What is a special rate variation?
Council’s Long Term Financial Plan has identified a gap between current projected funding for asset renewal and what is needed to ensure assets are maintained to an acceptable level into the future in line with the expectations of our community. That is why Council is proposing to apply for a Special Rate Variation (SRV), as a way of securing these funds. This is a process by which we apply to the Independent Pricing and Regulatory Tribunal (IPART) to increase rates beyond the rate peg. The SRV is being proposed only after all other sources of income and cost saving measures have been examined. A SRV allows councils to increase general income above the rate peg, under the provisions of the Local Government Act 1993 (NSW).
Since 1977, council rate revenue has been regulated in NSW under an arrangement known as ‘rate pegging’. Rate pegging allows all councils to increase their total rate revenue in line with the annual change in the rate peg. The rate peg is a percentage that is set each year by IPART, mainly based on an index of typical council costs. The rate pegging system also provides flexibility for individual council circumstances by allowing councils to apply to IPART for a special variation. Special variations allow councils to seek to increase their rates by more than the rate peg, after engaging with their communities as part of their Integrated Planning and Reporting.
What is a rate peg?
Council’s rating revenue is regulated under “rate pegging”. IPART sets a rate peg which limits the amount by which councils can increase their rate revenue from one year to the next. For many years, the rate peg limit has not kept pace with the spiralling increases to costs for councils in NSW to deliver vital community services.
Who is IPART?
The Independent Pricing and Regulatory Tribunal is the main independent pricing regulator in NSW. IPART set prices for water, electricity, gas and transport businesses. They set the rate peg for local councils.
How much will my rates increase?
What are the proposed rate increase options?
Council is proposing the following options of either:
Option 1: Rates to increase by 11.5% every year for 2 years (plus rate peg)
Option 2: Rates to increase by 6.27% every year for 4 years (plus rate peg)
Option 3: Rates to increase by 5% every year for 7 years (plus rate peg)
Why does Council need more funding to pay for its assets?
Our community has consistently told us that assets like roads, footpaths and drainage are important to them, but we need to improve their condition.
In addition to this, in 2014 the NSW State Government initiated its Fit for the Future local government reform program that required all NSW councils to submit a proposal demonstrating plans to achieve long term financial sustainability and meet seven asset and financial benchmarks.
Over time, the range of services Council provides, and the connected assets, has changed and expanded dramatically. It’s no longer just roads and rubbish, but childcare services, art and cultural facilities, sport and recreational facilities, environmental areas, stormwater management and more.
However, the income stream to fund these assets and services hasn’t changed. Many assets are already due for renewal, and Council has been undertaking a continual replacement and upgrade program to meet the needs of our growing city - but there is a renewal backlog that will only continue to grow if not addressed.
As a part of our Fit for the Future process we reviewed the condition of our assets and detailed long term financial modelling. This information told us we have a funding gap and need to invest additional money into maintenance and renewal of community assets.
The proposed Special Rate Variation is an important step to help maintain and manage our current assets to ensure that we deliver services in line with community expectations and remain financially sustainable into the future.
How will Council prioritise the spend of additional money?
Each project is assessed on an individual basis and subjected to specific criteria, such as:
· Existing condition
· Risk mitigation
· Usage rates
· Projected future growth
· Drainage issues
· Whether the asset is in a flood or fire zone
· Traffic volumes
· Traffic speed
· Accident records
Why do Council construction and upgrade projects appear to cost so much?
Council construction works have to adhere with strict conditions which can inflate costs.
Factors that must be considered and can have an impact on the cost of works include:
· Safety requirements - Council works are generally conducted in public places and therefore steps must be taken to ensure that any potential risk is addressed and minimised. This includes insurances and risk cover requirements
· Australian Standards – Council must comply with the Australian Standards for construction and maintenance. We must also comply with a range of other standards such as ensuring accessibility to as many constituents as possible.
· Environmental requirements must be complied with e.g. If a protected species is identified within the work site, plans may need to be altered which can add cost
· Costs of materials and disposal of material has significantly increased in recent years
· Location of works e.g. if the work site is isolated establishment costs can be high.
