Geoff Helisma, Clarence Valley Independent
An initiative to incorporate population growth as a primary factor when deciding the annual rate peg for NSW councils has been rejected before its implementation.
In early 2021, the Independent Pricing and Regulatory Tribunal (IPART) began a review that would include population growth in its calculation of the rate peg, and, upon its adoption, set the rate peg at 0.7 per cent for 2022-23 financial year.
“We have developed a way of incorporating population growth into the rate peg that balances the need to ensure councils are financially sustainable, while protecting ratepayers from excessive rate rises,” IPART chair Carmel Donnelly said in December last year.
Meanwhile, in October 2021, former NSW minister for local government, Shelley Hancock, “endorsed the new rate peg methodology and … asked IPART to give effect to it in setting the rate peg from the 2022-23 financial year”, the October 5, 2021, Office of Local Government (OLG) circular stated.
“This will increase revenue for many councils serving growing communities … no council will be worse off under the new methodology.”
However, attendees at the Local Government NSW Special Conference (Feb 28 – Mar 2, 2022) disagreed with the IPART, the OLG and the former minister.
Councillors at the conference voted to “implore the NSW Government to urgently intervene and overturn IPART’s aberrant base line rate peg determination of 0.7 per cent for 2022-23, to ensure that no council is financially disadvantaged”.
Consequently, five days later, the OLG announced in its circular that “the IPART will accept and process an additional round of 2022-23 Additional Special Variation (ASV) applications from councils”.
This one-off ASV round is available for the 2022-23 financial year only.
Councils that apply must “demonstrate the need for a special variation to meet the obligations they set for 2022-23 in their 2021-22 Integrated Planning and Reporting (IP&R) documentation”.
Applicant councils will have to show a “demonstrable financial need such that, in the absence of a special variation, council would not have sufficient funds to meet its obligations as identified in its 2021-22 Long Term Financial Plan [LTFP] as and when they fall due in 2022-23”.
Councils can apply for a variation of up to 2.5 percent (including population factor) or the council’s assumed 2022-23 rate peg, as exhibited in its 2021-22 LTFP, whichever is the lowest.
Clarence Valley Council’s assumed rate peg is 2.5 per cent from 2022-23 onwards.
The OLG circular states that the IPART will accept applications until April 29, 2022, and that it will notify councils of its decision no later than June 21, 2022.
Councillors at the LGNSW conference noted in their resolution, “This shock [IPART] determination will have a devastating impact and exacerbate the financial impacts on councils and communities of natural disasters and the ongoing COVID pandemic.
“The total shortfall in rate revenue is estimated to be $80-$100 million in 2022-23, with a compounded impact of up to $134 million over ten years.
“This issue goes to the very survival of many councils in NSW and the government is urged in the strongest manner possible to take immediate action to save the sector from financial ruin.”
Councillors also noted that a 2.5 per cent rate peg “will still not adequately cover the cost increases being experienced by NSW councils”.
Mayor Ian Tiley said councillors would decide whether or not to apply for the ASV at the April 26 ordinary meeting of council.
This article appeared in the Clarence Valley Independent, 30 March 2022.