Welcome to Ratepayers Victoria Incorporated. Our blog highlights the latest news and issues affecting ratepayers. Visit our Facebook
Welcome to Ratepayers Victoria Incorporated. Our blog highlights the latest news and issues affecting ratepayers. Visit our Facebook
Public responses to the LG Review Discussion paper closed last week.
We issues our submission paper. The key highlights of our submission are:
Recent news indicate a possible scenario of councils amalgamations if Victorians support this future option – refer to:
We issued a press release to respond to this possibility:
Ratepayers Victoria do not support forced councils’ amalgamations . We support that every council should engage and collaborate with its community to review the pros and cons of amalgamation in its own municipal and if there are better best value benefits arising, by all means progress further.
We prefer to take a more 21st century perspective of restructuring the Local Government sector. Councils have always been operating as decentralised units of the State’s LG portfolio. This decentralised business model is the cause of many councils’ inefficiencies and barriers to optimized service provisioning and good governance leadership.
It is time the sector should examine options of reducing council’s decentralised operations and identify more shared in house and community services to improve efficiency, good governance and best value outcomes for their communities. A lot of councils’ back office functions, including administration operations can be shared and this will release millions to billions of money that can be better used to provide more relevant and high value services and amenities to communities and reduce councils’ expenditure that can result in lower rates and consequently lesser CIV effects on individual ratepayers, ultimately increasing and sustaining rates affordability.
The centralisation of councils’ operational and management processes is certainly a viable and high impact option for LG reform, without compromising local democracy. The process of local democracy also needs to be reviewed, as the question is whether councillors have the right leadership and organisational competencies to lead multi million to multi-billion councils’ operations?
Many of our members are reporting their councils’ abuse in establishing Councillor Codes of Conduct. Joe Lenzo, leading RV’s special investigation task force into this matter, is confirming that many councils are using the code of conduct policies to stifle both debate and transparency. The most publicized case is from Monash Council (case 1, case 2).
Joe Lenzo’s reports:
“What it happening is that the block of councillors in power are setting up the code to stop councillors in disagreement from debating issues or bringing issues to the public. Some of the wording in the codes is so vague and ambiguous that anything a councillor does could be a violation and, here again, give cause to shut down opposing points of view. A couple of good examples:
Why do we need 79 councillor codes of conducts when one will suffice?
Local Government Victoria should write the councillor code of conduct which will insure consistency across councils. It will insure consistency of councillor conduct and stop the bullying tactics of the block in power at the time the code is written. It would take the politics out of the code.
If councils want to expand on the code to go into more detail about what it means and how it is applied then that would be OK. But they must be reined in from their current practices.
This concept should be followed in writing officer code of conduct also.
One must wonder if the violations of the code of conduct are actually bad conduct or just rebellion against stupid codes (like putting your hands on top of your head before you can make a motion).
This is just another example of councils abusing their powers to thwart transparency by expanding the rules of confidentially.”
A Parliamentary Committee was setup in 2015 to monitor, every six months, the outcomes of the State Government policy of local government rate capping on councils’ viability, service impacts on local communities and impacts on the provision of local infrastructure. Justification for this inquiry is mainly based on the concerns of (Parliament of Victoria, 2015)
These risks arise primarily because it is perceived that:
To date, there are 2 inquiry reports published so far.
The third review is underway, and Ratepayers’ submission is as follows:
Most ratepayers view the Fair Go rate policy is working successfully. However there are the few those, such as councils and their peak bodies, who perceive the policy is not working, because they lack the resolve to want and make the state policy work.
For decades, local government has been operating in its own vacuum, as the decentralised units of the Victorian State Government’s Local Government (LG) portfolio. The LG portfolio works under the discretionary operations of 79 councils, each with different appetites for budget and operating models for localising state services and managing local liveability.
A major overhaul of the LG Act took place in 1989, implying the Act is more than twenty years old. Since then, over 100 band aid amendments were added. We also observed many discretionary variations when councils interpret and practise compliance to the legislated rules, including handling non compliance.
Unsurprisingly, many councils and their peak bodies are still in the mind-sets of the eighties, their legacy to current practice norms cultivating:
These practice discretions explain why the current and legacy business models and work cultures of many councils are out of date and out of touch with today’s generations of ratepayers.
Today’s generation of ratepayers and their advocacy groups:
When councils and ratepayers disconnect, the “best” outcomes for local communities is easily dictated by those who hold decision making power and the capacity to ensure legislated objectives can be easily construed by discretionary and subjective decision arguments, politicised agendas and autocratic leadership styles.
