The Municipal Association of Victoria (MVA) has challenged a proposal by Ratepayers Victoria that council rates should be controlled by the State Government.

 

The MVA claims that capping of council rates had in the past lead to a deterioration of local assets and reduced community services.

 

“Capping of council rates - as occurred in the 1990s, deferred the maintenance of $55 billion worth of ageing community infrastructure. Restricting councils' main revenue source left assets under-repaired and eventually proved more costly for ratepayers. Full infrastructure replacement was needed sooner and cost far more than cyclical asset maintenance.

 

“Acknowledging this, the Kennett Government initiated a major review of council infrastructure in 1997 and Victoria is the only state where local government is lowering its identified infrastructure renewal backlog. Rate increases help to cover council costs for repairing and upgrading our local roads, drains, swimming pools, town halls, libraries, kindergartens, parks, street lights, and other facilities. These costs are not linked to inflation.

 

“Annual council budgets also take account of higher costs to deliver over 100 community services. The Local Government Cost Index – the yearly cost to preserve the status quo - is around four per cent before increased services and infrastructure needed for our growing population. While CPI measures price movements in a standard basket of household goods and services, a ‘basket’ of common council services is mostly affected by construction, material and wage costs.

 

“Councils have no immunity to price rises and have increasingly become the ‘funder of last resort’ as declining Commonwealth and Victorian Government funding fails to meet the cost of programs such as home and community care, kindergartens, public libraries, and school crossings.

 

“In the case of home and community care, funding for more than 200,000 older Victorians is tied to CPI but the real costs far exceed this. So councils, as the largest public sector provider, were left with two choices: limit services to the funding received (meaning many eligible people would now miss out) or fund the difference from council rates.

 

“Councils chose not to abandon the many elderly people who need care and assistance, including meals, to remain in their own homes. So through rate increases, councils now contribute $100 million or three per cent of rates each year. This is a third of the total cost for a service that should be funded 60/40 by federal and state governments.

 

“This is not an isolated example and far too often there’s buck passing and blame shifting between governments, with councils and unwitting ratepayers left to pick up the tab.

 

“Councils are also used as a collection agency for state levies. Last year, municipalities passed on more than $63 million in State landfill and fire service levies, or 1.8 per cent of their total rates, to fund State agencies and programs.

 

“But the rates pain could worsen if the State goes through with its proposed property-based fire levy to be collected by councils. It will hike municipal rates by an average 19 per cent in 2013, but as much as 30 per cent in some areas. And conveniently for Government, councils will be left explaining the new State levy and be the unfair target for community hostility.

 

“Last year several rural councils tested the waters by asking ratepayers which services or assets should be reduced to keep rates down. Generally people were unable to pinpoint service cuts. This is unsurprising given that communities access more, not less free and low-cost council services when they’re facing higher living costs.

 

“Despite this, councils must demonstrate that they’re operating as efficiently as possible. The community expects no less. It's also vital that they consider cost of living pressures when budgets are set. Options are also available for people experiencing genuine financial hardship, which can be agreed on a case by case basis with your local council.

 

“But councils must retain the autonomy to set rates at a level necessary for their local circumstances, to continue closing their infrastructure renewal gap, and to meet growing demand for essential community services.

 

“Rate capping is a poor solution to the ongoing challenge of balancing affordable rates with responsible financial decisions that won't reduce service levels or defer costs for future ratepayers.

Councils only collect 3.5 per cent of all taxes, but anyone concerned about rate increases should get involved - understand what councils do and what drives their costs. Council budget processes will commence shortly and there's opportunity for ratepayers to articulate local priorities for the coming year.”