Councils – including Broken Hill – are set to be hit hard by a capped rates increase for next year and 2024 of only 3.7% which means they cannot put their rates up more than that amount, despite soaring inflation and demands from council workers for pay increases well above the pegged rate.
The Independent and Regulatory Pricing Tribunal [IPART] have set a baseline 3.7% rate cap for all local councils for 2023/24, despite inflation currently sitting at 6.1% and expected to rise over the coming months.
In rare cases, some councils will see their cap at 6.8%.
The rate cap for 2023/24 is based on the change in the average costs incurred by a typical council between the 2020/21 and 2021/22 financial year, which were years when most councils were living with restrictions brought about by the COVID-19 pandemic.
IPART claims to help NSW residents get safe and reliable services at a fair price. They are the independent pricing regulator for water, energy, public transport and local government, the licence administrator of water, electricity and gas and the scheme administrator and regulator of the Energy Savings Scheme.
A 3.7% in the current economic environment could have a negative impact on Council services locally.
It could mean reducing services, delaying essential upgrades to infrastructure and even a reduction of staff.
As it happens, around 140 Broken Hill City Council workers, represented by the United Services Union, are asking for a much higher rise than the 2.7% they have been offered. That matter goes to conciliation this Friday.
According to its critics – and there are many of them – a big problem with the rate cap methodology used by IPART is that it’s a lagged measure.
IPART did announce in August that it would review the rate cap methodology. That move has been welcomed by Local Government New South Wales [LGNSW].
LGNSW President Darriea Turley – who is also a leading Broken Hill councillor and ex-City Mayor – says IPART is not fit for purpose and the review of the rate cap methodology could not happen soon enough.
“Not only is it incapable of pre-empting or reacting to a rapidly changing economic landscape, it is formulated using two-year-old data.
This two-year lag means that the rate cap does not reflect the real cost movements faced by councils in the year to which it applies,” Cllr Turley said.
“This is another body blow for the local government sector.
“This is another body blow for the local government sector that was still reeling from IPART’s decision to set the lowest baseline rate cap in 20 years, when it announced a 0.7% increase for the current financial year,” Cllr Turley said.
“Councils work hard to keep rates as low as possible but are also required to deliver services and infrastructure that their communities expect and deserve.
This is simply not possible with a rate cap that does not reflect the economic reality.
“Not only does this rate cap fall short of real cost increases that will be experienced by councils in 2023/24, but it will also fall short of the anticipated local government award wage increases.”
Cllr Turley’s sentiments are backed up by United Services Union General Secretary, Graeme Kelly.
“The United Services Union agrees with Local Government NSW that the rate peg system is broken.
This is a deeply flawed process which reduces funding to the local government sector and restricts the capacity of councils to deliver services to ratepayers,” Mr Kelly said.
“Setting the general rate peg at 3.7% when the ABS just listed headline inflation at 7% for July and 6.8% for August, defies logic.”
Broken Hill Mayor Tom Kennedy points out, “any potential further rate rise will not occur until July 2023, and what the particular rate rise will be, is determined by a budgetary process to be undertaken early next year, in consultation with the community.”
Cllr Turley added, “of course, Broken Hill City Council, like all councils across NSW, will consult with the community to ensure that they adhere to the priorities and service delivery as identified in their strategic plans.”
IPART’s decision ramps up the pressure on many local councils, including ours here in Broken Hill, that are still struggling to recover from years of droughts, bushfires, floods, the COVID-19 pandemic, skills shortages, and rising costs.