An Ordinary Meeting of the Bega Valley Shire Council will be held at Council Chambers, Biamanga Room Bega Valley Commemorative Civic Centre Bega on Wednesday, 18 May 2022 commencing at 2:00pm to consider and resolve on the matters set out in the attached Agenda.
10.5 Rate peg adjustment - Resolution clarification........................................................................... 4
Staff Reports – Business and Governance
18 May 2022
10.5 Rate peg adjustment - Resolution clarification..................................................... 4
Council 18 May 2022
IPART require further detail in Council’s resolution from the 16 March Council meeting regarding the ‘Additional Special Variation’ application for financial year 2023.
Director Business & Governance
That Council maintain resolution 31/22 from the 16 March 2022 Council meeting and resolve that ‘council has considered the impact on ratepayers and the community in 2022-23 and, if permanent, in future years if the special variation is approved, and considers that it is reasonable.’
The Office of Local Government and IPART notified all Councils of the ‘Additional Special Variation’ opportunity on 7 March 2022. The first iteration of guidelines provided to Councils were subsequently provided to staff who immediately pulled a report together for resolution at the 16 March 2022 Council meeting. IPART issued updated guidelines on 6 April 2022 after Council’s resolution. Council’s application was submitted on 28 April2022, whilst our regular annual budget planning and long term financial planning was taking place concurrently.
IPART have subsequently corresponded with Council to advise that our resolution and Council report does not verbatim match their criteria- item d. IPART are requesting that we provide wording in our resolution that clearly states ‘that the Council has considered the impact on ratepayers and the community in the 2022-23 and, if permanent, in future years if the special variation is approved and considers that it is reasonable.’ IPART have advised that should an updated resolution not be provided by 25 May 2022 then IPART will not approve our application.
For reference there are 86 out of 128 Councils that have applied for the Additional Special Variation, clearly evidencing the need across the Local Government sector for this increase in rates above the rate peg of 0.7%.
Council has advocated to IPART and are awaiting their response. This report is provided to Council should our advocacy with IPART not be supported and we are required by 25 May 2022 to provide an updated resolution.
Part of the advocacy to IPART in support of the fact that Council has considered the affordability of the 2.5% rate increases on our community included the following:
- The initial guidelines advised "This one-off ASV round is for councils that can demonstrate the need for a special variation to meet the obligations they set for 2022-23 in their 2021-22 Integrated Planning and Reporting (IP&R) documentation." As part of the community engagement for the adoption of our 2021-22 IPR documents where we had modelled a 2.5% rate peg increase, we had at that time considered the impact on ratepayers of affordability for that level of increase. The increase of 2.5% was considered reasonable and in line with previous years increases and assumptions for what future years increases would be. No-one was predicting a rate peg of 0.7%
- Criteria d. is typically connected to ratepayer affordability in a standard SRV process where an increase in rates above the rate peg is usually proposed. It is important in this instance that IPART also consider the other 'impact' on ratepayers and community of reduced income through a lower than assumed rate peg which would mean a need to reduce service levels to the community. The ASV is not about going above and beyond a moderate and assumed rate peg- it is about catching up the gap this year and cumulatively for future years when the rate peg this year was so very low.
The ASV guidelines outline the 'ASV application process will be a simpler more targeted application process'. Staff have advocated that requesting a further resolution from Bega Valley to explicitly meet the wording of criteria d. is not making this a simple process. Council’s resolution and report wording in March after the first ASV guidelines had just been released may not verbatim meet what the guidelines had advised, however the overall intent is evident.
Council can opt to not support this recommendation and risk losing the opportunity for the ‘Additional Special Variation’ to be approved.
Community and Stakeholder Engagement
Feedback from the community on the Additional Special Variation is currently being accepted through the IPART website.
Financial and Resource Considerations
The BVSC Long Term Financial Plan currently forecasts a rate peg of 2.5% for FY2022-23 estimated to generate additional revenue of $509,000. A 0.7% rate peg will only generate $187,500. Therefore, the projected revenue in FY2023 budget will be reduced by $321,500.
Applying for the ASV will ensure Council can secure the additional revenue included in our financial year 2023 budget and LTFP forecast. It is important to note that Council continues to face other financial constraints including increases in the Emergency Services Levy, significant increases in insurance, fuel, electricity and materials costs along with reduced fees and charges revenue through Covid impacts. Should the ASV determination be successful the inclusion of this revenue is projected to still result in a deficit operating position.Legal /Policy
The ASV process would be administered by IPART under section 508(2) of the Local Government Act 1993 (the Act).
Impacts on Strategic/Operational/Asset Management Plan/Risk
Community Strategic Plan 2040
OUTCOME 6: Strong Consultative Leadership
GOAL 12: We are financially sustainable, and services and facilities meet community need
Environment and Climate Change
The recommendation has no direct impact on environment and climate change.
The Office of Local Government and IPART have acknowledged that, due to the delayed council elections and the later than normal determination of the 2022-23 rate peg (December 2021) at a lower rate than councils had forecast, many Councils would not have sufficient funds to pay for required infrastructure and services. As outlined earlier in this report this would have significant immediate and long-term financial and economic impacts for the Bega Valley community.
The most significant risk in not supporting the recommendation provided in this report is Council’s financial sustainability and capacity to deliver services to our community. Ongoing cost escalations outside of our control and reduced revenue opportunities through an unrealistic rate peg of 0.7% significantly impacts the annual and long-term operating position of Council.
Social / Cultural
There are no immediate social and cultural impacts as a result of the recommendation presented in this report.