When will rates rise?
If the proposal is approved by IPART it would be expected that rates will rise from the first rates notice in June 2017. This is subject to Council adopting any recommendation received from IPART.
What happens if Council's application for a rate increase is unsuccessful?
How have we saved money so far?
Council has saved millions by changing the way it works. In the last 4 years council has saved up to $6m in staff changes, service reviews and other transformation efforts. We will continue to make savings by changing the way we operate, finding ways to cut costs and work more efficiency.
Some specific examples include:
Organisational restructure saving over $3M
Overtime reductions and resourcing changes over $500K
Changes to plant and fleet
Changes to purchasing policies
New systems play a major role in gaining efficiencies in how we do things, online services will improve interactions with Council and improve efficiencies and costs.
How do we get our income?
Council’s income comes from a number of areas. Council’s income is limited and or fixed in many ways, for example:
· Fees for services and access to facilities are limited by market demand and our customer’s ability to pay. Many of our services and facilities are heavily subsidised.
· Council supports many not for profit organisations by charging reduced rent for Council buildings and little or no charges to sports groups for sporting facilities, therefore Council meets the needs of these community organisations. Rental subsidies alone are approximately $1.2m annually.
· We are always looking for additional revenue from the State and Federal Government and also seek a number of grant opportunities where we can.
What about all the new developments – do developers contribute?
Council charges developers to help build and improve community assets and facilities. All new developments are charged a developer contribution fee. This money is then used for projects within the area that the development is located and includes funding community infrastructure, roads and drainage, parks and playgrounds.
Can our community afford an increase in rates?
Part of the community engagement being undertaken is to understand whether our community can afford an increase in rates and by how much.
Every year costs for various things increase. Council is no longer just responsible for roads and rubbish and services many other aspects of community life. Our costs to service these needs also increase over time and as we continue to add new facilities, assets, toilet blocks, rubbish bins these costs increase.
When comparing the costs that rate payers experience, consider what your rates are actually paying for: roads, drainage, roundabouts, community services, sporting facilities, swimming pools, protection of the environment, libraries, entertainment centres, street bin collection, visitor information, playgrounds, arts centres, street lighting, cemeteries reserves, parklands and the list goes on.
Certainly the increase will have an impact, but the alternative is that services, facilities, asset maintenance and road repair is reduced, which in the long term will cost our community more.
What options are available to those that can’t pay a rates increase?
Council offers a number of options for ratepayers to tailor their payments to manageable amounts. For example you can arrange to pay in quarterly or monthly instalments. Council recognises that some ratepayers may experience financial difficulties in meeting their rate commitments on time. A ratepayer may at any time make arrangements to pay off their outstanding accounts by regular payments Council can also provide a hardship application for those people in severe financial distress.
Where will the monies collected from a rate increase be spent?
Council intends to maintain services at their existing level and to inject more funding into maintenance and renewal of Infrastructure Assets.
I have concerns about the rationalisation of Council assets, what plans do Council have in this regard?
Council has recently received a report on Community Infrastructure requirements for the future, including priorities and funding. The full report can be found at www.shoalhaven.nsw.gov.au/My-Council/Current-Projects/Community-Infrastructure-Plan.
Is Council able to minimise spend on external Conferences and Training Courses to save money?
Council currently spends $1.1M on training costs, including conferences and HEC’s. This equates to less than 1.6% of total employee costs. A significant proportion of this spend relates to Occupational Health and Safety Training, which is mandatory. The remainder is an investment in personal and professional development and contributes towards a stronger business and increased productivity.
Is Council able to cut costs with regard to External Consultants and use existing staff where possible?
Council endeavours to utilise existing staff where possible, however, sometimes the specific task requires specialist expertise or Council staff do not have the capacity to handle all the work required. In these instances the work is outsourced to contractors or consultants.
Council needs to increase revenue by targeting business growth in the LGA, what is Council doing to achieve this?
Council contributes funding towards economic development and tourism to help grow the local economy. A number of DA fees are set by Regulation, so to further encourage development Council could reduce these charges, but this would then fall back on the ratepayers to fund.
