Victorian Ombudsman Report
Investigation into Wodonga City Council’s overcharging of a waste management levy April 2018
The three Rs of local government are, famously, roads, rates and rubbish. While all three feature regularly in complaints to the Ombudsman, this case concerns ‘rubbish’ – or more specifically, a waste management charge levied by a local council in which over 30 per cent of the revenue raised was used to fund services other than waste management. Wodonga City Council raised some $18 million surplus over the last decade through this charge – money that was indeed spent on council services, such as parks and playgrounds. But not on waste. As every ratepayer knows, councils raise funds for general services through rates. While the council argues it has been transparent, did the average ratepayer in Wodonga really know they were paying extra in waste charges to subsidise other council services? Or when they received their annual rates bill and saw the line item for waste management, did they think they were paying solely for this essential service? The council said it acted in good faith, believing the practice to be compliant with the Local Government Act, and that they consulted the community. I accept that the legislation does not explicitly require the council to recover only its reasonable costs. However, the intent is clear. And our investigation found they maintained the practice, among other things, to avoid ‘unnecessary negative public reaction which may result from shifting the charges [to general rates]’. A widespread adoption of this approach creates the risk that councils could charge ratepayers an arbitrary figure for waste services, to be used on anything related to council activities, while avoiding the scrutiny that invariably attaches to rate rises. While this practice long pre-dated rate capping, it raises issues about how revenue is raised, in an era when far greater transparency is expected of government. Although the council suggested the waste charge is ‘revenue neutral’ for ratepayers, as the money would have been recouped anyway in some form, this misses the point. As Local Government Victoria pointed out, funding council services through a flat fee also raises issues of inequity and regressive taxation, as it is unrelated to a person’s capacity to pay. Rate capping – which has been in effect since July 2016 – does put financial pressures on councils, especially rural councils with a smaller rate base and, often, ageing infrastructure. But those financial pressures need to be faced head on, in partnership with their communities, rather than buried in the financial fine print. The financial pressures on councils and their communities are likely to increase with the latest developments in recycling household waste. All the more reason for councils to be open and transparent with ratepayers about the true costs of a service. I am pleased this council has accepted my recommendation that they reduce their waste management charge to only recover the reasonable cost of the service provided. But 72 of the 79 Victorian councils have separate waste charges, and I encourage them to satisfy themselves that the charge reasonably reflects the service provided. To do otherwise is to undermine the public’s trust in how their money is spent.
Deborah Glass Ombudsman
Victorian Ombudsman Report