The first and second inquiry reports focused to summarise the face value findings of submissions from stakeholders who primarily resist the rates capping policy, because it threatens the autonomy of status quo and/or because of politicised reasons. Conclusions are made on the basis of submissions’ summary highlights. The reports lacked deep analysis of the findings to investigate the motivation and causal drivers underpinning the strong consensus resistance against the rate capping policy. Neither do the reports address the prevailing systematic issues that require short to long term reform interventions, such the rate capping policy to contain current and sustain future rates affordability & equity for local communities. This example has trade-offs that councils and their peak bodies dislike, because the tradeoffs disrupt status quo domination of power in LG.
If there is optimisation of economies of scale and scope, there is no need for rate capping. A system that is guided by a rule-book (the LG act) that is more than twenty years old and especially when its compliance policing is discretionary, loose and subjective, resulting systematic inefficacy is a natural given, further worsen when there are 79 decentralised and autonomous councils doing what and how they like. Therefore, it is not difficult to see why systematic cost-shifting blames occurs, when operational duplications and decentralised autonomy are the real structural barriers to economies of scale and scope and they increase system management complexity.
Claimed uncertainties in budget planning is not due to rate capping, but competency gaps in zero based and scenario budget planning, risks management and total lifecycle cost of ownership in assets management, financial management alignment to councils’ strategy cycles and the lacking clear definition and hence integration of service management structures in councils’ charts of accounts.
When councils complain they have hundreds of services, their complaints reveal there is no understanding of service management and lacking capabilities, which affect the integration of service and financial management structures in charts of accounts that are crucial for effective management reporting.
Reforming systematic change is inevitable to improve the situation. The previous Liberal State Government started the journey of reforms, by introducing the development of LG Performance Reporting KPI framework (LGPRF) and making short term legislation changes to fix growing conduct issues. The present Labour Government is intensifying this change journey and the resistance to change is very real and strong, coming from councils and their peak bodies. Both previous and current State Governments have their heads and hearts in the right place, to reform the LG system in the interest of current and future communities.
Councils’ peak bodies rely on councils to bring in their revenues through membership fees that are calculated based on the financial capacities of councils. MAV also earns big money from councils outsourcing their procurements. The worldview is escalating rates are good, because they pay every provider stakeholders very well and always increase.
The LG Index was designed to justify ongoing uncapped rate increases, only supported by evidence of uncontested common practices, and ignoring good practice design and program logic evaluation principles.
This year, MAV also initiated an advocacy rates capping program for its members to contest the policy.
Self interests and preservation are the key providers’ motivators for resisting change, especially rate capping that hurt their real hip pockets badly.
If rates are not capped and councils are not made more accountable for increasing operating efficacy, ongoing and escalating rate rises will make owning properties unaffordable for most and exclusive to the rich, often overseas investors.
A fairer rate system that ensures rate affordability is not unreasonable but a social responsibility necessity.
Councils and their peak bodies are failing to meet their statutory obligations to ignore this growing ratepayers’ dilemma by insisting rate capping is detrimental to their operations and autonomy in local municipal service provisioning. We witnessed in a MAV meeting this year, one socially responsible Council, ie the Colac Otway Shire , asked other council attendees have they checked with their local communities if they want rate capping and many chose to ignore the question asked and supported the MAV lead rate capping program.
Most ratepayers, especially if they don’t work in the LG sector, will want rate capping to continue, even more having higher future rate caps until they can see KPI evidence that their councils have optimised their operating and service provisioning efficacy. Today service management and accounting is a dog’s breakfast and while LGV is working on improving KPI reporting and performance transparency, councils continue to winch about good governance and compliance obligations as bureaucratic waste of time tasks.
The first year of rate capping only applies to the general rate and municipal charges components of council budgets. Other expenditure areas of councils are not affected. We have received cost shifting reports from our members that some councils are reducing general rate and municipal charges to other expenditure areas, to be less constrained by rate capping. We also observed the sector wide trend in increasing fees and other charges, and differentiate rates, to compensate the financial impacts of rate capping.
Councils are now cost-shifting to their communities and yet they complain about costing shifting from the State Government. Cost shifting may be a contributor of insufficient funding of councils’ expenditures, but operational inefficacies and lacking systematic economies of scale and scope are the larger and higher impact causes.
Such practices are not kosher, especially when statutory financial indicators reveal many and often metro councils have large reserves of unrestricted case, over geared working capitals and long standing underperforming asset renewal ratios ( that have been prevailing for many years when rates were not capped). The patterns of news media reveal that there is implicit collaboration to use the media to discredit rates capping. The common media manipulation is publicly complaining that rate capping is hurting communities because councils have to cut services (selectively), such as school crossings. The tactic is when one lies enough and the lies become reality, often used by social engineering rogues.
