Federation Council - Fact Sheet: Proposed Permanent Special Rate Variation
Federation Council plans to apply to the Independent Pricing and Regulatory Tribunal (IPART) for a permanent Special Rate Variation (SRV) for the 2025-26 year. A special rate variation allows Council to increase total rates by more than the annual IPART rate cap. Ratepayers can find more information about the SRV process at: https://www.ipart.nsw.gov.au/Home/Industries/Local-Government/Special-Variations
The purpose of the SRV is to continue the journey to improved financial sustainability, subsequent to the 2016 amalgamation, with a view to mitigating infrastructure maintenance shortfalls and maintaining other services wherever possible.
The cumulative impact of the Special Rate Variation is substantial and sits at 69.94 percent over two years, including the assumed rate peg. It should be noted that this figure also reflects the necessity of converting the current temporary SRV (which otherwise expires after the 2024-25 financial year) into a permanent one. This proposal that we now make will be a permanent increase to the rate base.
It is important to be clear that an SRV is about the total rates that can be levied by a local government – how precisely this is distributed between categories is a matter entirely up to the elected Councillors each year under the Local Government Act (1993, NSW). Indeed, IPART (2023, p. 5) generally makes clear when issuing its decisions that ‘the council retains the discretion to revise how it raises its general income across rating categories’. It is not possible to know with any certainty what the future decisions regarding distribution across rating categories will be. This will be entirely up to the Council elected in September 2024. Moreover, the precise amount that individual ratepayers will be levied depends on specific land valuations, as well as adjustments such as the pensioner discount.
Prior to determining the size of the SRV which Council intends to request of IPART, Federation Council considered other options, as outlined in the Operational Plan. For example, during preparation for the 2024/25 budget, Council did significant work to improve efficiency and is on target to realise considerable savings. These savings will continue in the later years and have been imputed into the Long-Term Financial Plan. Council will continue to work through the lengthy list of recommendations (including efficiency measures) in the independent Drew, Miyazaki, and Ferreira Report, and continue to advocate strongly for both a fairer distribution of grants as well as compensation.
In early 2024 Council had Professor Drew, Professor Miyazaki, and Professor Ferreira conduct additional robust empirical work required for the submission of an SRV. They demonstrated beyond reasonable doubt that the community (on-the-whole) has adequate capacity, that Council efficiency is improving and near the efficient frontier according to free disposability hull (FDH) envelopment analysis, but that Council remains unsustainable and has no surplus liability capacity.
The need for an SRV responds to a structural imbalance in the operating budget that earlier work has demonstrated beyond reasonable doubt to have existed for decades. Quite simply, Council’s required operating expenditure has well-exceeded its revenue over many years.
If we don’t get the SRV approved then to continue our journey towards sustainability we would have to cut capital expenditure by approximately $6 million, or 24% of cash operating expenditure per year. This would involve Council abandoning its commitments under the Strategic Asset Management Plan, and the already sizeable implicit liabilities arising from deferred maintenance of roads and hard infrastructure assets over many years will grow substantially. We caution that the longer asset maintenance and renewal is delayed, the greater the ultimate costs to bring them up to a satisfactory standard. It should be noted that we would endeavour to maintain other council services, but would not be able to assure their continuation. We believe that the community would not find these measures acceptable.
1. Under the Office of Local Government (OLG) rules this figure is subject to OLG confirmation, as well as the final production of audited financial statements (which we won’t receive until around November 2024). It is likely that the headline rate will change marginally towards the end of the calendar year. However, the (effective) proposed increases for each year will be as stated.
2. The figure is based on a scenario whereby the extant temporary SRV was allowed to expire and Council were forced to return to the permissible income that existed prior to the June 2023 IPART decision. It is reasonable to also consider the impact of the SRV from 2024-25 levels of taxation (as if the temporary SRV were not allowed to expire) and later in this Fact Sheet we will provide this data for the sake of comprehensiveness.
3. This means that after 2026-27 rates will not go down again, but instead be increased by the rate peg set by IPART which Councils are advised by the Office of Local Government to assume to be 2.5% per annum.
Residents are referred to Council’s Delivery Programs and other planning documents (including addendums), which will be available on the Federation Council website.
Council is very conscious of the hardship that the Special Rate Variation might cause and has recently reviewed its Hardship Policy, on which it invites the community to provide feedback. The Hardship Policy is available at https:// www.federationcouncil.nsw.gov.au/Living-Here/Rates/Debt-Management-and-Hardship or at either Council office. We want to hear from the community and will incorporate your feedback.
