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

 

Rates setting without complying to ATO ruling

Taxation ruling ATO ID 2012/87 defines a general rate (as a tax) as “a compulsory extraction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered”. This distinction makes “rates as taxes” and “rates as fees for service”, mutually exclusive.  Thus, in setting rates, Municipal Councils must be cognisant of the nature of the economic goods that are to be supplied. A range of different rates, licence fees and charges are able to be levied, all with their individual requirements on those who should pay the fee for the delivered services. Public goods, which are paid for from the Consolidated Fund, need separate identification. Hence, taxes raised to support the payment for public goods, are identifiable by being raised in the same manner as the Fire Services Levy.

A good governance watch Bayside ratepayer found that this ATO did not apply in his Council’s financial management and rates setting. Read about the discovery in the two reports:

  1. COUNCIL RATES PAPER
  2. The Comprehensive Income Statement.

Monash Mayor Misconduct @ Citizenship Ceremony

What does this article says about the Monash Mayor’s understanding of good governance?

Julia Rabar of Waverley Leader, reported on 26 January , 2015 (original source http://www.heraldsun.com.au/leader/east/monash-mayor-paul-klisaris-cops-backlash-over-vote-labor-appeal-at-citizenship-ceremony/story-fngnvlxu-1227197046847)

Monash Mayor Paul Klisaris cops backlash over ‘vote Labor’ appeal at citizenship ceremony

Monash Mayor Paul Klisaris speaks at the council’s citizenship ceremony. Picture: Lawrenc

MONASH Mayor Paul Klisaris has been lambasted by his Liberal colleagues for a “tongue-in-cheek” comment appealing for new Australian citizens to vote Labor.

Addressing 42 new citizens at the council’s Australia Day citizenship ceremony today, Cr Klisaris said Australians could vote however they chose, “but we’d prefer it if you voted Labor”.

> > > Was the comment inappropriate? Tell us below.

Cr Klisaris later defended his comments, saying there was freedom of speech in Australia and he didn’t think his comment would have “swayed anyone” to vote Labor.

“I think people are being a little bit precious, it was all tongue in cheek,” Cr Klisaris said.

“I turned to our guests and apologised.”

But Mt Waverley state Liberal MP Michael Gidley and Monash councillor Robert Davies, who ran for the Liberal Party in the recent state election, were less than impressed.

Mr Gidley said it was “disgraceful” and “completely inappropriate” for the mayor to use Australia Day as a platform for party political purposes.

“The purpose of Australia Day is to recognise our history, and look forward to the future,” Mr Gidley said.

Cr Davies also said the mayor’s comments were “disgraceful”, particularly in front of new Australians.

“It also shows a lack for respect for his colleagues,” Cr Davies said.

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