Melton council has slammed a draft report by the Essential Services Commission into municipal rate capping, stating “inadequate” detail has been provided and some matters “have not been fully dealt with”.
The draft report proposes to cap rates at the Consumer Price Index (CPI) and Wage Price Index (WPI), but Melton council chief executive Kel Tori said the report failed to acknowledge the broader pressures faced by councils.
“Council officers believe that it’s better than a straight CPI cap in that it recognises the significant component of council expenditure that is wage costs,” Mr Tori said.
“But it fails to acknowledge the cost pressures from contractors and other service providers, which council must engage to deliver the 100-plus services it provides to the community.”
If the draft report is approved, rate increases will be capped at 3.05 per cent in the 2016-17 financial year and decline thereafter – 2.85 per cent in 2017-18, and 2.8 per cent in 2018-19.
“We are not proposing to adjust the cap to reflect other cost pressures faced by local councils, such as the costs of materials or construction,” the ESC report states.
“Similarly, in order to keep the cap as simple as possible, we have not attempted to adjust the cap to account for structural differences between councils, for cost pressures beyond council’s control, and infrastructure renewal.”
Councils that need to increase rates above the CPI plus WPI formula will need to justify a “variation process” to the ESC.
“We are … concerned at the impact the implied efficiency factor will have on council in the longer term, in its stewardship responsibilities for infrastructure assets,” Mr Tori said.
“[With a rate cap] at 3.05 per cent, the loss in revenue in year one will be about $1.8 million; in year two about $3.8 million, and in year three, about $6 million … so, across three years, a cumulative impact of $11.6 million.”
Melton council will consider the draft report at its meeting tonight. Moorabool council chief executive Rob Croxford said officers were still analysing the ESC report.
