When Warrnambool City Council announced this week that it wanted to raise rates by more than the state government cap, the public backlash was swift from homeowners already battling soaring costs of living.
A year ago, ratepayers were spared a hike in rates above the cap when councillors voted 4-3 against applying for a variation to the rate cap, but this week was a different story.
On Monday, councillors voted 5-1 in favour of asking the Essential Services Commission to allow it to add an extra $40 to the average rate bill on top of the rise they already faced under the cap.
But applying to the Essential Services Commission is not a guarantee that they will get permission to lift the rates above the cap.
Earlier this year, Wannon Water’s plan for a $70 increase on water bills was rejected by the independent regulator which froze the average yearly bill at $1110 for five years.
Retiring Warrnambool City Council chief executive officer Bruce Anson said it was time to have the tough conversation. Mr Anson said that feedback from the community, through the W2040 project, had been that people want more services. However, he said that if council couldn’t raise rates to fund the vision for a cosmopolitan city by the sea, then it had to look at what gets cut.
On Tuesday, the council revealed it would spend up $30,000 to engage consultants over its plan to increase rates above the cap by two per cent over three years to raise $2 million. Mr Anson said the consultants report would provide an independent voice as part of its application process to the commission.
The council’s director of corporate strategies Peter Utri said that no one liked to be taxed more, and it was time to have a sensible conversation about what the alternatives were. He said the consultants’ report was about asking people “well you don’t want a rate increase, what is that you think you could do without?”.
“This has all got to get to a stage where this goes to an umpire, that is what the Essential Services Commission (ESC) has been set up for,” he said. “It’s an incredibly stringent criteria. If council decides to put the application in and the ESC approves it, they’re saying you really need it.” Mr Utri said going to the Essential Services Commission would determine if the council was being run efficiently.
He said there was a lot of the rhetoric about making cuts, but many of them only had a one-off impact. “What we’re looking for is what needs to be a sustainable change in the way that we operate,” he said. Mr Utri said the council had already cut two per cent from a budgeted three per cent growth in its wages bill by not filling vacant positions. Mr Anson said casual positions had also been dropped and hours of part-timers reduced.
Since 2004 staff numbers have increased by about 20 per cent from an equivalent full-time workforce of 318 to 391 in 2018. Mr Anson said some of those jobs had come about because state or federal government had funded council to deliver its services and programs. “So it’s not us expanding our staff, and a lot of them are regional services,” he said.
Mr Anson said rhetoric that millions could be cut from the budget without any loss of services and staff was “just lunacy”. He said claims that the council was not efficient were inaccurate, and pointed to the Victorian Auditor General’s Office which puts it in the top 10 per cent of councils for efficiency in corporate services.
Statistics show that the average homeowner in Warrnanmbool was now paying more than double the amount of rates than they were 14 years ago. In 2003-4, the average residential rate bill was $788, but in 2017-18 that jumped 225 per cent to $1772. The council’s reliance on revenue from rates has also risen by more than 15 per cent over the past 14 years with rate revenue making up 30 per cent of the council’s budget in 2004, but now made up about 45.6 per cent. Mr Utri said that for some councils, rates made up 75 per cent of the budget.
Warrnambool’s rate bill was lower than some similar-sized councils such as Wodonga, Mildura and Shepparton. The Know Your Council website shows that while Warrnambool’s rates are about $3 to $5 below the average of similar-sized councils, it was $140 more than the average of all councils across the state.
However, average rate bills across Melbourne vary with Melbourne ratepayers paying $1109, but in Maribrynong bills are $1992.60. But council said comparison with metro councils, or even smaller regional councils, was complicated by the fact that they all provide different services. Warrnambool’s residential rates are higher than its neighbours with the average rate bill in Moyne $1577, Corangamite $1242, Glenelg $1047 and Southern Grampians $1432. Mr Anson said the grants commission recognised that Warrnambool was a massive provider of services for the surrounding municipalities including services such as Aquazone, Lighthouse Theatre, Art Gallery and airport.
He said that while the commission recognised that it should be allocated more money to compensate for its role as a provider to the wider region, there was not enough funding to do that. “The bucket’s been reduced over the years,” Mr Anson said. A three-year freeze on grants commission funding was starting to have an impact, he said.
