The Narrandera Shire Council has agreed to increase its 2022-23 borrowing bid to the Office of Local Government and NSW Treasury from $2 million to $3 million to enable it to undertake stormwater infrastructure works in urban Narrandera.
The works are aimed at solving severe flooding that occurred in the town earlier this year.
The council will also engage additional resources to prepare a special variation application to IPART to fund loan repayments for the $3 million loan through a stormwater special rate.
Community consultation will take place to confirm support for the stormwater infrastructure design and its intent to raise additional stormwater charges.
It has already received one response to the exhibition of the proposed stormwater design but no responses to the Long Term Financial Plan addressing the stormwater capital works and associated funding.
A Special Rate is to be levied by way of an annual charge on rate assessments within the Special Rate boundaries to be further defined.
Council will lobby the Commonwealth and NSW State Government, politicians and agencies to provide significant grant funds towards the implementation of the stormwater project and submit applications to finance the stormwater project when Commonwealth and State infrastructure grant programs open.
NSC previously considered a design solution to remediate the urbanised flash flooding that was experienced in January 2022 at its May 2022 meeting and resolved to support the project and the required funding allocation.
Council endorsed the design solution for public exhibition and later provision of funding options. Consultant hydrologists’ reports were overlaid on Council’s rating database to indicate the rate assessments that contributed to the need or or benefit from the proposed new stormwater infrastructure as the basis for any Special Rate.
Council’s options to fund the proposed infrastructure works were considered and it was decided that consideration must be given to raising additional funds to complete the project, or the scope varied, or the project deferred until funding became available.
Council engaged consultant hydrologists and engineers to design solutions to mitigate the impacts of these types of stormwater flood events on the urban areas of Narrandera.
Council’s 2022-23 Long Term Financial Plan (LTFP) was being finalised prior to the design solution being developed and it was essential that provision be made in the LTFP for the stormwater project and the financing of the works.
The LTFP made the following pro-visions for the proposed project:
- 2022-23 Financial Year Capital Works proposed $4,000,000.
- Funded by grants $2,000,000 and external loan (drawn June 2023) $2,000,000.
- 2023-24 and Forward Years
- Repayments for loan drawn in 2022-23 financed by a stormwater special rate.
The engineering investigation and design outcomes were reported to Council in May 2022 with the works proposed in three components as detailed below:
- Drainage Line Description Estimated Cost Proposed Line 1 Bolton Street & Cadell Street Concrete lined inlet channel between Charles & Arthur Streets, through to Marie Bashir Park $2,500,000
Proposed Line 2A Marie Bashir Park at Twynam and Adams Streets 3.6 x 1.5 box culvert $2,850,000 Proposed Line 3 Cadell & Larmer Streets 1.2m concrete pipe $550,000.
The total estimated cost of the three lines is $5,900,000.
While the ultimate design will include all three sections of upgrade, it was recommended that the minimum works should include the drainage line 1 and 2A works with an estimated combined construction cost of $5,350,000.
Since the May report to Council, engineers componentised the costs and provided a contingency sum. These project costs are:
- General items $666,517
- Site preparation $1,322,580
- Culvert works $3,650,991
- Road reinstatement works $231,503
- 5% contingency for unestimated cost $293,580
Total Estimated Cost (excluding GST) $6,165,170.Options considered to fund the new stormwater infrastructure were:
- Source additional revenue
- Change priorities within the existing capital works program
- Amend the scope of the proposed stormwater infrastructure project.The NSW State budget was released and did not contain the anticipated grant programs for stormwater infrastructure.
While grant programs to the extent envisaged are not presently open, programsare available to a maximum of $300,000.
Staff lodged a grant proposal for $250,000 to fund the detailed design of the proposed works under the NSW Disaster Risk Reduction Fund. This grant application should be determined in August 2022.
If the application is unsuccessful, the design will have to be funded by Council and raised through a special rate beyond the loan repayments currently forecast in the LTFP.
Works such as stormwater infrastructure may be funded by making a special rate under Section 495 of the Local Government Act 1993 (the Act).
The special rate is to be levied on rateable land in the council’s area that the council decides will benefit from the works, services, facilities or activities, or has or will have access to the works, services, facilities or activities.
An element in calculating a rate is the land value of each assessment, which results in the amount being levied increasing as the land value increases.
In circumstances such as stormwater infrastructure, Council may consider that it is more appropriate that all properties paying the special rate make the same annual contribution irrespective of the land value. The Act provides for this under Section 503 as an annual charge.
If a Stormwater Special rate was applied to an assessment paying the Stormwater Management Charge, the management charge was removed.
It was stressed that Council cannot raise additional revenue without approval from IPART and the SRV process is extensive. Council must identify the essential works, options to fund the work, demonstrate the ratepayers’ understanding of additional charges and their ability to afford that charge.
IPART also requires councils to actively engage residents in discussions about the proposed increase above the rate peg through public hearings and other community engagement tools that suit their population.
IPART will then consider how effective each council’s community inclusion has been before determining its application to increase charges above the set rate.
In addition to Council’s evidence, IPART will assess any other information they consider relevant, including letters from ratepayers.
In determining a Special Variation, IPART may consider the Socio-Economic Indexes for Areas (SEIFA). SEIFA is a product developed by the ABS that ranks areas in Australia according to relative socio-economic advantage and disadvantage.
The indexes are based on information from the five-yearly Census. The Local Government Area (LGA) Index of Relative Socio-economic Disadvantage, 2016’ shows Narrandera LGA ranked 23rd out of 130 NSW Local Government Areas (with a ranking of being the highest disadvantaged and a ranking of 130 being the least disadvantaged).
IPART can also wholly or partially approve or reject Council’s application. The special rate proposed in the LTFP to commence in 2023-24 to fund repayment of the stormwater loan drawn in 2022-23 can only proceed once IPART has approved a special variation to raise the additional general income through the special rate. Council must resolve to make application and advise IPART of this intent prior to the cut-off date prior to February 7 2023 with IPART releasing its determination in May 2023.
Given this timeline the Narrandera Council could not contract for the project until approval is given in May 2023 as without approval, funds to make loan repayments would not be available in 2023-24.
The timeline set by IPART for the 2022/23 Special Variation process was:
The Council’s Long Term Financial Plan provides for Council to borrow $2,000,000 with repayments commencing in 2023-24. Given that the project cost has now been estimated at $6,165,000 and substantial grants are not currently on offer, the modelling of a special rate includes servicing loans of $2M, $3M, $4M and $6M.
An indicative loan servicing cost has been calculated on a 30-year term at an interest rate of 7.5%.
The annual cost to service the loans are estimated at $168,000, $253,000, $337,000 and $505,000.
The proposed stormwater rate area takes in 1,389 rate assessments with a land value of $64,525,563. The average general rate paid by these assessments in 2021-22 was $809.05.
The amount a rate will vary with the land value of an assessment, whereas an annual charge will apply equally to all assessments.
The table below indicates the indicative annual charge at each level of borrowing and the annual charge as a percentage of the average 2021-22 general rate paid by the assessments.
Average General Rate
- $2,000,000 $120.95 14.95%
- $3,000,000 $182.15 22.51%
- $4,000,000 $242.62 29.99%
- $6,000,000 $363.57 44.94%
A special rate would consist of two components – a base amount common to all assessments and an ad valorem amount calculated on the land value. The yield from the base amount cannot exceed 50% of the total yield and the higher the base percentage, the less impact the land value has on the charge to each assessment.
This article appeared in the Narrandera Argus, 4 August 2022.
