Independent Pricing and Regulatory Tribunal (IPART) was tasked by the NSW Government with reviewing its methodology for setting the annual council rate cap following the sector’s frustration with rate increases not keeping up with inflation or the true costs of service delivery. The draft IPART report, with recommendations, was released last week. Council’s management is generally pleased with IPART’s proposed path forward.
In the view of GM, Jackie Kruger, IPART has genuinely listened and considered the feedback provided. Leeton Shire Council provided a written submission to IPART and also participated in a technical workshop.
“We feel we have been heard and genuinely listened to”.
IPART’s proposed new rate methodology is more forward looking and agile and better recognises the diversity of councils.
Proposed changes which will be staged over two years include:
- setting different rate pegs for metropolitan, regional and rural councils
- considering more relevant / real costs to councils including employee costs; asset costs and true operating costs
- using forward indicators to estimate change instead of historical trends
- making specific adjustments for cost shifting from State Government rather than having these absorbed into existing rates, making these costs more transparent to all concerned
- still considering population changes but using a more refined approach that better considers the true impacts of that change
- maintain a productivity factor when relevant but noting that IPART have been and will continue to be realistic
Mrs Kruger feels that IPART respects the work of local councils and appreciates that councils need to be adequately resourced to deliver services. IPART also appreciates the complexities local councils face. “Pleasingly, they have understood that a ‘one-size-fits-all’ model for rate pegging isn’t very useful”.
In making their recommendations, IPART has sought to balance the feedback from Councils and ratepayers from across NSW. On the one hand, residents across the state are saying they want the services but are concerned about cost of living increases, affordability issues and sound financial management, while on the other, councils are strongly questioning the effectiveness of the funding model in the face of cost escalation due to the likes of labour shortages, supply chain disruption, cybersecurity risks, disaster recovery, cost shifting, higher inflation and rising interest rates, to name a few. Councils like Leeton Shire would like the rate peg to reflect these actual costs.
NSW ratepayers interviewed by IPART are asking to be better consulted about council priorities before these are voted in and elected councillors are asking for better tools and training to more effectively hold management to account. Leeton Shire management strives to do this already and welcomes any ideas on how these can be improved.
Importantly, IPART is recommending that the rate peg methodology be reviewed every 5 years going forward so that the sector doesn’t ever again land up in the predicament of being subjected to critical decision-making methods that are clearly not fit for purpose.
IPART has also made it clear in their review that their scope was constrained to working out the appropriate movement in a council’s existing cost base. The review has NOT addressed the cost base itself which means that councils facing financial sustainability issues will still need to consider Special Rate Variations and/or cutting services. IPART nonetheless recognises that financial sustainability is the number one issue facing all councils across NSW and has recommended that the NSW Government initiate an investigation into the financial model for councils in NSW. Leeton Shire would support this wholeheartedly.
The elected Leeton Shire Council has yet to formally consider the IPART proposed changes and determine how it wishes to respond but the GM reckons there will be general support as Leeton Shire Council’s concerns have been fully heard and responded to by IPART.
GM Jackie Kruger believes the IPART proposal to be fair in principle but notes the devil is always in the detail and how decisions are executed. “Council’s ultimate opinion on the helpfulness of these proposed changes will be made once future rate pegs are issued by IPART”.
