More light shed on IPART rates decision

IPART Tribunal Member Deborah Cope. CCN Feb 2021

With a 15 per cent rate rise approved by IPART, just how much will Central Coast ratepayers be paying from July 1?

Gosford average residential ratepayers will experience an increase of $416 a year.

Wyong average residential ratepayers will experience a reduction of $104 a year (as average rates pre-harmonisation were higher compared to Gosford residents).

The average business rate will increase by 50.2% or $1,557 for Gosford ratepayers.

The average business rate will decrease by 17.5% or $752 for Wyong ratepayers.

The average farmland rate will increase by 53.2% or $719 for Gosford ratepayers.

The average farmland rate will decrease by 25.2% or by $735 for Wyong ratepayers.

In total, IPART received 4,387 submissions about the rate rise.

But overall, it found Central Coast Council’s average rates are lower than many other councils – and that residents did have the capacity to pay.

Compared to NSW and Greater Sydney, the Council has a greater proportion of households owning their own dwelling.

In 2016: 33% of dwellings were fully owned, 33% were being purchased with a mortgage, 22% were rented privately and 3.6% were social housing.

Outstanding rates and annual charges ratio were 5.9% which is just above the benchmark of 5%.

“The impact is greater on those in the former Gosford City Council (area) and impact is reduced for ratepayers in the former Wyong Shire Council (area),” an IPART spokesperson said.

“The Council notes that levels of disadvantage are greater in the former Wyong Shire Council area where the impact will be lower.”

But IPART did limit the one-off increase to three years.

It said that in that time, the Council will collect an additional $70.2M in rates revenue compared with an increase limited to the assumed rate peg.

“This extra income will enable the Council to repay its first three years of loan repayments,” IPART said.

“It will also allow the Council sufficient time to adequately implement, execute and quantify its efficiency and productivity goals whilst responding to recent structural changes.”

IPART said the Council’s submission only showed the rate rise being used for seven years to pay down Council debt.

It also mentioned the public inquiry as a reason for the time limit.

If the Council wants to continue with the rate rise, it will have to apply to IPART again.

Shortfalls in Consultation

IPART said there were shortfalls in Council’s consultation with the community.

The shortfalls included: inadequate information distinguishing the effect of harmonisation and the SV impact on ratepayers in the pre-amalgamated councils and no consideration of community feedback of the Special Variation in its Integrated Planning and Reporting documentation.

“However, on balance, the Council demonstrated that its community is sufficiently aware of the need for, and extent of, the proposed rate increase,” IPART said.

IPART also said there was some uncertainty around the Council’s long term financial modelling as it had only recently started implementing a program of substantial cost containment measures.

It said it was a shortcoming of the application as Council’s forecasts might not be accurate over the medium term.

“Its Long Term Financial Plan assumes all of the identified efficiencies and productivity improvements will be achieved (but) the Council does not have a demonstrated track record of delivering cost savings or efficiencies which gives rise to a level of uncertainty with its forecast expenditure levels.”

Council said its operating performance ratio (OPR) would be three per cent over five years which was above the Office of Local Government benchmark of greater than 0 per cent.

IPART said an OPR consistently well above 0% would bring into question the financial need for an SV.

“As the Council’s primary intended use of its SV income is to repay bank loans it may not be necessary for the SV to be retained permanently in the rate base, as proposed by the Council.”

IPART said the Council had shown it had a poor history of realising cost savings, including failing to recognise synergies from amalgamation.

“It has explained its initiatives to improve productivity and contain costs going forward but has only partially quantified the cost savings resulting from these efficiency measures as these initiatives have only recently been planned,” IPART said.

IPART’s approval of the rate rise is subject to the following conditions:

That the Council uses the additional income from the Special Variation for the purposes of repaying loans and restricted funds.

It said that the Council must include in its annual report for each year until 2023-24 information on: the program of expenditure that was actually funded by the additional income and the actual revenues, expenses and operating balance against the projected revenues, expenses and operating balance, as outlined in the Long Term Financial Plan.

Council had to account for any significant variations and the reasons for the variations and the outcomes achieved as a result of the actual program of expenditure.

IPART said the Office of Local Government was responsible for monitoring and ensuring compliance with the conditions.

Merilyn Vale