New South Wales has launched its long-delayed review of the local government rating system.

The review kicks off in earnest in Sydney this week with a public hearing before IPART Independent Pricing and Regulatory Tribunal.

The review has been set up to design a new, fairer rating system, and is due to report back in December this year.

“The local government sector has long argued that a more effective rating system is key to financial sustainability, rather than forced amalgamations which merely compound systemic problems,” Local Government NSW President Keith Rhoades said.

“Forced amalgamation is not, and has never been, the answer to better or stronger local government.”

Cr Rhoades said the core financial problem for councils came from the combination of cost-shifting and rate-pegging; an inefficient rating system full of archaic exemptions; and a shrinking share of Federal funding – a cluster of the worst kind which squeezed council finances from all directions.

“Cost shifting – the process by which local government is forced to pick up the tab for services passed onto them primarily by the State Government – wipes more than $600 million off local government revenue every year,” he said.

“At the same time rate-pegging means that revenue goes down in real terms, so councils are continuously being asked to do more and more with less.

“The only reason the problem isn’t worse is because the vast majority of councils work very hard each and every year to increase productivity and reduce costs, and the concern is that this must eventually impact service provision and jobs.”

Cr Rhoades says discussions on rates and council revenue are always difficult because governments of all persuasions assume the solutions are politically unpalatable.

He pointed to the Baird Government’s own terms of reference as a clear illustration of how political sensitivities can work against fiscal sustainability and meaningful reform.

“The Terms of Reference for this inquiry direct IPART to recommend the best way to freeze rate paths for four years,” Cr Rhoades said.

“It’s understandable that the State Government wants to be seen as the good guys in this exercise - but the reality is that a four-year rate path freeze for amalgamating councils will only exacerbate the very real problems the review is supposed to help fix.

“We’re undermining the chance of a comprehensive solution before we start.”

Cr Rhoades said at least IPART offered an opportunity to move beyond the heated hyperbole of politics or shock-horror headlines about rate rises.

“It’s easy to label councils greedy or lazy in a 3-second sound-bite, but that sort of superficial approach achieves nothing,” he said.

“It certainly doesn’t deliver the outcome we all want, which is a financially sustainable local government system able to deliver the right level of services to residents and ratepayers.

“I am confident that IPART will approach this inquiry in an objective and equitable manner, and while the Tribunal may have been hamstrung by its Term of Reference, I look forward to their analysis and recommendations.”