COUNCILS will struggle to maintain services under a 2 per cent rate cap while also battling state government cost shifting, south-west leaders say.
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Local Government Minister Natalie Hutchins announced a 2 per cent cap on council rate rises on Monday. The 2017-18 cap is in line with the Consumer Price Index, but below the 2.15 per cent rate recommended by the Essential Services Commission.
The cap is 0.5 per cent lower than the first-time 2.5 per cent cap set in 2016-17.
The decision has been met with anger and disappointment from council and south-west state government members.
Corangamite Shire mayor Jo Beard the council had hoped for more.
“Obviously we’re disappointed with the 2 per cent, we were hoping for a higher rate,” she said.
“In saying that, we did a pretty crucial cutback last year and we looked for continued savings for future years, rather than just looking one year ahead. That puts us in a better position than some other councils.”
Cr Beard said Corangamite would continue to lobby for what it sees as a fairer deal.
“We’re having to take on the services and cost shifting from the state government,” she said.
“It’s our communities that will be suffering if we can’t provide services.”
Moyne Shire mayor Jim Doukas agreed cost shifting was a concern. “But until councils have the courage to stand up to the state government and not take any more on than nothing will change,” he said.
Cr Doukas was almost a lone voice in the south-west in backing rate capping when it was first introduced.
“I still hold the same belief that rate capping is a good thing,” he said. “There just might be disputes on what that cap should be.
“We all have to live within our means and I think Moyne Shire has handled it very well.”
Member for Polwarth Richard Riordan said rate capping, coupled with cost shifting of state government services onto councils, would leave smaller shires in “an increasingly untenable position to pay for more”.
“It appears that the Victorian Labor government is strangling shires by capping rates, while shifting costs onto the them, which will lead to less sustainable local government,” he said.
“While struggling to offset debt, local councils will be forced to raise fees and charges, cut basic services and slug businesses not protected by a rates cap with huge rises. This will quickly have a detrimental economic impact.”
MAV interim president Coral Ross said the 2 per cent rate cap was hypocritical.
“Council rates are being restricted to less than half uncapped state property taxes, while the government is also stinging Victorians with out of control increases in state employee costs. It smacks of double standards,” she said.
“Under a 2 per cent rate cap, many councils will struggle to meet their community service and asset renewal obligations next year.
“The 2 per cent cap comes on top of decades of cost shifting from state governments and a 2.5 per cent cap last year. There comes a point where councils will have to make difficult decisions about no longer being able to afford all the services their communities currently rely on.”
An Auditor General’s report last month warned that small rural councils faced long-term financial sustainability challenges in trying to meet their infrastructure renewal obligations.
Ms Hutchins said the introduction of rate capping was fairer to ratepayers.
“In the decade before we introduced Fair Go Rates, council rates increased by an average of 6 per cent per annum. This has now stopped, making things fairer for ratepayers,” she said.
“Victorians have told us they want more of a say in council decision-making, and now is the time for councils to speak with their communities about their budgets for next year.”