Council seeks to reduce budget deficit with rate rise application
Published on 02 May 2022
UPDATE 20 JUNE 2022: The Independent Pricing and Regulatory Tribunal has announced special variations for 86 Councils for increases up to 2.5%, including the 2% rate peg for Kempsey Shire Council.
Kempsey Shire Council will apply for an Additional Special Rate Variation to generate an extra $266,000 to avoid having to reduce its services or proposed works program for the coming financial year.
The decision to submit an application to the Independent Pricing and Regulatory Tribunal (IPART) to increase rates by a total of 2% for the 2022-23 financial year was approved at the April Council meeting on Tuesday and will help reduce operating deficits in Council’s 2022-23 Budget and 10-year Long Term Financial Plan.
In December 2021, IPART shocked councils across New South Wales with the announcement that the baseline allowable rate increase for the 2022-23 financial year would be just 0.7%. This increase does not reflect the demand for council services in communities and is a far cry from the 2% rate increase that Council had budgeted.
Kempsey Shire Council Director Corporate and Commercial, Stephen Mitchell, said determining long-term forecasts and the funding requirements for Council is a hugely complex issue with many variable factors.
“The announcement of 0.7% in December was the lowest rate peg in over 20 years and didn’t adequately consider variables such as rising inflation, increasing cost of materials, Local Government Award increases and demand for Council services,” said Mr Mitchell.
“The Additional Special Rate Variation to set the rate peg at 2% for 2022-23 will have an average impact of less than $20 per annum per ratepayer and provide $266,000 more in general funds for the financial year.”
Council’s draft Long Term Financial Plan for 2022-2032 forecasts a collective deficit in the general fund of $46 million over the 10-year period. If IPART approves the requested 2% rate peg, this will reduce the forecast deficit by $3 million. Without Councillors’ support to apply for the rate increase there would be little option but to consider reducing Council services to address the income shortfall, while Council works to address its overall deficit position.
In March, responding to complaints and lobbying from many councils across the state, the Office of Local Government and IPART offered a one-off Additional Special Rate Variation with a simpler, faster application process yet still requiring councils to demonstrate the need for the variation in rates to deliver the services required.
The outcome of the application will be formally advised before 21 June 2022, with IPART making all submissions available on its website for public comment throughout May.