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Commission decides on applications for higher rates
31 May 2016
Under the Fair Go Rates System, State Government puts a cap each year on the amount councils may increase rates. The cap for 2016-17 was 2.5 per cent. The Essential Services Commission may approve council applications for a higher cap if councils can demonstrate a clear need.
The Commission has rejected applications by the cities of Ballarat, Casey and Wyndham for rate rises above the cap set by Government.
The municipalities of Buloke, Horsham, Moorabool, Pyrenees, Towong and Murrindindi (in part) had their applications for larger increases approved.
Commission Chair, Dr Ron Ben-David, said that, in approving the higher caps for the six municipalities, the Commission needed to satisfy itself that higher rates were consistent with the long-term interests of their communities.
“We considered each council’s application on its merit,” Dr Ben-David said.
“We approved applications where the councils could clearly demonstrate a long-term financial need, supported by well-developed long-term plans,” Dr Ben-David said.
The Commission assessed whether councils had demonstrated that they had explored feasible alternatives to a rate increase and had in place the practices necessary to support their claims. This includes: rigorous financial planning systems, strong asset management frameworks and a demonstrated commitment to community engagement.
Dr Ben-David said that there was no single reason why applications were rejected. He noted, however, that applications seeking rate increases due to short-term funding needs were not approved if those councils had other options available to them.
“Rate increases last forever, short-term budget needs do not,” said Dr Ben-David. “A rate increase means ratepayers continue to pay higher rates even after the short-term need has been met.”
The Commission’s decisions emphasise the need for councils to work closely with their communities to develop rigorous long-term plans identifying their service and infrastructure expectations, while taking into account the communities’ preparedness and ability to pay.
“Once councils and their communities have decided what needs to be delivered, we expect councils to manage their costs on a multi-year basis rather than going back to their communities seeking higher rates on a year-by-year basis,” said Dr Ben-David.
As this was the scheme’s first year of operation, the Commission took into account councils’ inexperience in preparing applications and often sought additional information from the councils. Dr Ben-David thanked council staff for their strong commitment to assisting the Commission.
The Commission will monitor and report on how councils who applied for higher rates have complied with the spending commitments made in their applications. “We will be reporting on whether councils spend their money in line with the commitments they gave in their applications. Failure to do so could result in some tough questions,” said Dr Ben-David.