1. 2016 IPWEAvic Public Works Conference
Fair Go Rates System
Andrew Chow
Director
2016 IPWEAvic Public Works Conference
20 April 2016

2. Today’s presentation Background Overview of the Fair Go Rates System
Implementation
higher cap applications

3. Background Historically high growth in rates over recent years
Review was undertaken and new framework is being implemented when a number of other reforms are also happening (Local Government Act review, etc)
NSW reforms in local government

4. Fair Go Rates System
Legislative Objective
“ ………(a) to promote the long term interests of ratepayers and the community in relation to sustainable outcomes in the delivery of services and critical infrastructure; and
(b) to ensure that a Council has the financial capacity to perform its duties and functions and exercise its powers.”

5. Fair Go Rates System THE CAP
The Minister will set the cap each year. The Act allows the flexibility for the Minister to set different caps for a class of councils or individual councils. The Minister must request and have regard to the advice of the ESC when setting the cap(s).
The ‘average rate cap’ (the Cap) will be based on the change to CPI (as forecasted by DTF) over the financial year to which the cap relates plus or minus any adjustment (such as Wages Price Index and an Efficiency Factor).
Cap applies to revenue from general rates and municipal charges. The Minister will have the authority to expand the cap to include other categories of rates and charges at a later date, if necessary.
The Cap applies to average rates per assessment (total revenue from general rates and municipal charges + annualised effect of supplementary revenue / number of rateable assessments)

6. Proposed Fair Go Rates System
APPLYING FOR A HIGHER CAP (VARIATION)
Councils have the opportunity to apply to the Commission for a higher rate cap if they decide there is a need to do so.
ESC not requiring councils to meet pre-determined reasons for seeking a higher rate cap. Councils are best placed to establish the need to do so, in consultation with their communities.
The following matters be addressed in each application for a higher cap:
The size of increase and year(s) that it will apply to
the reason(s) a variation from the cap is required
how the application takes account of ratepayers’ and communities’ views
how the variation reflects the efficient use of the council resources
what consideration has been given to alternative budgetary priorities and funding options and
that the assumptions and proposals in the application are consistent with the council’s long-term strategic planning and financial management instruments.

7. Proposed Fair Go Rates System
APPLYING FOR A HIGHER CAP (VARIATION)
Council may seek a higher rate cap for a period of up to 4 years. Except for 2016/17
The Commission may accept, reject or vary an application.

8. Proposed Fair Go Rates System
MONITORING & REPORTING
The Commission will monitor and publish an annual rates report on councils’ compliance with the average rate cap set by the Minister (or a varied cap set by the Commission)
The Commission will monitor and report on outcomes under the framework every two years. This report will focus on drawing together existing but disparate data on service outcomes, asset and infrastructure outcomes and financial sustainability outcomes.

9. Other matters Compliance
If a council fails to comply with the cap, the Minister or the Commission will take this non-compliance into account in subsequent years
In cases of serious non-compliance the Minister will be able to declare rates collected by the council invalid and initiate action to suspend the council
Information for ratepayers
Amendments to the Local Government (General) Regulations 2015 will be proposed to require councils to include relevant information in rate notices about the cap and how the rates and charges being levied complies with that cap

10. 2016-17 Implementation Stage of the Fair Go Rates System Process
Timeline
Minister announced cap(s)
23 December 2015
21 Councils notified ESC of intention to apply for higher cap
31 January 2016
10 Councils applied for a higher rate cap
31 March 2016
ESC assesses Council applications
February‑May 2016
ESC notifies Councils of decisions
May 2016
Councils formally adopt budget*
June 2016
All Councils provide compliance information
October 2016
ESC publishes Compliance Report
December 2016
*Councils must consult on draft budget for 28 days at a time determined by the council as part of existing legislative requirements

11. 2016-17 Implementation – Higher caps
ESC released Guidance Material in December 2015 covering:
Complying with the rate cap
Applying for a higher cap
Reporting requirements
We have met with most councils who have applied for the higher cap
We will work through the process with those councils who have applied for a higher cap while making preparations to work with the wider sector for subsequent years applications
Facilitating a technical working group on community engagement
Facilitating discussions/workshops on better measures on service outcomes, asset renewal and utilisation, etc
Refining guidance material following learnings in Round 1
Scoping the foreshadowed productivity study
Assisting in building capacity for the sector for subsequent years applications

12. 2016-17 Implementation – Higher caps
Our approach:
The basis for assessment is drawn from existing obligations under the LG Act 1989, most notably the Best Value Principles and the principles of sound financial management
The application process is, in a way, independent verification that councils have gone through the budgeting, planning and engagement processes required by the Best Value Principles

13. 2016-17 Implementation – Higher caps
Councils remain responsible for determining the mix and level of services they provide to the community
Councils will need to show how services have been prioritised within the base cap prior to seeking a higher cap (drawing to attention new or altered service offerings)
Councils will also need to demonstrate what has materially changed since the previous year (i.e. new or increased services, rising costs, changes to revenue)
Long-term financial planning must be demonstrated - councils must show that ‘whole of life’ costs for assets have been taken into consideration (capital and operating expenditure for the life of the asset)

14. 2016-17 Implementation – Higher caps
Councils remain responsible for determining how they engage with their communities and ratepayers
Engagement should be consistent with principles:
Contain clear, accessible and comprehensive information and be timely
Ongoing and tailored to community needs
Prioritised on matters of significance and impact
Lead to more informed and empowered communities
Councils are expected to demonstrate:
How, why, who, when and where they engage
What information, including options and trade-offs, were presented
How views have been taken into account in seeking a higher cap
For the application, Councils can use any in-depth community engagement they already undertaken but must still engage with their community of the case for a higher cap

15. Summary of 2016-17 Applications
Councils
 Overall cap
% above base cap
$ terms
Ballarat
3.70%
1.20% $
Geelong
3.50%
1.00% $
Casey
3.47%
0.97% $
Wyndham
4.50%
2.00% $
Buloke
3.05%
0.55% $
Horsham $
Moorabool $
Murindindi
5.40%
2.90% $
Pyrenees
3.83%
1.33% $
Towong
6.34%
3.84% $

16. QUESTIONS?