The rate capping policy provides councils the choice of increasing rates above capped levels through a rate variation process. The process requires them to consider a strong business case, show good explicit decision making traceability and demonstrate genuine community engagement. This process integrates good governance principles - especially concerning transparency, accountability, community responsiveness and inclusiveness, efficiency and effectiveness. Accusing the rate variation process is bureaucratic and consumes unplanned and large resources and money, only reflects the real good governance competency of winching parties, also their capability-level to write business cases, or some other sinister reasons.
One would squirmed even to think the future fury reactions of councils and their peak bodies when future rate caps can be further increased and efficiency factors integrated in the rate capping formula. Does LG serves in the interests of councils and the peak bodies first before local communities – the new black in LG?
What this inquiry’s submissions and reports have not revealed are the legacy leadership cultures and systematic issues in councils and their peak bodies that are blocking the rates capping policy and compromising its implementation success. Concluding the inquiry findings, based on summarising the common themes of submissions (which are mainly from stakeholders who oppose rate capping) at face value, lacks substantiation of deeper analysis to identify the real causal barriers to rate capping and consequently system efficacy improvements.
If councils are tactically persistent to discredit and remove rates capping, they may as well include the LGPRF improvement program and cancel the modernisation of the LG Act. They can also consider restructuring the State Government, to remove the LG portfolio. These cancellations and state government restructuring would allow councils and peak bodies to:
Then the rule of law principle of good governance, which relates to complying to the LG Act, can be bent, not breached, to fulfil the wishes of the exclusive few before interest of local communities first?
Cutting to the chase, the policy is working now. If councils and their peak bodies redirect their energies and resources to ensure the success of the policy, there will be greater systematic improvements and many longer term benefits arising from rate capping.
When the rate capping policy was developed and adopted, all official communique and documentation were very clear upfront in stating that rates capping only apply to general rate and municipal charges. Other council service charges, fees, fines and differentiated rates, together with prevailing state levies (e.g. the fire levy) are excluded.
The Minister also specifically said that in some cases, ratepayers will find their rates bills would increase more than 2.5% (the capped level) because of the changes in their properties’ capital improvement value and other increases in municipal charge-outs that are not subjected to the rates cap. Most councils advocated for and changed to CIV rating system a few years back.
The Fair Go Rates policy is a real present and future threat to some councils, as it has taken away councils’ free reign of rates increases and require them to be more transparent and accountable in supporting and sustaining a fairer rating system that would deliver more visible value for money services and maintain rates affordability in the longer term. Because of this threat, most councils have come together with their peak bodies, even during the development of the rates capping policy, to defend their tuff. Their lobbying campaign is still continuing and growing strong despite the policy is now legislated and operating.
What MAV didn’t make it clear in its 30 June media release that rates capping can work if councils are committed to make it work. Influencing the public to think and eventually lead to believe that the rates capping policy does not work isn’t quite kosher.
The last two years of media stories clearly showed the lobbying resolve to campaign against and discrediting the Fair Go Rates policy. These stories, together with local ratepayer-advocates’ reports, revealed the use of:
Many people do not understand how their council rates, rates capping levels and fire levy are structured and calculated. It is easy to leverage this low community literacy and convince people that the State Government has mislead them, because their total rates payable for the next financial year is above the capped level of 2.5%. Now (just before the election) is also most strategically timely to leverage political pressure in any public communication broadcast.
Ratepayers are disappointed that some of their councils and their peak bodies are not willing to make rates capping policy work, eroding the opportunity of achieving longer term community and organizational improvement benefits for every stakeholder in Local Government.
Let’s cut to the chase, ratepayers would like councils and their peak bodies stop winching and continue resisting the rates capping policy. They should spend more time and effort in making the Fair Go Rates policy work, to increase efficacy in council operations and bring more visible best value outcomes in municipal service provisioning. Change is incremental and to expect full delivery of long term benefits in the first year of the Fair Go Rates policy is most misleading and laden with manipulative intents?
The ESC just released their decisions of the rates variation applications submitted by a number of councils. They are:
9 out of 79 councils (11%) applied and 67% of applicants received approvals. This shows at least 89% of councils have the capacity to lower rates - if we include the 3 unsuccessful rate variation applications, the real figure is 73 councils or 92% can afford lower rates for their communities.
The full report of the rational decisions and underpinning reasons are found in Overview-of-Local-Government-higher-cap-decis…pdf (159kb) and there is the Q&A resource Approving higher caps – Questions and Answers.
