Rate rise why?
The capacity of ratepayers to afford the proposed rate increases; clarification on the permanent nature of those increases and their compounding and cumulative effect on rate bills now and in the future were among the key issues raised at a consultation session to discuss council’s pitch to increase the general rate above the rate peg for three years from 2013.
It was also strongly recommended that council should do some belt tightening rather than inflict more financial hardship on the ratepayers.
This will be the seventh consecutive year that BVSC ratepayers have had to foot a bill over and above the rate peg limit which has shot the general rate up 24 per cent.
The session, held on Tuesday January 28, was at the invitation of the mayor to which members of the Bega Valley Shire Ratepayers Association and the media were invited. Mayor Bill Taylor chaired the session and all councillors were present with the exception of Cr Kirsty McBain who sent an apology. General manager Peter Tegart and finance manager Lucas Scarpin were also present.
It was dubbed as a preliminary step in the consultation process. Council has indicated there will be a range of engagement and consultation opportunities for the broader community during this month. Council says what results from the consultation process will be taken into account prior to council making a final decision in March as to whether to lodge a formal submission to the Independent Pricing and Regulatory Tribunal (IPART) to increase general rates above the 3.4 per cent rate peg.
Council proposes to increase the general rate by 2 per cent above the rate peg for two years – 2013/14 and 2015/16 and the continuation of an expiring special variation (SV) in 2014/15. Council says the three increases will net the shire an extra $1.3 million per annum for spending on essential infrastructure upgrades and renewals.
Should council decide to pursue its application to IPART, in 2013-14 ratepayers can expect a 5.4 per cent general rate increase.
Mayor Taylor said the SVs had been flagged and formed part of the council’s financial plan, “So you could say the train has somewhat left the station.”
He said the alternative for the council would be to only adopt the 3.4 per cent rate peg increase.
Cr Michael Britten confirmed that the rate increases incur a compounding factor.
“There are three increases in what we are looking for now. All of those compound after a period of time. The compounding effect of those increases compensates for not having the 2.5 per cent increase every year for the next 10 years. So you do get the compounding effect if you’ve got the 2 per cent and get a rate pegging next year that will be on top of that 2 per cent. What we have been able to do is forecast that growth in the compounding and taking into account to reduce any need for any rate variation in the future.
“There is $180 million that needs to be raised for renewal of roads, recreation and community facilities - the money must come from somewhere so it is coming from part savings by us being more efficient; part is coming from the compounding effect of rate increases and part is from the increases themselves,” Cr Britten said.
Council has stated that all three rate increases will be “one-off permanent”.
The one-off aspect was challenged by BVSRA’s president Peter Rogers.
”I predict it now, it will go on. Another council will be elected and the first thing they will do is push up the rates.”
Cr Taylor said council’s 10-year financial plan allowed for the three rate increases that were now the subject of council’s application to IPART.
He said they were to be the subject of public consultation and until that process had been completed no decision would be taken by the council.
BVSRA member John Richardson said while the council may have a case to put up the rates he questioned how well it had been marketed.
“The consultation process thus far does not stack up statistically and leads to ratepayer scepticism.”
Cr Britten said, ”We can’t be responsible if our documents are not read.”
Mr Richardson said there were about 19,000 ratepayers who should have been made aware earlier of the council’s intentions.
“You should be better at telegraphing that information.”
BVSRA member Marlene Wall admonished the councillors (with the exception of Crs Tapscott and McBain who had previously shown some sensitivity to the ratepayers’ plight), for giving little thought to the ratepayers’ capacity to pay year on year increases.
“I said recently that councillors are thinking from a position of affluence. I suggest you are taking the easier path of putting up rates rather than insisting the council becomes more efficient and it undertakes cost cutting. You don’t consider the capacity of the ratepayers to pay.”
Cr Taylor said, “No-one has a closed mind on it. We are initiating the consultation process.”
BVSRA member Geoff Jones questioned why the council called the rate increases one-off.
Cr Taylor said the 10-year financial plan contained no rate variation proposals after 2015/2016.
“But it will continue as a thing in our rates so it will be there forever,” Mr Jones said.
Cr Taylor agreed, but for only 10 years he said.
Mr Jones disagreed.
“Last year I asked whether the SV put on commercial for a tourism levy was forever and I was told that was the case.
“Twenty years,” Cr Allen replied. “No it was forever, Tony,” Mr Jones said.
Mr Tegart clarified that it was in fact permanent. “I’m amazed,” Cr Allen said.
“Why can’t council look at tightening its belt?” Mr Jones asked.
He stated his opposition to any rate increase above the 3.4 per cent rate peg.
He said while he could afford it, he knew many were struggling and “it’s not fair it is costing them more to live”.
Cr Britten said, “Everyone is conscious of the total rate bill (including charges for water, sewer, stormwater levy, waste disposal). This (the general rate increase) is a small part of the total. We hope to go back and have a look at the charges.”
Cr Tapscott asked Mr Scarpin what effect it would have if council were to push back the three SVs for a year, “so you push the hurt back a bit?”
Mr Scarpin said the council would probably lose the cumulative effect of about $2 to $2.5 million over the 10 years. Not only do you lose the principal of the SV but the indexation of that over 10 years and you never really catch that back, you’re always behind. Indexation is compounded.”
The News Weekly asked why the council couldn’t increase its borrowings as an alternative to putting up the rates.
Cr Britten said that was what the SVs were allowing the council to do - borrow money over a 20 year period in some cases and pay it back.
Mr Scarpin said the council did factor borrowings into the rates proposal.
“The Division of Local Government set up a benchmark for what it considered to be a good borrowing level for the council - it is 20 per cent of the operating revenue. Ours is very low at the moment, about 8 per cent but our long term financial plan does include borrowings to bring it up to around $16 million, a big loan, it would take it up to just below the 20 per cent threshold.
“We really have tried to prevent a rate rise. We started off with what we had to spend, I can honestly say rates was the last on our list so we filled up with such things as borrowing extra money, fees and charges, efficiency gains, shifting operational expenditures into that capital area, and what we were left with effectively becomes the rate increase,” Mr Scarpin said.