Goulburn Mulwaree Council responds to rate peg ruling

Aaron Johansson was commenting after the Independent Pricing and Regulatory Tribunal (IPART) recently set a 3.7 per cent rate peg for Goulburn Mulwaree in 2023/24. It equates to an extra $850,000.

The Tribunal's chair, Carmel Donnelly, said the pegs, set for all NSW councils, considered the average annual cost increases faced by local government and population changes.

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Goulburn Mulwaree and Upper Lachlan Shire will be allowed to increase general rate revenue by 3.7pc in 2023/24. It's estimated the former's population will rise by 0.8pc by that time, and the latter, 1.8pc.

Yass Valley can increase the rate yield by 4.2pc, Queanbeyan Palerang - 4.6pc and Wingecarribee - 4.1pc.

Goulburn Mulwaree Council CEO Aaron Johansson was diplomatic in his response.

"We thank the government for the 3.7pc. It's a significant increase on the 0.7pc granted earlier this year (for 2022/23) but having said that, the cost of continuing to provide services is ever increasing," he said.

Mr Johansson said road and other project costs had risen as much as 30pc in the past 12 to 18 months.

Moreover, councils were also awaiting the outcome of a wage case for local government employees, which could match the 6.1pc cent inflation rate.

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The 3.7pc is well below the CPI. Mr Johansson said he firmly believed that IPART didn't understand the local issues.

The Queenslander started in the role in June. The former Charters Towers Regional Council CEO is adjusting to a new regime. In that state, councils set the rate level according to service needs but in NSW, IPART and the state government dictate the peg.

IPART says the method protects ratepayers from "excessive increases in rates."

Last year, it attracted widespread criticism for its 2022/23 decision which gave many councils, including Goulburn Mulwaree, a 0.7pc increase. At the time, general manager Warwick Bennett described it as "a slap in the face" for councils, arguing it did not reflect rising costs. Ms Donnelly said it reflected forecast population changes and inflation.

Following outcry, councils were allowed to apply for special rate variations. Goulburn Mulwaree was permitted to raise rates by 2.5pc in 2022/23.

The latest decision hasn't calmed controversy. Local Government NSW (LGNSW) described IPART's 2023/24 rate cap was "further proof of how the rating methodology is fundamentally broken."

President Darriea Turley said inflation was expected to rise above 6.1pc in coming months. Further, IPART's announcement "underlined the critical need" for changes to the rating methodology and broader reforms to abolish the cap.

IPART announced in August that it would review the methodology - a move welcomed by LGNSW.

"The review...cannot come soon enough, as the current system is not fit for purpose," Cr Turley said.

"Not only is it incapable of pre-empting or reacting to a rapidly changing economic landscape, it is formulated using two-year-old data."

The rate cap for 2023/24 is based on the change in the average costs incurred by a typical council between the 2020/21 and 2021/22 financial year.

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Cr Turley said these were years when most councils were living with restrictions brought about by the COVID-19 pandemic.

"This two-year lag means that the rate cap does not reflect the real cost movements faced by councils in the year to which it applies," she said.

"With inflation spiralling out of control, a number of councils are preparing for double digit rate cap variations. A 3.7pc rate cap in these current economic conditions will mean many councils will continue reducing services, delaying essential upgrades to infrastructure and even reducing staffing levels."

Cr Turley said the determination would heap more pressure on councils already struggling to recover from years of droughts, bushfires, floods, the COVID-19 pandemic, skills shortages, rising costs and several other challenges.

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IPART is reviewing the methodology it will use to set the rate peg from 2024-25. It is calling for submissions to an Issues Paper on its website. These are due by November 4.

"We will be looking at new approaches to setting the rate peg that reflect, as far as possible, changes in inflation and local government costs, while continuing to protect ratepayers from excessive rate increases," Ms Donnelly said.

A draft report with findings and recommendations will be released in February, 2023, with further consultation to follow.

Mr Johansson said Goulburn Mulwaree would make a submission after assessing what it would mean for its long-term viability.

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