What does Council mean by “Fit for the Future” and how is Council measured?
The Office of Local Government released a roadmap for Stronger, Smarter Councils, highlighting that for a Council to be deemed “Fit”, they must:
· Be sustainable
· Be efficient
· Effectively manage infrastructure and deliver services for communities: and
· Have Scale and capacity to engage effectively across community, industry and government.
Councils also needed to meet the following seven benchmarks:
· Operating Performance before Capital Grants and Contributions
· Own Source Revenue
· Building and Infrastructure Asset Renewal Ratio
· Infrastructure Backlog Ratio
· Debt Service Ratio
· Real Operating Expenditure Ratio.
Only the General Fund was considered as part of Fit for the Future. Council only meets three of the seven benchmarks. In order to meet the further ratios within a 3 year period, Council needed to implement a number of strategies, the key one being a rate increase, along with cost control measure.
It has been suggested that Council examine its debt policy, what has Council done to improve aged debt?
Council reviewed its Pensioner Deferral Scheme in 2015 and with this Policy change Council is now able to pursue rates debt from pensioners. This benefits Council with cash receipts earlier but also reduces the impact of interest charges for Pensioners over the longer term.
Council is also very active in terms of recovering debt and takes the necessary legal action if debts remain unpaid.
Will the increase in rates drive some pensioners to have to sell their home or move to a cheaper suburb or smaller premises?
The average increase for a property with current rates of $1000 will be approximately $130 in the first year, this equates to $2.50 per week. Everyone’s situation is different and some may be impacted by this more than others. Council does have a Hardship Policy and can assist anyone having difficulties in paying their rates.
What is Council doing to support the locals, why do they spend so much money on areas for holiday makers?
Tourism brings significant money to the Shoalhaven. As a result, accommodation, retail and entertainment businesses all benefit from tourism as well as any investment Council makes in this area.
Has Council considered an efficiency review by an independent body?
In 2012, Council organised for an efficiency review by Blackadder Associates Pty Ltd, which resulted in an organisational restructure, multiple service reviews with an emphasis on savings and efficiencies and improvements in Customer Service. The review highlighted 8 areas for improvement and resulted in over $6M in savings. Council has also put in place an internal continuous improvement team and are fast tracking a system implementation to achieve further efficiencies.
What plans does Council have to review the services provided to the Community?
Council is continually reviewing services provided to the Community and additional services are continually requested and added to the current portfolio. If a rate increase is not supported, then a further review of current service levels will be required.
What operational efficiencies has Council identified to save money?
Council has undergone a review of structure along with a number of service reviews to ensure the current cost structure within Council is competitive with the market. Council has also put in place a Continuous Improvement team to further support “Lean” principles and the implementation of a new system will bring inherent productivity gains.
How does Council plan to increase value for money on large purchases and capital projects?
Council, under Office of Local Government Tendering Guidelines and as per the Local Government Act, always go to competitive tender for any purchases over $150,000. Council is also part of the Illawarra Pilot Joint Organisation which works on combined tenders for the four Illawarra councils, which further increases the competitiveness.
What is Council going to do to sort out the Collingwood Beach Dune issue?
Councillors will have further discussions with the consultant in an endeavour to find a reasonable position that can be both beneficial to protect the dune system and important vegetation, and also meet the desires of some residents to retain or improve residents views of Jervis Bay from nearby homes and also the shared pathway.
Councillors should be qualified in financial and governance matters to properly manage Council affairs.
Under the Local Government Act 1993 anyone who is entitled to vote at Council elections is eligible to stand for election as a Councillor. Nominees must be at least 18 years old, an Australian Citizen and on the electoral roll for the relevant council area. No further qualifications are required at this point in time.
Where is the evidence that Council will improve its services with a rate increase?
With the proposed rate increase Council will not be improving service levels. The existing service levels will be maintained and the additional funding will be used to increase expenditure on maintenance and renewal of aging infrastructure assets.
Aren’t there any alternatives to a rate increase?
