Councils are often damned if they do and damned if they don’t when it comes to how they set their rates, but Victorian councils have striven to find a balance that they hope will satisfy everyone in the 2015-16 financial year.
Rate hikes are usually an electorally unpopular move, inducing panic among cash-strapped ratepayers about how they’ll manage to pay their quarterly dues.
They also have a tendency to provoke negative media coverage as well as scare campaigns from state governments, which has resulted in rate capping from the New South Wales government and recently the Victorian government.
But the Municipal Association of Victoria (MAV) reckons that councils across the state have “worked hard” this year to keep the average rate increase to a 10-year low of 3.8 per cent, which is equivalent to $67.
Since councils in Victoria are still providing more than 100 vital community services and maintaining $73 billion worth of infrastructure and assets, the need for rate increases has never been more urgent.
It’s been especially demanding since the federal government’s $139 million freeze on indexation in Financial Assistance Grants and the scrapped $160 million state government Country Roads and Bridges program, which have been significant pain points for councils, causing frustration about how they can maintain the necessary government services.
It has also forced them to radically rethink their annual budgets and pushed procurement officers to think more carefully about products and services that deliver the best value for money.
And rate increases have simply been necessary to meet at least some of the shortfall left by state and federal funding cuts.
MAV President Bill McArthur said councils were once again having tough conversations in order to tighten their budgets, and the annual MAV rates data demonstrated this achievement.
“Councils have been able to keep the average rate increase low, while still delivering services including kindergartens, public libraries, maternal and child health, home and community care, street lighting, waste services, and maintaining 85 per cent of the state’s road network,” Mr McArthur said.
This is despite the hardships that have been imposed on councils by policies set at state and federal levels of government.
Mr McArthur said many councils are implementing cost-saving measures by adopting online, collaborative methods of operation, with other levels of government and organisations to achieve savings.
“Councils are often unfairly criticised when they increase rates above CPI, but CPI does not reflect council costs.
“While CPI measures the cost of common household goods including bread, milk, and electricity, a council’s basket of goods includes more expensive items like construction, material and wage costs,” Mr McArthur said.
He said MAV’s survey shows that the average increase of 3.8 per cent is in line with the Local Government Cost Index of around 3-4 per cent, which tracks councils’ cost movements, but does not include extra funding needed to maintain ageing assets.
The recently announced $1.1 billion national increase to Roads to Recovery funding will assist in relieving long-term pressure placed on councils, he said.
“The Financial Assistance Grants freeze has led many councils, especially in rural areas, to make tough decisions in order to strike the right balance between the level of services provided to the community, while trying to keep rate increases low,” Mr McArthur said.
He said the Country Roads and Bridges program was another funding stream relied on by 40 rural councils that is yet to be replaced by the state government.
Mr McArthur lamented the adversity that the cuts have brought, saying that they “put councils between a rock and a hard place”.
“Rate rises cause community anxiety but service cuts cause community outrage,” he said.
Councils in Victoria have been proactive in their goal to better understand what the community wants by holding public meetings, listening posts, participatory budgeting and surveying residents.
Mr McArthur said the MAV is aware that in the current economic climate, many homeowners face financial challenges, and urges residents under genuine financial stress to speak with their council to find a way forward.