Accordingly, we have arranged for a number of different kinds of community engagement opportunities: 1. The community is requested to fill in the attached survey and return it to Council in person or by mail to P.O. Box 77, Corowa, NSW 2646. Please note that we have not provided replied paid envelopes, in order that we might preserve scarce funds. Other options are to drop the survey into any council office, or complete the online version of this survey (scan the QR code below:).
2. Council has already established website content specific to the SRV project and posted many videos to its website to explain matters and will continue to add more.
3. Council has already conducted pre-consultation with five community groups across the Federation region and adjusted our proposal accordingly.
4. Council will hold four listening posts, six in-person community meetings, as well as one online community meeting, to present the case for an SRV and receive community feedback:
Council will conduct four listening posts at the following sites and encourages residents to attend:
• Listening Post: Monday, 22nd of July 2024 – Corowa Memorial Arcade: 11am – 1pm.
• Listening Post: Tuesday, 23rd of July 2024 – Mulwala Bakery: 11am – 1pm.
• Listening Post: Wednesday, 24th of July 2024 – Urana Council Chambers: 11am – 1pm.
• Listening Post: Thursday, 25th of July 2024 - Howlong Bakery: 11am – 1pm.
Council will conduct six in person community meetings, as well as one online community meeting at the following sites and encourages residents to attend:
• Community Meeting: Monday, 29th of July 2024 – Oaklands RSL, Bowling and Community Club: 9am – 11am.
• Community Meeting: Monday, 29th of July 2024 – Morundah Palladium Theatre: 12.30pm –2.30pm.
• Community Meeting: Monday, 29th of July 2024 – Urana Bowling Club: 6pm – 8pm.
• Community Meeting: Tuesday, 30th of July 2024 – Club Mulwala: 10am – 12 noon.
• Community Meeting: Tuesday, 30th of July 2024 – Corowa Golf Club: 6pm – 8pm.
• Community Meeting: Wednesday, 31st of July 2024 – Howlong Football Club ‘Mighty Murray Room’: 10am – 12 noon.
• Community Meeting ‘Online’: Thursday, 1st of August 2024 – Council Website www.federationcouncil.nsw.gov.au for meeting link: 6pm – 8pm.
How will the SRV impact on Rates compared to no SRV?
Table 1 (below) outlines the annual changes for the total rate revenue, in both percentage and dollar terms (note figures are rounded to the nearest dollar or two decimal places for percentages). Figure 1 that follows sets out Council estimates of the likely changes to average rates depending on the decisions which will be made after the election by future Councillors. The data is presented as suggested by IPART, according to a scenario whereby the temporary SRV was allowed to expire without replacement (which would see rates decrease in nominal terms).
Table 1. Impact on Total Rate Revenue of an s508A Permanent Special Rate Variation of 52.01% followed by 11.80% (assumes temporary SRV was allowed to expire and is subject to IPART approval)
Baseline Scenario
Total Notional Rates Income under assumed rate peg (no SRV)
Proposed SRV Total Notional Rate Income after proposed SRV
Cumulative impact of SRV above Base Year levels
Difference between SRV and rate peg only scenarios
Figure 1. Estimate of Impact on Average Rates for Each Category of an s508A Permanent Special Rate Variation of 52.01% followed by 11.80% (assumes temporary SRV was allowed to expire and is subject to decisions of both IPART and future Councillors).
How will the SRV impact on Rates compared to 2024/25?
In our pre-consultation sessions with community groups, conducted during May 2024, several participants stated that they felt it more reasonable to express the proposed SRV in terms of the change from levels paid during the Temporary SRV approved by IPART in June 2023.
To respond to this feedback, and provide comprehensive information to the community, Council has reproduced the aforementioned table and graphs to reflect an alternate way of looking at matters whereby increases are conceived of as additional taxation on top of the temporary SRV levels in place during 2024/25. We advise that this way of looking at matters may be inconsistent with some readings of the official guidelines (this is why we have clearly stated the headline SRV increase as 69.94%):
Table 2. Impact on Total Rate Revenue of an s508A Permanent Special Rate Variation converting the existing Temporary SRV to Permanent plus an additional 19% in Year 1 followed by 11.80% in Year 2
Scenario
Notional Rates Income under assumed rate peg (no proposed SRV)
Proposed SRV Total Notional Rate Income after proposed SRV
Cumulative impact of SRV above Base Year levels $2,457,316 $4,273,402
Difference between SRV and rate peg only scenarios $4,809,904 $6,149,860
Figure 2. Estimate of Impact on Average Rates for Each Category of an s508A Permanent Special Rate Variation converting the existing Temporary SRV to Permanent plus an additional 19% in Year 1 followed by 11.80% in Year 2 (is subject to future decisions of both IPART and a future Council).
