a statement by the Municipal Association of Victoria which questioned rate capping when the State Government was increasing state property taxes by 5.2 per cent and state employee expenses are 7.8 per cent higher this year.

The MAV said the state had ignored warnings from councils, the MAV, a Parliamentary Inquiry, the Auditor General and irrefutable evidence from independent assessments of rate cap regimes in other states to set a lower rate cap for councils in 2017.

MAV interim president Coral Ross said the two per cent cap came on top of decades of cost shifting from state governments and a 2.5 per cent cap last year. There comes a point where councils will have to make difficult decisions about no longer being able to afford all the services their communities currently rely on,” she said.

“The recent Parliamentary Inquiry report into rate capping confirmed a range of measures had been adopted by councils this year including organisational reviews and restructures, purchasing efficiencies, reducing fleet vehicles, and lower staff costs through EBA negotiations.

“Councils have also voiced serious concerns about their capacity to continue funding the current mix of community services and infrastructure,” she said.

Cr Gauci said he also was concerned about large municiplaities in the north of the state where they had a smaller rate base but large areas to maintain.

“Some of them are really struggling and this system will not be sustainable,” he said.