Tuesday, 31 May 2016

Clarence Valley taken down a peg by IPART in 2016

Clarence Valley Council website, accessed 24 May 2016:

At the 24 November 2015 Extraordinary Council meeting (Item 12.060/15), Council resolved to apply for a Section 508A SRV of 6.5% p.a. (including the rate peg limit) for 5 years commencing 1 July 2016, which is a cumulative increase in ordinary rates of 37% by year 5 (2020-21) of the SRV (with the cumulative increase permanently built into the general rate after the 5 year SRV period has ceased). Council notified IPART on 25 November 2015 of its intent to make an SRV application of that nature. The additional income from the SRV above the rate peg as per Item 12.060/15 is to be spent on roads and roads related infrastructure renewals and maintenance to address the significant infrastructure backlog and maintenance gap for this group of assets.

In May 2016 Clarence Valley Council submitted an amended application to the Independent Pricing And Regulatory Tribunal (IPART) for this special rate variation (SRV) which was to be permanently retained in the rate base and also applied for a minimum rate increase (MR).

This table formed part of the council application:

Clarence Valley residents made at least 169 submissions to council on this proposed rate increase and sent in a 115 signature petition. Only 3 submissions were in support of the rate increase. While IPART received 56 submissions (including one petition with around 2,000 signatures and 268 online submissions) opposing Clarence Valley Council’s application.

On 17 May 2016 IPART announced approval of  the application for a SRV increase for the 2016-17 financial year only. This represents a 4.7% rise above the rate peg.
Council’s MR application was not approved. On 1 July 2017 the rate increase will be removed as per IPART’s instructions and therefore average rates will decrease.

According to the IPART Determination:

The application was not approved in full because it did not satisfy criteria 1 and 2 of the Guidelines. The council did not adequately justify the extent of the need for the proposed special variation, as the effects of additional revenue and cost savings previously adopted by the council were not included in the IP&R documents (or presented to the community). Secondly, the annual and cumulative cost impacts of the proposed rate increases were not adequately communicated to the community…..

The council’s ‘Base Case’, in its adopted IP&R documents, understates the available revenue and therefore overstates the financial impact of, and the need for, the special variation…..

The increased income from user charges and fees were included in the LTFP adopted by the council on 23 June 2015 and should have been included in the ‘Base Case’ used for community consultation on the special variation (in August and September 2015). Similarly, the efficiency cost savings adopted by council on 24 November 2015 should have been included in the ‘Base Case’ included in the Revised LTFP adopted 9 February 2016, which formed the basis of the special variation application.

The council amended its application to IPART in April 2016 and May 2016 to include these measures in its ‘Base Case’, however this followed the completion of the community consultation process. In excluding the additional user charges and fees and efficiency savings from the ‘Base Case’, the council did not adequately inform and make the community aware of the financial impact of the proposed special variation…..

In 2015 the council reviewed its IP&R documents in consultation with the community. It clearly explained the purpose of the proposed special variation and provided reasonable opportunities for community feedback. However, we are not satisfied that the community was provided with:
* adequate opportunity to consider the need for the special variation, as a result of the positive effects of the additional revenue and cost savings previously adopted by the council, which reduce the need for, and extent of, the rate increase required to achieve financial sustainability, and
* adequate information about the extent of the annual and cumulative financial impact of the proposed rate increases over the five years of the special variation….

IPART’s decision means that Clarence Valley Council may increase its general income in 2016-17 by an estimated $1.8 million including the rate peg.

Out of the ten councils who applied for rate increases this year, Clarence Valley Council was the only one which didn’t get all it asked for.

Perhaps that will tell this particular council something about how inadequate is its approach to community consultation and revenue raising.

Though I am quite sure that ratepayers across the valley are hugely relieved that it was found to be so inadequate by the folk in Sydney.

Of course Clarence Valley Council can apply for a special rate variation again in 2017-18 and perhaps the next time around management will allow Council in the Chamber a chance to consider its final formal written application to IPART before it is submitted.

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