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.

Community service needs, taxes & levies hit council rates

The Municipal of Victoria (MAV) reported (29 June 2012) that:

Victorian council rates will rise an average $75 or 5 per cent this coming year to help cover growth in community service demands, hikes in Government levies and the impact of the national carbon price.

Cr Bill McArthur, President of the Municipal Association of Victoria (MAV) said that as the economy had slowed, councils were under more strain to increase community services to meet local needs.

“The Local Government Cost Index has forecast it will cost an average 3.9 per cent more this year to provide the same level and mix of services as last year. That’s around $58 per ratepayer to maintain the status quo.

“Council budgets must also address cost pressures not included in the Cost Index such as growing service demands, declining government funding and rising State levies.

“When money is tight, we tend to see a higher reliance on free and low cost council services and programs.

“Local government’s contribution to vital community program such as aged care, youth and family services continues to grow as funding from other levels of government fails to keep pace with service delivery costs.

“For example, over $120 million a year is now tipped in by Victorian ratepayers to top up under-funded Federal-State home and community care programs to meet the rising demands of our ageing population.

“Budgets also facing growing pressure on municipal waste management costs due to the start of the carbon price, stricter Environment Protection Authority standards for landfills, and rising State landfill levies.

“This year councils will redirect an average $20 from each household ($49 million) to pay the State’s landfill levy. If you’re in one of 25 metropolitan areas, an average $28 ($39 million) will also be paid from your rates towards the State’s fire services levy.

“Add to this a median increase of $22 facing ratepayers due to the carbon price impact on councils, and most of this year’s rate rise will be eaten up by external costs that councils can’t control,” he said.

Analysis released by the MAV in March estimated a median rise in council costs of 0.8 per cent due to the carbon price. Excluding any mitigation programs to reduce council emissions, if carbon price cost increases are collected through rates it would equal a median rate rise of 1.5 per cent – around $22 per ratepayer.

Cr McArthur said a common misconception was that rates should rise in line withCPI, which measures a common basket of household goods and services not construction, material and wage costs facing councils.

“Councils need staff to deliver over 100 community services and maintain $60 billion in local assets.

“It’s never easy striking a balance between keeping rates affordable and delivering everything that communities have come to expect. When councils ask what services they could reduce, communities generally want all the same services but at a lower cost.

“Councils have been successfully lowering costs using joint procurement, surplus asset sales, planning reforms, restructures and other efficiency programs. Significant savings are being realised and councils must continue to demonstrate how they’re reducing unnecessary expenses.

“We’re mindful of the tougher economic climate and payment options and deferrals are offered for those facing genuine hardship. Get in touch with your council if you need to discuss your situation,” he said.

Rates data for 70 of Victoria’s 79 councils is available at www.mav.asn.au