Posted by Whistler 220 words
Lancing Farrell has made some good points in her post about rate capping. I think the ESC has been optimistic. The impact of application of the CPI and WPI and the Efficiency Factor is likely to be more significant for many councils, particularly large urban councils.
The main reason I say this is that the average of 40 % of expenditure on labour costs doesn’t reflect the reality of many councils. For many it is 55 to 60%. This means that a significant part of their labour costs will be adjusted for CPI, not the higher WPI. I have reproduced the table from Lancing Farrell’s post above.
I have produced my own table comparing a council that has 60% labour costs. Continue reading
Posted by Colin Weatherby 800 words
The pressure is on. The Essential Services Commission has released its draft report on the proposed rate capping for councils in Victoria. It has a number of interesting elements and some significant implications for local government. The report sets out which revenues are proposed to be capped, how the rate cap could be calculated, the current forecast for rate increases to 2018/19 under the proposed system (see below), and the impact of the application of an ‘efficiency factor’ to provide an incentive to pursue efficiencies.
The article in The Age describes the major impacts.
“Victoria’s 79 councils had an average rate increase of 3.8 per cent this year. Several councils increased their rates by more than 6 per cent.
The draft report includes indicative forecasts for an annual rate cap of 3.05 per cent in 2016-17, dropping to 2.85 per cent in 2017-18 and 2.8 per cent in 2018-19.
In addition to the cap, the review calls for a new “efficiency” deduction to be introduced from 2017-18 where councils would need to reduce their rates bill by 0.05 per cent because of efficiencies (increasing by 0.05 percentage points each year). Jason Dowling, The Age, 31 July 2015.
So, what are the likely implications for councils?
There have been some previous posts on this topic (see ‘Council rates capped from mid-2016’, The Age, 21 January 2015 and ‘Labor’s rate cap to hurt services and infrastructure, ratings agency warns’, The Age, 27 February 2015.). That thinking still stands. Councils will have to say ‘no’ louder and more often. Difficult choices will need to be made about what services to offer or not offer, and what the levels of service will be. Some people will no longer be eligible for services as councils start to distinguish more strongly between those who are or are not customers. Expect much more customer segmentation for services delivery. All of this will be difficult for our politicians who succeed by pleasing their constituents.
In many ways this is the easy bit Continue reading