Rates to rise 4.8 per cent next year

Central Coast ratepayers will see a rate increase capped at 4.8 per cent next financial year.

It is one of the lowest rate increases in NSW, set by the Independent Pricing and Regulatory Tribunal (IPART).

IPART made major changes to the methodology it uses to calculate the rate peg which meant all of NSW’s 128 councils received their own personalised rate increase.

In the 2024-25 financial year these range from 4.5 per cent to 8.2 per cent.

The new formula is based on a model that forecasts costs, rather than the (former) system which was based on a Local Government Cost Index but with a two-year time lag.

The new method uses a Base Cost Change Model of Employee Costs, Asset Costs and Other Operating Costs.

It adds in costs relating to superannuation, the emergency services levy (ESL) and population increases.

Central Coast Council CEO David Farmer said the increase still did not cover the entire cost increases but was better than the old system.

But he believes the rate peg is a broken model.

“People think the rates cap is a good thing but it’s not,” Farmer said.

“If the rate peg doesn’t cover costs each year then over 10 or more years the council is falling further and further behind.”

He said that leads to councils reducing services and dissatisfaction growing in the community with the standard of council infrastructure and services – and that ultimately leads to councils applying for a special rate variation (SRV) for large one-off increases.

“The SRV gets people upset and angry,” Farmer said.

He would prefer to see smaller increases each year that actually allow councils to fully cover cost increases.

Or even better, no rate cap, but a conversation between elected councillors and community as to their expectations of the quality of council services and infrastructure with the rates then set accordingly.

Council received an SRV of 15 per cent in the middle of the financial crisis.

But the following year the rate cap was 0.7 per cent when inflation for the previous year was 3.8 per cent.

This year the rate cap was 3.8 with inflation at 6.1 per cent the previous year.

Next year’s rate of 4.8 per cent comes with inflation at 6 per cent as of June 30.

Farmer said the system was clearly broken when the rate cap was under the inflation rate over the three years.

“If you get 10 years in a row where the rate peg doesn’t cover costs, you’re getting deeper and deeper into a hole,” he said.

The new rate method set council-specific ESL increases; set at 0.5 per cent for the Coast.

But the increase does not cover the cost of the ESL.

This year, Council paid a $4M increase in the levy.

The 0.5 per cent increase brings in only $800,000.

In May, Councils’ peak body, Local Government NSW (LGNSW), criticised the State Government for its decision to apply “sky-high” increases to the ESL.

IPART announced the rate peg on November 21 and recommended the NSW Government commission an independent review of the financial model for councils in NSW.

It said the rate peg could not address all the issues raised during the consultation period, held earlier this year.

Issues included the inequities of rate exemptions.

IPART said one example was an aged care facility with the majority of residents being self-funded which becomes rating exempt with one social housing resident.

Councils would also prefer to see rates based on the capital improved value of land rather than the unimproved land value (UV).

“Mandatory use of the UV method means councils cannot set equitable, efficient rates for those who own apartments and units,” IPART said.

“This makes it difficult for them to raise an appropriate level of rate income from these residential and business ratepayers.

“This is an increasing problem as areas become more built up over time.”

Councils also complained that statutory charges don’t reflect the full costs of service provision.

“When this occurs, councils may need to use rates’ income to cover the gap,” IPART said.

“As a result, ratepayers may be cross-subsidising statutory service users, placing undue upward pressure on rates levels.”

Examples included the development contributions caps.

Councils can levy developers’ contributions towards the cost of providing local infrastructure such as new roads, stormwater and open space but not for the cost of providing facilities such as pools.

Administrator Rik Hart will be asked to formally adopt the rate peg at an upcoming council meeting.

Merilyn Vale