We anticipate several councils and highly possibility peak bodies will be spilling “blood” in the street, with ESC the main target. If and when this behaviour reaction realises, then a lot will be revealed about and confirm the good governance culture of our councils and their peak bodies.
The decision report is rational, of high professional quality and based on very clear decision criteria that were well communicated upfront before the rates variation process commenced. Applicants also had many opportunities to consult with the ESC, to ensure their applications meet the criteria.
It is AMAZING that the Casey Council submits an unusual business case for raising rates of 0.97% above the capped level of 2.5%, to cover a shortfall of $1.605mio in a $9mio new investment.
The Herald Sub’s news story (29 May 2016) below confirms that the council is poised to spit the dummy if and when the ESC rejects their rates variation application.
It is no rocket science to clearly see through Casey council’s behaviour, which is part of an ongoing collective groupthink campaign by many councils and their peak bodies to discredit the rates capping policy and to attempt social engineering a strong a public opinion that the rates capping policy does not work. This campaigning of course works beautifully for the opposition party’s politicising, conveniently using councils’ foul cries to claim the rates capping regime is a shambles. It is all but a poor attempt to enact a Monty Python show.
Street warfare is not only between the anti-Islam and anti-racism protesters. VLGA leaked letter is also revealing that councils and their peak bodies are using street warfare tactics in their social engineering and media propaganda to publicly fight their opponents, especially targeting at ESC, accusing them they lack understanding of how local government works. The key difference is the anti Islam and racialism folks use physical violence and councils and the peak bodies use psychological warfare. Both cases are unacceptable, especially more so for council and peak body insurgents.
The naked truth is that how local government currently works now is NOT acceptable and councils and their peak bodies are working hard to defend their legacy empires when eminent and positive changes are rolling out to clean up the system to be more efficacious and community centered. They do NOT like the change, full stop. Anyone involved in implementing the change is an enemy.
What they apply for? They want to increase rates to 3.47%, not 2.5%, to raise $1.605mio to build $9 mio worth of new infrastructure amenities.
While they ask for $1.605mio extra, they are also making profit equivalents for the next few years . Presently, they are making profits / surpluses which are significantly above their peers and all councils average.
The dubious budget games: While enjoying excessively high liquidity, Casey is also maintaining excessively:
Its financial performance indicators also revealed the Council has ample capacity to:
In 2015, Casey happily spend thousands of dollars on paying ratepayer attendees $120 each to attend a community engagement forum for gauging support for rates increase higher than 2.5% (Berwick Leader, 2015). Obviously, bribe is so blatantly open and public in council practice as well.
It is a no brainer why ESC or any financially literate person would not question Casey’s application for increasing rates above 2.5%, which only asks for a mere $1.605mio. In previous years, it has grabbed more than is needed from its ratepayers excessive rates to build up its over geared liquidity position and any forward explicit and implicit spending for a good number of future years.
Furthermore, the large unrestricted cash and over-geared prudential reserves (eg working capital) would already inflated total revenue, which added significant “fats” in general rates calculation to grab even more from its rate payers. As Casey’s budget methodology is incremental, this deliberate “fat” will be permanently sealed and infused into future budget plans – a new concept of inter-generation budget obesity trend in LG.
One wonders whether the real intention of the rates variation application is to smear the rates capping policy and discredit any party that is committed to make it work.
We need to remind ourselves that LG is not in Wall Street, where the culture is “greed is good”. It is a subordinate entity to the state portfolio of LG under the management of the Minister of LG, as confirmed in the Victorian Constitution, not MAV and/or VLGA.
Greed has no place in property taxation and municipal service charging. Time to downsize councils and get them operating community centered and like the real world, where lean and best value should be the new black in the land of local government.
Whether it is an oversight or politically incited process, the current legislative inquiry into the rates capping policy has allowed more opportunities for councils and their peak bodies to engage in political leverage to:
Ratepayers Vic, via one of our members, presented insights of why do we have rates capping. The key contributing reason comes from councils’ common budgeting approach, which discourages collaborative community engagement and participation in budget planning. It is no wonder why ratepayers have no confidence that their councils are making the right financial decisions every year. This is how the budget planning process typically work in your council:
This process is the primary reason we have rates capping today. Moving to a participatory and zero based budgeting process will improve community confidence in council’s financial planning, while removing the need for rates capping.
It is better late than never. Finally, we have the Minister’s responses to last year’s conference’s attendees’ questions to the Minister. There had been a chance of senior staff in the Minister’s office, which partially contributed to the delay.
Click here to access the Q&A information.
The Herald Sun’s editor’s opinion column (15 Feb 2016) reported: