The Role of Local Government Inspectorate & Revise Rates Capping 2017-18 Guidance

On the 4 March 2017, we hosted our first 2017 community education forum to better understand:

  1. The role of the Local Government Inspectorate in the Victorian Public sector’s Integrity System for Public, presented by David Wolf
  2. ESC Revised Rate Capping Guidance 2017-18, presented by Andrew Chow.

We recorded these presentations and will upload the videos on this website and Facebook, when they are available.

Local Government Investigations & Compliance Inspectorate (LGICI)

The LG Inspectorate has been in operation since 2009 and with the return of Chief Municipal Inspector   David Wolf in July 2016, has been cementing its position as the lead integrity agency for local government in Victoria.

David’s presentation helped to clarity the responsibility and key function of the Local Government Inspectorate, which is to investigate concerns related to council operations including criminal or corruption offences involving councillors, senior council officers or any person subject to the conflict of interest provisions.  It is not just about any violations of the LG Act by Councillors, as many of us incorrectly thought so.

If you have complaints about council operations and breaches of the Local Government Act 1989, which relates to the following and leads to potential criminal offenses:

  • corruption incidents
  • misuse of position
  • conflict of interest
  • disclosure of confidential information
  • distribution of unauthorised electoral material

then go to the LGICI’s complaint reporting guidelines, available on its webpage.

The best way to submit a complaint is to complete an online form – click here to access it. The agency is keen to address ratepayers’ complaints and will advise incident reporters of follow-up evaluation decisions and actions.

Essential Service Commission (ESC)’s Revised Rate Capping Guidance 2017-18:

ESC Andrew Chow presented the Revised Rate Capping Guidance 2017-218 resources as he did to councils, to ratepayers.

There is a role for ratepayers to evaluate how well their councils comply with the Community Engagement Guidance, which requires councils to inform their communities not just tokenism information about their proposed higher rate caps, but also

  • the reasons for which the higher cap is sought
  • how the views of the ratepayers and community have been taken into account
  • how the higher cap is an efficient use of council resources and represents value for money
  • what consideration has been given to reprioritising proposed expenditures and pursuing alternative funding options and why those funding options are not adequate
  • the application’s consistency with the council’s long-term strategy and financial management policies.

These business case information must be disclosed to communities. Communities have an oversight role to check the community engagement compliance requirements are adequately met. If they know councils are eluding this compliance obligation, they should inform the ESC before or at the time their councils submit in their rates variation. ESC has a short time-frame to evaluate all councils’ applications and there may be insufficient time to address community feedback received late.

Ratepayers are already aware that some councils, such as Monash Council, are manipulating community engagement and making multi-million and biased and closed meetings’ project decisions now that will impact future rate levels in 3 or more years later. While some councils may elude informing their constituents of the future and longer term rate burden impacts of their larger project decisions now, little do they know that ratepayers can read & evaluate their councils’ 4 years forecasts of statutory financial ratios to understand whether future rate burdens prevail with their current large project intentions.

The Rates Capping policy require councils to consider long term forecasts in budget planning. However there is a loophole in the LG Act –  some councils  can be elusive in disclosing budget scenarios and long term forecasts publicly, because LG Act does not explicitly require them to do so. Reporting such elusiveness to the ESC now, will be considered when ESC evaluates these councils’  rate variation applications in the future.

 

 

Community Enagement & 2017-18 Rates Variation Applications

Councils who wish to increase next financial year’s rates will need to ensure they inform their community of their business case for raising rates above the cap.

The Essential Service Commission (ESC) has issued guidelines to help councils engage effectively with their communities, to ensure they provide top quality information, to ensure their communities become well informed of their councils’ decisions to increase rates above the cap.

The guidelines are available online for the public to view and understand the evaluation criteria ESC would use to assess whether councils have genuinely engaged with their communities. Ratepayers can assist to evaluate if their councils have followed these guidlines properly. If their councils have not, ratepayer advocates can provide the factual evidence to justify the non compliance and share with Ratepayers Vic to quality assure and facilitate forwarding community concerns to the ESC. They should also discuss the concerns with their councils, to agree improvements, while also taking leadership in fostering good community rapport with councils, helping them improve their organizational learning.

ESC is also presenting the guidelines to ratepayer groups who are interested to understand their councils’ obligation in community engagement, when they apply for rates variation this year. We are collaborating with ESC to discuss with our ratepayer networks these community engagement guidelines for councils’ 2017-2018 budget planning on 4th March 2017, at the Knox Council Offices, 511 Burwood Hwy, Wantirna South VIC 315. We are also having an earlier session with Local Government Inspectorate that day. Connect with our https://www.facebook.com/ratepayersvictoria/ to keep up to date.

Regional/rural ratepayers groups can come together and contact Ratepayers Victoria (email RatepayersVictoria@outlook.com) to organise a similar workshop with ESC in regional Victoria.

Status Report on PlatformRV Project (Governce KPI Dev)

In December 2016, team members were identified and approach to form a project team. They met in early Jan 2017, and preliminary requirement research followed.

The following is a summary of the research highlights (click here for the detailed report) so far:

  • Good governance is meant to be a conduct and practice integrated performance management framework for governments and their agencies, including down to the lowest level of municipal councils and their peak bodies.
  • It is part of a bigger corporate governance framework, already defined in DTPLI’s Council Governance webpage, comprising of the following sections, categorised and re-organised as follows, for deeper gap analysis.

  • A gap analysis of the above corporate governance framework reveals the following:

Good Governance Framework

Operational Control Framework

1) There are no state-wide community engagementguidelines for councils:

2)  Operational control areas have not been structurally designed and aligned to the core operational functions of a council3) State directed service provisioning controls are missing, a major gap when municipal service provisioning is the core business of councils.

4)  Integration of these state corporate governance areas in councils’ frameworks is discretionally translated by each council. This has resulted in the growing prevalence of good governance and operational performance quality issues in and across councils, including varying and often lacking compliance policing intensities and offence handling.

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These findings have lead the project team to focus on defining the governance KPI for supporting council decision making and community engagement. The next step is to interview several stakeholders from selected council, state agencies and peak bodies, and MPs who have contributed and/or supported to developing past and present LGPRF versions.  Interviewees will be carefully selected to avoid politicized influencers and reputed good governance offenders, to choose people who are committed to improve the LG system and attain its highest governance integrity.

For full details of the findings, click here.

RV Response to ESC Response to Peter Brown Report

Essential Service Commission (ESC) is the state government agency for overseeing compliance to the Fair Go Rates System (FGRS) aka rates capping policy. It called for an independent review of its implementation of the FGRS, which was conducted by Peter Brown. The review was completed in October 2016, with the publication of a review report.

ESC has responded to this review report, see http://www.esc.vic.gov.au/document/local-government/36176-escs-response-peter-brown-report/. The conclusion is:

“The community consultation required for applications should not be a standalone process to satisfy a higher rate cap application but rather part of councils’ ongoing planning and consultation processes outlined in the current Local Government Act and further expanded  within the proposed new Act”.

Synopsis of RV Response

(Click here for the full report):

Ratepayers Victoria has reviewed both reports and agreed with most of ESC responses. We also highlighted additional recommendations to:

  1. Include a representatives of the community in any pre-application submissions, especially to verify with evidence that community engagement was satisfactory
  2. The provision of a model chart of account should be a first and high priority for improvement.
  3. Councillors and officers should have to attend compulsory training on the subject of participative democracy and their community engagement performance be monitored by LGV
  4. There is a need to define and measure value for money, to improve compliance to the best value principles in the LG Act
  5. Participatory budgeting should be a future mandatory, to enable collaboration with the community in planning council budgets.

RV disagrees with several responses, notably we see no value but more risks if:

  1. Councils are advised of ESC’s decisions regarding the rates application before public release of the final decisions
  2. Councils are provided a copy of the final decision and an opportunity for a debrief and comment prior to public release
  3. ESC presumes that if a mayor signs off that the criterion concerning community consultation on the higher rate cap has been undertaken in accordance to the framework
  4. Councils are given at least 2 opportunities within the calendar year for Councils to apply for a higher cap.

Press Release: The Truth is Out There

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:

  • media and community communication strategies, to create a series of related news and messages to social engineer people into believing that rates capping has caused more harm than good to councils and their communities, e.g. like cutting out the school crossing services,
  • diverting council funds to support collaborative projects with peak bodies, which duplicate state services e.g. the Alliance For Gambling Reform
  • many internal cost shifting tactics, to ensure the parts of council-budgets constrained by rates capping are reduced or kept unchanged, in order to minimize rates reduction. For the next financial year, some councils have already and blatantly introduced new or increased existing charges, fees and differentiated rates that are not affected by rate capping.

 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?

 

Results of Councils’ Rates Variation Applications

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.

Councils’ Growing Insurgency Against Rate Capping

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.

The financial justification of Casey’s rates variation application:

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:

  • Over geared working capital ratios, which again are significantly above peers and all councils average (150 – 200% is good practice targets in LG, industry rule of thumb is 150%

  • Over maintaining unrestricted cash reserves, which again are significantly above peers and all councils average. Good practice is under 100%.

Its financial performance indicators also revealed the Council has ample capacity to:

  1. Repay the principal and interest amounts of  its loan exposure, which is anticipated to grows by about 10%, from  ~36% to under 45% of its rate revenue, in the next few years;
  2. Improving  its assets renewal position in the right direction, ie aiming to achieve 90.96% next year, however it plans to reduce capacity to 84.32% by 2019/20.

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.

Councils’ Resistance Against Capped Rates

Despite the rate capping bill not passed in Parliament yet, many councils are revealing their resistance tactics to override / sabotage the rating capping policy. The tactics that was reported to RVI so far are:

Tactic 1 – Apply special charge schemes

Source: http://mpnews.com.au/2015/10/26/rate-cap-may-not-quell-cash-calls/

What are special charges? Click this document for not one consistent definition, but many varying definitions by councils and state agencies.

Tactic 2: Compliance strategy that also integrates suggestive social engineering tactics in leading ratepayers to request more services and agree to supporting councils in raising rates above capped levels.  At the same time, councils can conveniently argue, with survey evidence of course,  that they have “engaged” with their communities and only representing what they want, in future capped rates variation applications.

Source: https://www.monash.vic.gov.au/About-Us/Council/Have-Your-Say/Looking-ahead-to-next-Council-budget/Survey-for-next-Council-budget

If Councils want to effectively engage with their communities in seeking to raise rates above capped levels, they must comply with good principles of community engagement, which the final ESC report gives some insights into. They cannot simply exercise controlled community engagement as they currently do, but must show evidence of complying to the rate capping policy’s criteria. This includes giving specific service and trade-off information to assist local communities to make informed decision to support their councils in seeking higher rate rises