Council has already completed an efficiency review in 2012, and continues to monitor costs closely. Other alternatives considered were increases to user pay fees and charges and reduction in services or service levels. Council already struggles to deliver the level of service to meet community expectations, so service level reductions will be a last resort.
Council needs a full asset maintenance system to allow asset rationalisation, what is Council doing about this?
Why doesn’t Council look at paid parking in over-utilised precincts eg. Hyams Beach?
Does Council coordinate the approval of DA’s with the assessment of rating categories to ensure that all ratepayers are paying the correct rates?
Council does have a process for all relevant areas of Council to be notified when DA’s are approved or occupancy certificates are issued. There has been a full review of properties for the introduction of the State Government’s “Emergency Services Property Levy” and this should assist with any rating category anomalies. Council are also in the process of carrying out a farmland review to ensure correct rates are being levied.
Has Council considered a bed tax on holiday properties?
As part of a KPMG review of rating categories, the different options were considered with regard to short term accommodation. Current legislation does not provide for a different rating structure easily. Shoalhaven City Council allows residents to let their property for 45 days as short term accommodation without development consent. The Local Act defines residential property in Section 516. The relevant part of this section states:
(1) Land is to be categorised as residential if it is a parcel of rateable land valued as one assessment and:
(a) Its dominant use is for residential accommodation (otherwise than a hotel, motel, guest-house, backpacker hostel or nursing home or any other form of residential accommodation.
Given that holiday properties are generally only rented out over the Christmas period or for periods less than 45 days it is difficult to determine these properties are anything other than “predominantly” residential.
Why doesn’t Council reduce out dated services not required by 90% of ratepayers and make these user pays?
Where it is at all possible, a user pay scheme exists, and costs are reflected in the fees and charges. However, the general rating base does cover those services which are of a public nature, where recovery is difficult, the ability to control the access is limited or where a community benefit is an outcome.
Why doesn’t Council review under-utilised community facilities and unwanted undeveloped land and sell them off?
Council staff will continue to propose options for reducing low-utilisation services or rationalising under-utilised assets, but it is up to Council to make these decisions.
Can Council charge more to developers for development in the area?
A number of DA fees are set by Regulation, and those where Council has some flexibility are reviewed annually to achieve optimum revenue.
Why doesn’t Council utilise the cash reserves currently held before increasing rates?
Council does hold a large investment portfolio, however, at any particular time there is only between $5M - $15M which is unrestricted for the day to day running of Council. All other funds are restricted for either internal reasons or legislative requirements. Additionally, a significant proportion of these funds can only be spent on New or Growth Capital works, thereby limiting their use for general asset renewal or other service requirements.
Why does Council do all the Community Consultation and then do what they want anyway?
Council has committed significant resources to community engagement and does welcome input from the community. Council needs to also consider legislative and other factors as well as community feedback in its decision making process. A decision such as an above rate increase will also be reviewed by the Independent Pricing and Regulatory Tribunal (including copies of all public submissions) and they will make the final decision as to whether a rate increase can be introduced.
Why does Council invest in Nowra CBD revitalisation and not in other areas in the Shoalhaven?
Council allocates funds of $500,000 per annum to the Nowra CBD revitalisation committee but this is recovered from the business ratepayers in the Nowra CBD who pay a higher rate than other businesses in the City.
How do my rates compare to other councils?
Shoalhaven City residential rates rank at number 64 in the State and are significantly less than the neighbouring councils and also the Group 5 Councils which Shoalhaven is compared against.
Council has a substantial revenue stream from Caravan Parks in the area, why can’t this income be used?
The income from any assets and facilities managed by council on Crown Lands must be spent only within Crown Lands. Profits from Holiday Haven operations are either invested into capital improvements or are utilised to maintain the vast areas of Crown Lands Council manages such as foreshore reserves.
Why can’t funds be better managed to improve the state of our local roads, not just filling in pot holes?
Council would like to be able to renew roads to meet community expectations but currently there is insufficient funding to carry out the renewal and resealing work required to maintain at the level required. For Example: Council currently has approx. 1,400 km of sealed roads but only has funds available to reseal 35 – 40 km per annum to keep the roads waterproof. The desired maintenance requires that about 100 km of resealing should occur each year. This is one of the reasons for the request to increase rates.
Why did Council purchase the land at Huskisson, to benefit a few, which they said would be developed to then not allow development?
Council has been lobbied for many years by the community to protect this particular parcel of land from development that would obscure the magnificent views of Currumbene Creek and Jervis Bay from the main street of Huskisson. The Council purchased the land following approaches from the land owner.
Why do Council need to use volunteers to clean toilets, why are there not sufficient staff to do this work?
Council does not have sufficient resources to manage all community facilities and appreciates the work that Management Committees and their volunteers to do support their local areas.
Why don’t high tourist areas have toilet facilities, rather than using portable toilets during holiday seasons?
Unfortunately, Council only has a limited budget for new amenities and the replacement of existing older infrastructure. Priority is given to areas where facilities are more critical. The other issue with establishing public amenities on a permanent basis is the ongoing cost of maintenance and cleaning, etc., which council is trying to avoid, particularly where amenities are in close proximity.
Why does it cost so much for waste tipping fees, when other Council areas have either very low or no fees?
The cost to establish and operate waste depots is substantial and these costs need to be recovered to continue to operate these facilities. Council does offer two free vouchers per year to assist households with rubbish disposal. The tipping fee is to ensure that a user pay scheme is in place, so that the general ratepayer does not pay for what clearly is for an individual’s benefit.
Why aren’t the roadsides cleared of rubbish in my local area?
If a significant amount of rubbish is identified in road side areas, or Council is notified, the maintenance department is available to respond. Council also co-ordinates major road side clean ups with corrective services. The street sweeper attends CBD areas regularly and aims to visit each street with kerb at least once a year. Streets subject to more litter and debris are serviced more frequently.
Why were there no Christmas decorations in Nowra CBD this year?
The CBD Revitalisation Committee decided that rather than allocate funding to Christmas decorations they would encourage local shopkeepers to decorate their shops and investigate the placement of permanent festive lighting within Junction Street. Unfortunately the finalisation of the lighting design and procurement had not been resolved within sufficient time to have the lighting in place for the 2016 Christmas period.
What legal right does Council have to charge rates and taxes without first contacting landowners?
Under Section 495 of the Local Government Act (1993):
495 Making and levying of special rates
(1) A council may make a special rate for or towards meeting the cost of any works, services, facilities or activities provided or undertaken, or proposed to be provided or undertaken, by the council within the whole or any part of the council’s area, other than domestic waste management services.
(2) The special rate is to be levied on such rateable land in the council’s area as, in the council’s opinion:
(a) benefits or will benefit from the works, services, facilities or activities, or
(b) contributes or will contribute to the need for the works, services, facilities or activities, or
(c) has or will have access to the works, services, facilities or activities.
Council is required under the Office of Local Government Guidelines to seek community feedback in relation to any proposed special rates and the results of any community consultation will be added to the submission to the Independent Pricing and Regulatory Tribunal.
We understand that the next round of NSW Valuation General land revaluations will significantly increase rateable land values, which will automatically deliver a great rates take for Council, without the need for a rate increase?
As Council’s total rates income can only increase by the IPART approved percentage, the revaluation of land in the Council area will not have any impact on the total revenue Council will receive. However, any changes to property values within the Council area may result in increases or decreases for individual property owners.
Can the special rate be itemised on the rates notice?
Given that the Special Rate will become part of the General Rate income it will be included in the current rates charged. However, at each quarterly review of Council’s accounts a reconciliation will be provided of what the additional rates raised are being spent on.
What is the rate peg amount for next year?
IPART has released the rate peg for 2017/18 of 1.5%.
Why is it necessary to fully compound the Special Rate Variation, why not just implement for one year?
Council has spread the proposed rates over a number of different years to make it more affordable for ratepayers and to not have a significant spike in any one year. If Council were to avoid compounding of the rate increase, they would need to implement a 26% increase in the one year.
Why is there not an option for no rate increase on the survey?
If there was an option for no increase, Council would not need to do the survey. The survey is to determine which is the most supported option of those suggested by Council, as an increase is required to support future sustainability of council.
Why doesn’t Council only do work within the revenue raised?
Council does operate within the current revenue raised, resulting in close to breakeven from a cash perspective. The issue is that Council does not have the funds to fully maintain and renew existing assets, and as they age, these requirements grow and each year further deterioration is experienced.
Why can’t council reduce the number of swimming pools and libraries to help fund other works?
Council staff will continue to propose options for reducing low utilisation services or rationalising under-utilised assets, but it is up to Council to make these decisions.
Why aren’t there more footpaths in Nowra?
Currently there is approximately $490k in the budget for new and replacement paths within the Local Government area. Council would like to be able to build new footpaths to meet community expectations but currently there is insufficient funding to carry out this work, at this stage Council can only prioritise renewal and maintenance of existing paths in most instances. This is one of the reasons for the request to increase rates.
Why are dogs allowed to soil our beaches and owners take no responsibility for this, where are the rangers?
The adopted policy states that dogs can be off leash between certain times only, additional random Ranger Patrols have been organised over the next few weeks to assist with any issues being encountered.
Why is the Entertainment Centre not running at breakeven or a profit making enterprise, it should be more effectively managed or sold off to private enterprise?
The CCTV cameras placed throughout the region are generally for the protection of the business community, therefore this expense should be borne by that sector?
The CCTB cameras do assist businesses to some extent by providing greater security, but this also benefits the wider community, an assists with the reduction in crime in our business areas.
If the Council operated caravan parks are an expense to the ratepayer then they should be sold or leased to the private sector.
The Council caravan parks do operate at a surplus and this surplus is utilised to fund other Crown Reserves in the Local Government Area, the net result of Crown Reserve management is generally a cost to Council, but if Council handed back the Caravan parks there would be a net decrease in profit available for the Crown assets Council manage.
Why can’t Council function as a Board of Directors and remove all councillor involvement?
Under Section 222 of the Local Government Act, The elected representatives, called “councillors”, comprise the governing body of the council, so unless an administrator is appointed Council will continue to operate under this governing body.
Why doesn’t Council establish a Citizen’s Jury to have input into how their rates are spent?
Council tried a number of years ago to establish a Community Panel to review the rating structure but this had to be cancelled due to lack of interest from the community. The survey currently out with the community is asking for feedback with regards to current services and where changes can be made.
Amalgamation of Councils should result in less staff costs, why doesn’t this occur?
Council staff were supportive of an amalgamation with Kiama Council, however the community did not support such a move in either Council and given we were deemed Fit for the Future the requirement to amalgamate was taken off the table.
My area receives no water or sewerage service for the rates I pay, no pathways and very limited mobile services, and limited hours of use of the transfer station, so why are my rates so high.
Rates are charged based on the unimproved land value of properties within the Local Government area, therefore lack of certain services will reduce these values and as a result you will pay less in rates than an area that may have better access to these facilities. The rates levied do not cover water and sewerage services, they are charged by Shoalhaven water, so have no impact on the rates charged.
Why are Council killing local tourism?
The Shoalhaven is the No. 1 Tourist Destination in the State of New South Wales and Council is committed to ensuring that funds are available to support Tourism in the area, with many new initiatives having been implemented in the last few years.
Why are tourism initiatives being replaced by income depleting initiatives?
Council cannot be held responsible for changes to private business operations within the Shoalhaven. Council does significant work within the level of funding available to promote the area and therefore allow private operators to benefit from this advertising.
Why can’t council live within its means?
Council continues to monitor its finances to ensure that it does manage within the cash and reserves available. Loan funding has been reduced over recent years, with further rigour around when and for what purpose loan funding will be utilised. The problem Council has is the infrastructure is aging and needs more funds than currently available to bring it to the level of community expectations.
Why are the senior staff paid such high wages?
Senior staff make a major commitment from a professional and personal perspective towards the operations of Council and are remunerated accordingly.