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Rate Capping

The LGA is strongly opposed to rate-capping and forced amalgamations. We are focused on intelligent local government reforms such as boundary reform, benchmarking and shared services, which will deliver efficiencies and better outcomes for communities.

This page provides an overview of the LGA’s response to the rate-capping policy being proposed by the State’s Opposition in advance of the State election in March 2018.

It provides details of our key advocacy messages, evidence and research, and LGA submissions.

For further details of council rates in South Australia, including fact sheets on the range of services funded by council rates, property valuations and rebates please click here: LGA Council Rates.

The LGA has also prepared an information pack, including Frequently Asked Questions, to assist councils and their communities to understand the real impact of rate capping on their communities. Click here to download the: Rate Capping Information Pack for Elected Members(548 kb)

Background

Councils in South Australia are legally already required to:

  • continually strive to improve the efficiency and effectiveness of their services; and
  • consult with their community on the setting strategic priorities, annual business plans, and rates.

The Liberal Party’s SA Branch has stated that if elected in March 2018, the Marshall Liberal Government will apply a rate-capping policy and allow an independent regulator to set the rate rise councils are allowed to apply based on the cost of services councils provide.

Rate-capping is an externally imposed maximum percentage council rates revenue may increase from one financial year to the next. In this form, it has been in place since 1977 in New South Wales and was re-introduced in Victoria in 2016.

Local government is the level of government closest to the community. It is also the most trusted level of government, when compared to the State and Federal governments. The LGA welcomes discussion on setting of rates, as it focusses attention on why and how council rates are raised. However, the local government sector is firmly opposed to proposals under which unelected bureaucrats would effectively take over the role of elected members chosen by communities to represent their interests.

The LGA agrees that it is essential for councils to engage with communities. Councils already work with their communities to strike a balance between expenditure, revenue and the types of services expected by the local community.

An externally imposed rate cap will reduce a council’s capacity to get this balance right.  Rate-capping will introduce an expensive bureaucratic process that will restrict vital service delivery to the community or, if services are maintained, postpone the financial burden of today’s services and infrastructure onto future generations.

Should rate capping be introduced, it would impose an extra layer of bureaucracy and two extra decision makers – the Essential Services Commission of SA (ESCOSA) and the Minister for Local Government on top of what is already a legislative requirement for councils to consult with their communities.  However, unlike the councils, neither ESCOSA nor the Minister would be directly accountable to the affected ratepayers.

Only two states in Australia have rate-capping; New South Wales and Victoria.  There is considerable evidence in NSW, where rate capping has been in place since 1977, to show that rate capping has resulted in loss of council services, in council amalgamations, in significantly higher user fees and charges, and in decaying infrastructure as maintenance levels decline and costs are shifted onto future generations.

In 2016, rate-capping was introduced in Victoria where evidence is already mounting that the process is cumbersome and costly while diverting resources away from community services.

LGA Policy Position

South Australian councils do not support rate capping for many reasons. Ultimately, it is a populist policy that takes decision making powers away from local communities and their elected members and has not saved communities money in states where it has been introduced.

The LGA’s adopted policies are set out in the LGA Policy Manual.  Our policies relating to self-raised revenue state that:

6.4.1 Councils must have autonomy and flexibility in determining locally raised revenue while observing principles of equity and accountability and legislative constrains;

6.4.2 Other spheres of government must not enter normal revenue fields of Local Government in competition with and to the detriment of Local Government; and

6.4.3 State governments must not interfere with the autonomy of local government by imposing limits on rating.

The LGA Ordinary General Meeting on 14 April 2016 unanimously resolved that the OGM:

  1. reaffirms the view that decisions concerning council rates are better informed, and the impacts better understood,      when made by the respective councils in consultation with their communities;
  2. rejects the State Opposition’s policy on rate capping; and
  3. endorses the LGA President and CEO to continue to work with all Members of Parliament to ensure rate capping is not imposed on South Australian councils.

