Victorian council cost pressures outstripping rates
Draft local government budget data collated annually by the Municipal Association of Victoria (MAV) confirms that Victorian council rates are budgeted to rise an average of 5.9 per cent or $82 this year.
Cr Bill McArthur, MAV President said that in response to cost of living pressures, local government rates would rise less than councils‟ combined costs of doing business, the payment of State levies and the superannuation shortfall.
“The Local Government Cost Index, released last month, forecast that it will cost councils an average 3.6 per cent more to deliver the same services as last year. This CPI-equivalent measures price movements in councils construction, material and wage costs rather than household goods and services.
“Councils must also pay a $71 million shortfall to the closed Defined Benefits superannuation scheme, which represented more than two per cent of total local government rate revenue for the coming year.
“In a spectacular show of double standards, Federal and State Government defined benefit schemes had accumulated unfunded liabilities worth billions of dollars following the market downturn between 2008 and 2010.
“Unbeknown to ratepayers, councils must also pass on more than $63 million in State landfill and fire services levies, or 1.8 per cent of total rate revenue collected, to fund State agencies and programs. This was taxation by stealth, and people deserved to know what portion of rates don‟t stay in their municipality.
“Despite these cost pressures, councils continued to boost spending to maintain and renew $55 billion of ageing community assets to ensure future generations won‟t be burdened with prohibitive asset replacement costs.
“While the annual infrastructure renewal gap had shrunk from $310 million to $100 million in the past five years, the gap between government grants and delivery costs for vital community services continued to grow,” he said.
Councils have increasingly become the "funder of last resort‟ to redress an ongoing decline in Commonwealth and Victorian Government contributions to ensure programs such as home and community care, kindergartens, public libraries, and school crossings continued to meet community expectations, according to Cr McArthur.
He said that core financial assistance provided through Commonwealth tax distribution to local government had halved from 1.2 per cent of federal revenue in 1993 to just 0.62 per cent in 2011.
“In addition, the continued failure of other levels of government to provide adequate funding to match service delivery costs meant that councils were increasingly reliant on ratepayer revenue to make up the shortfalls.
“The cumulative impacts of under-funding and the erosion of financial assistance left councils in the untenable position of choosing between unpopular rate rises or explaining to frustrated communities why demand for kinder places, meals on wheels and other important community programs could not be met.
“It‟s a double-edge sword. Achieving a balance of affordable rates without cutting services was an ongoing challenge as rising living costs placed a strain on household budgets and increased demand for council services.
“Pensioners and other residents facing financial hardship are urged to contact their council to discuss their options. Please speak with your council if you need assistance,” he said.
Rates data for 71 of 79 Victoria councils is available at: www.mav.asn.au/finance/rates#resources