The reality of ‘eroded’ and ‘impacted’ service delivery by local council’s was voiced in front of State MPs as a passionate plea for adjustments to the rate cap and further financial support.
On Wednesday 25 September, chief executive officers, chief financial officers, directors and Mayors presented in the Economy and Infrastructure Committee’s look into Local Government funding.
While Yarra Ranges Council was initially on the line up to present, the public hearing was attended by Mornington Peninsula, Frankston, Cardinia and Knox councils.
Laying bare the funding shortfalls and the impact of a standardised rate cap, Knox Mayor Jude Dwight said local government was at an “unfair disadvantage” because of the “disparity and inability to raise income on par with inflation and demand”.
“With rates being a critical income source, the current rate cap set below inflation, combined with limited revenue collection options and continued cost shifting or updates to ministerial guidelines, imposes significant financial challenges on local governments,” she said.
Mayor Dwight said the rate cap system negatively impacted Knox specifically when the base was set, seeing the disparity grow between other nearby councils.
“If we’d started with a similar rate base as a neighbouring council, we’d actually have $12 million additional revenue each year,” she said.
“So over time, that gap is just increasing and we’re at that point now where we’re seven years in, it’s quite obvious where it may not have been three, four, five years ago.”
Delivering over 100 services to the Knox community, Mayor Dwight said this was an essential role of the council but meeting demand, costs and community expectations was ever more challenging.
“Councils need to maintain over $140 billion in physical assets. For Knox alone, we need to maintain over $2 billion in assets.
“Community expectations continue to increase regarding the delivery of additional community assets, so sporting fields, pavilions, open space, plus the maintenance of these additional assets, there’s often a larger footprint for them because our population is increasing.”
Referencing the decision to forgo its delivery of sessional kindergarten, Mayor Dwight said this was a balancing act of infrastructure and asset financial suitability and providing the best for the community.
“Because of the constant changes with the kindergarten or early years reforms, Knox Council got to a point where we really had to do a significant service review, and it was a very lengthy process. It pretty much took this term of council to decide to withdraw from being a direct sessional kindergarten provider,” she said.
“I believe this is a good outcome when we’re talking about financial sustainability, that’s what we need to do, is assess what we’re delivering, and can we continue to do it? Is there a better option, which, fortunately for kindergarten, there is a great option.
“But the message to the community is we are constantly cutting services that they value, and it’s difficult to convey the whole story and retain that trust.”
Despite the distance between council areas, Mornington Peninsula Shire Council shares a number of similarities to the Yarra Ranges, often advocating together for better outcomes, given the large percentage of green wedge and the multi million tourist visitors each year.
Chief executive officer John Baker said rate capping, cost shifting and the waste service charge were the three most financially degrading aspects of the council’s restrained budget.
“The fiscal reality is that our core service delivery is competing against new responsibilities for resources and budget,” he said.
As for the rate cap, Mr Baker said Mornington was the “the eighth lowest rating council in Victoria, $400 lower per property than the average rateable property across Victoria”.
“We acknowledge the intent behind the rate cap, which is to enforce fiscal discipline for councils but…with 81 per cent of our revenue coming from rates, rate capping limits our ability to adjust income in line with inflation, threatening our financial stability and the ability to deliver essential services,” he said.
“Our average rate is approximately $350 lower than interface councils average, and $400 below the state average, translating to a loss of about $40 to $42 million in rates income per annum since the introduction of the rate cap.
“Without sufficient state funding, we’re going to face pressures, including reduced government grants, high inflation, rising costs that far exceed the revenue generating constraints imposed by the rate.”
Mr Baker said the added waste and recycling charges “took the sector by surprise with minimal consultation” and essentially “at the stroke of a minister’s pen” increased costs over five years by $68 million.
“The recent guidelines have redefined the scope of the waste service charge without prior consultation with councils, and this change introduces an additional financial burden that was not anticipated in our financial projections.
“It poses a challenge to our ability to plan effectively for future service delivery and infrastructure investment.”
Over in Cardinia, chief executive officer Carol Jeffs and chief financial officer Allison Southwell said there was “not much more to squeeze out of the lemon” in the council’s finances and flagged services being “rethought and not able to be provided”.
“It’s becoming more and more challenging to meet the broad range of requirements for our very diverse community,” Ms Jeffs said.
$60 million projected to facilitate free kinder, several million out of pocket from this year’s storm recovery, $15 million for a cybersecurity update ‘not considered optional’ and an almost $200 million shortfall from developer contributions, are among the many issues that have put a bleak shroud over the council’s future budgets.
The bleakness of all councils in moving forward and managing the extensive maintenance bills of ageing facilities, while delivering more housing and meeting the demands of growing populations with a lessened budget was met with a listening ear from MPs.
Further public hearings will be held in early October.