Local Government Rates Awareness Campaign

The LGA Board has endorsed a public campaign that responds to the threat of rate-capping and builds the awareness of local government by:

  • educating the community about the value of councils,
  • empowering elected members as advocates; and
  • engaging council staff, volunteers and community groups on behalf of the sector.

As part of the LGA campaign councils have been asked by the President to consider passing a motion that:

  • Notes the unanimous decision from SA councils at the 2016 LGA Ordinary General Meeting to reject rate capping;
  • Opposes rate capping in any form;
  • Agrees to support and participate in the LGA’s public awareness campaign including placing material in quarterly rates notices; and
  • Notes the LGA will continue to work with all Members of Parliament and political parties to ensure rate capping is not imposed on South Australian communities.

Councils can find further detail and useful resources for the campaign here: LG Awareness Campaign Value of Council Services Artwork

Summary of LGA's key advocacy messages in response to rate capping

  • Rate-capping centralises decision making about council rate revenue and shifts accountability from community representatives to an unelected bureaucracy. 
  • Rate-capping interstate has resulted in more red tape and bureaucracy and has increased administration costs for councils and state government, diverting funds at away from core services. 
  • The role of councils to work with communities to develop an annual business plan and budget would be duplicated at the state level, where a rate cap will be determined with no community input. 
  • Rate capping does nothing to address the shifting of costs and responsibilities between state and local government and the pressure this creates on local government rates.
  • Rate capping shifts costs to future generations as councils will not be able to raise the revenue required for the maintenance and renewal of assets forecast in long term management plans.

LGA Submissions

On 15 May 2015, the South Australian Parliament’s Economic and Finance Committee resolved to undertake an inquiry into local government rate capping policies.  Following consultation with member councils, the LGA provided a submission the Committee on behalf of the local government sector.  In addition to this submission, the LGA also appeared before the Committee to provide evidence on the impacts of rate capping on local communities. 

For a copy of the Economic and Finance Committee's terms of reference please click here: Local Government Rate Capping Inquiry - Call for Submissions(97 kb)

For a copy of the Economic and Finance Committee's Final Report, including a copy of the Minority Report, please click here: Economic and Finance Committee - Final Report(1498 kb)

For a copy of the LGA submission to the Committee please click here: Economic and Finance Committee Inquiry LGA Submission(314 kb)

Further information on the Committee, including all submissions provided, may be found on the Committee's website: https://www.parliament.sa.gov.au/Committees/Pages/Committees.aspx?CTId=5&CId=173 

LGA Research (ongoing)

Parliament of Victoria's Inquiry into Rate Capping Policy

On behalf of the Parliament of Victoria, the Environment and Planning Committee of the Legislative Council is undertaking an Inquiry into the Rate Capping Policy. The Committee’s website has details of the inquiry, including terms of reference, submissions, hearings and transcripts and Committee reports.  

The Committee comprises members from Government (Labor) and Opposition (Coalition and Greens). It is required to provide a report to Parliament every six months, which are available in full here.

The LGA’s summaries of the Committee’s reports are provided below:

LGA research summary – Environment and Planning Committee’s First report into rate capping policy, December 2015

  • The Committee’s first report was prepared based on evidence gathered through submissions and hearings in 2015, before the cap applied in July 2016.
  • Quote from Chair’s forward: “There are real risks to the critical services and infrastructure provided by councils around the state as rate capping is implemented. There are also risks that council debt along with other charges, fees and levies, will be increased to compensate for rates being capped at the rate of inflation.” 

LGA research summary – Environment and Planning Committee’s Second report into rate capping policy, June 2016 [to follow]

LGA research summary – Environment and Planning Committee’s Third report into rate capping policy, December 2016

  • The Committee’s third report was prepared based on evidence gathered through submissions and hearings in 2016, six months into the first financial year of rate capping.
  • Quote from Chair’s forward: “The so-called “Fair Go Rates System” is now in place, but it in no way resembles what Victorians were promised prior to the 2014 state election”.

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