Proposed rates reform no silver bullet

Proposed reform to increase rate flexibility for councils were minor and would not provide any real immediate financial benefit to the vast majority of NSW councils, Local Government NSW (LGNSW) said today.

The peak body estimated a maximum of five of the State’s 128 councils and their communities would have any power to effect any changes as a result of this government announcement.

LGNSW President Linda Scott said that while the principle of increased flexibility was a good one, reports it would result in rate hikes or help councils and communities recover financially from the pandemic, bushfires or drought demonstrated a real misunderstanding of the proposed reform.

“We are in extraordinary times, and understand there is no public appetite to raise rates: councils are focused on assisting communities and businesses facing financial hardship as the result of the cumulative impacts of drought, bushfire, flood and the COVID pandemic,” she said.

“This is only about catch-up funding, and it’s only available to councils that have not passed on the full rate peg increase handed down by IPART in previous years,” she said.

“It’s not even really new: the Local Government Act already gives councils the power to catch-up by increasing rates above the IPART rate peg if they haven’t passed on the full rate peg rise in the previous two years.

“The only real difference from this very limited reform is that it extends the catch-up window to 5-10 years.

“In other words, it allows any catch-up of rate revenue already foregone to be spread over a longer period.”

Cr Scott said extending the existing two-year catch-up window to minimise the impact on ratepayers was great in theory.

“Local government certainly welcomes that principle of increased flexibility,” she said.

“We think there does need to be a broad look at widespread tax reform in NSW, as does IPART in its report on the NSW Rating System.

“But this proposed reform is a very long way from a silver bullet.

“The reality is that most councils have been forced into such a difficult financial position over many years that they are consistently forced to pass on the full IPART-approved ‘rate peg’ in order to keep delivering services and local infrastructure.

“That means there is no foregone rate revenue to catch up.”

She said it was difficult to determine whether any council would benefit this year, because councils were still struggling to put together budgets amid future uncertainty created by the pandemic.

“We’ve heard back from roughly one-third of our members since this reform was announced in the media, and so far only one council has indicated it will be provided with any power to effect any changes next year,” she said.

“The most generous extrapolation suggests that fewer than five of the 128 councils across NSW will be able to avoid passing on the full rate peg, which means the reform will have very little meaningful effect.”

Cr Scott said councils were acutely aware of the financial pressures facing their communities, and worked extraordinarily hard to keep rates low while continuing to deliver services and infrastructure.

“Over time, it’s clear the existing ratings system has hampered what can be delivered for communities,” she said.

“This is a welcome first step, but there’s more to do.”

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