Mr Utri said a reduction in grants, cost shifting and a drop in their own source of income (such as a significant drop in surplus from the saleyards after the new Mortlake facility opened), had combined to put the council in a position where it needed to either raise rates or make cutbacks. Mr Anson said the Warrnambool probably provided the broadest array of services of any council Victoria, from FOGO, saleyards, ports, aerodrome, economic development, tourism, Flagstaff Hill to caring for people with acquired brain injuries.
“We start to get into the argument of efficiency, we’ve got to deliver 92,000 hours of home care, well you can’t deliver 92,000 hours of aged care in 89,000 hours,” he said. “The average age of recipients is 85. So what do we do? Jack the prices up? We’re already at the top of what the feds allow us to charge, or do you cut the services? What’s the trade off? Do we have an airport or don’t we?”
He said for the first time, the council now had to roster someone on call every weekend over summer in case emergency relief centres were needed. “There’s a whole change of expectation from the state.”
Mr Utri said funding major projects, such as the Reid Oval, also put extra pressure on the council budget. As well as having to find capital to help fund the project, it would also leave a legacy of additional operating costs for the council. “All of these cumulative effects have built up and, with rate capping going on the top of it, means providing the same services to the same level and meet the expectations and aspirations of the community, you need to be finding additional funding sources and that’s either rates, fees and charges or you’re looking at reducing the services,” he said.
ESC approval not guaranteed
The Essential Services Commission has allowed 11 councils to raise rates above the state government cap since its introduction in 2015.
Only one council was granted permission to lift rates above the cap in 2018-19, while in 2017-18 four were successful.
In the first year the cap was introduced, six councils were given approval to adopt rate caps higher than the 2.5 per cent set by the state government.
Even though Warrnambool plans to apply for a two per cent rise above the cap, there is no guarantee that even if it approves a rise it will get the amount they ask for.
Monash City Council applied for a one year higher cap of 3.53 per cent for 2018-19 but the commission approved an alternative higher cap of 2.57 per cent, which is 0.32 per cent above the cap set by the state government minister.
In 2015, the Andrews Government introduced the The Fair Go Rates System to limit council rate rises in a bid to put an end a decade of uncontrolled rate hikes.
The cap matches both the forecast Consumer Price Index and the advised limit from the Essential Services Commission.
Councils wanting to raise rates over the cap have to prove to the commission that an increase is warranted.
As part of the process, they also have to prove that they have engaged and listened to ratepayer and community views.
On Tuesday, Warrnambool City Council announced that they will spend $30,000 on consultants to get feedback from the community, a move which was heavily criticised by The Standard readers in online commentary on social media.
Rate hike will hit hard, Hulin says
Warrnambool City Council’s spending was out of control according to the only councillor to vote against a plan to raise rates above the state government imposed cap.
Cr Peter Hulin has called for a forensic audit and a complete restructure of the council. He pointed to the construction of two toilet blocks in Warrnambool which is costing $700,000.
“You can build three houses for that amount of money,” he said. “I don’t know how it can cost that much.
“I think we need a forensic audit through the whole place and we need a complete restructure.”
Mr Hulin said new CEO Peter Schneider, who will replaced Bruce Anson after he retires in January, had a massive job on his hands.
“He’s more than capable because he has worked in private enterprise so he knows the value of a dollar,” he said. “I think we need to restructure the whole organisation before we pay more rates.”
He said that in some cases there was too many staff, and when an employee left the council needed to assess if they needed to be replaced. However, he said the average council worker was working hard, and pointed to the success of last Friday’s Christmas street party as an example of the good work staff was doing.
He said that rates had gone up by 59.65 per cent over the past decade. “I don’t believe wages have gone up that much,” he said. “It’s all nice and good to say it’s just a cup of coffee, some people can’t afford a cup of coffee. People are struggling, even with the low interest rates.”
Having run his own business for 17 year, he said he knew what it was like to go through tough times.
“When dad died we had to sell the family car to bury him because we had no money at all,” he said.
“I wouldn’t go to sleep any night for the first 10 years in business without being really stressed financially about how the hell I was going to keep the whole thing going.”
He said putting the rates up was not the answer. “That’s just a lazy way of doing it,” he said.
While the average rate bill might only go up about two per cent, or 4.5 per cent if the rate cap was lifted, some properties were copping a 10 per cent increase because their properties were revalued to be worth more, he said.
“I don’t care what Shepparton or whatever does because that’s them. They’ve got completely different scenarios to us,” he said.