Changes to how rates are determined could be on the agenda for local councils across NSW, including Lane Cove, after a preliminary report put forward by the Independent Pricing and Regulatory Tribunal (IPART).
Lane Cove Council Rates and Annual Charges for the 2023/24 financial year include a general rate increase of 3.7%. Lane Cove Council (and other NSW councils) cannot set their own rate increases.
NSW Local council rate increases are determined by IPART using a rate peg methodology.
This rate peg methodology is not popular with local councils. The peak body, for NSW local councils, Local Government New South Wales (LGNSW) has been pushing for a review since last year as interest rates were rising.
IPART’s decision to introduce a record low-rate cap just before inflation began to spiral out of control is clear evidence that the methodology used to calculate the rate cap is completely broken,” said LGNSW President Darriea Turley.
In August 2022, the then Minister for Local Government asked IPART to review the rate peg methodology and recommend a methodology that:
- allows councils to vary their general income annually to reflect (as far as possible) changes in the costs of providing local government goods and services due to inflation and other external factors
- continues to include a population factor.
IPART’s Preliminary Report
After a 10-month review, which included consulting with ratepayers and councils on the rate peg methodology, IPART has suggested changes to the way rate caps are calculated.
Discussions, workshops, focus groups and submissions from ratepayers and various NSW councils assisted in the development of this new proposal.
IPART had over 3,400 responses to surveys from ratepayers, which aided in addressing issues in the model.
“Our review has shown the current rate peg methodology can be improved, to better reflect changes in council costs to maintain services, while continuing to help ratepayers by limiting increases in total rates revenue to what is needed,” said IPART’s chair Carmel Donnelly.
IPART has recognised that one size fits all approach does not work. The draft report includes a recommendation that council costs should be calculated for three different categories of council: rural, regional, and metropolitan.
Communities differ in their size, population, demographic, socioeconomic characteristics, needs and preferences for local services. Each council needs support differently, managing its revenue and cost to meet its community’s needs.
The draft report noted that one potential improvement was using economic forecasting to help calculate the rate caps, rather than interpreting data from the Australian Bureau of Statistics (ABS).
They report also proposes to make an explicit, council-specific adjustment for changes in councils’ Emergency Services Levy (ESL), as well as making additional adjustments to consider costs driven by external factors which affect councils, such as climate change and cyber security.
IPART plan to approach this through a step-by-step process, with some stages implemented in the 2024/25 cycle and the remainder in the 2025/26 rate peg.
IPART Seeking Comments
IPART are keen to hear what you think about their draft decisions, recommendations and findings on the rate peg methodology and the broader regulatory framework.
To have your say, you can:
- provide a submission or feedback to this Draft Report by 4 July 2023 – click here to submit feedback.
- participate in an IPART public hearing on 18 July 2023. Register here.
Financial Sustainability
IPART have also urged the NSW Government to consider an independent investigation of the financial model for local councils in NSW.
The report noted:
“Throughout our consultations for this review stakeholders have made it clear they have serious concerns about council financial sustainability and affordability of rates in the current cost of living climate. Our draft decisions on the rate peg methodology may reduce some of these concerns. But many of the issues raised won’t be fixed by the rate peg or the special variation process. We consider the financial model for councils needs to be investigated to identify improvements. IPART is making a draft recommendation that the NSW Government consider commissioning an independent investigation into the financial model for councils in NSW. The investigation could examine the broader issues highlighted by IPART’s recent consultation, including financial sustainability, funding, costs and expenditure, financial management and the impact on rates and ratepayers”.
When ITC asked the NSW Government for a comment on the Emergency Services Levy increases, a Government Spokesperson told ITC:
“The NSW Government recognises that councils are facing increased cost pressures and is focussed on ensuring the sustainability of the local government sector.
The NSW Labor Government has committed to implementing a review of financial modelling for councils, with a lens on the increasing cost burdens on residents, and we remain committed to that promise.
Councils have other concerns about the way the emergency services levy interacts with rates and want to be able to list ESL as a specific line item on rates bills (like insurance companies already do, but almost all councils cannot). The Government is committed to listening to councils’ concerns around these matters.”
IPART Background
IPART is the independent pricing regulator for water, public transport, and local government. They are also the scheme administrator and regulator of the energy security safeguard and market monitors for energy, the fuel market and biodiversity. Their role is to ensure safe and reliable services at fair prices for NSW residents. Despite being a government agency, IPART runs independently, encouraging competition, improving provider’s efficiency and service quality, as well as protecting consumers and the environment.
Article was jointly written by Jacky Barker and Hannah Hartup.
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