Communique #2

The CRG met on 12 August 2024 to discuss the issues it proposed the Tribunal consider for the 2025-26 rate peg. 

The CRG considered 6 issues as set out below and deferred 1 to the next CRG meeting.

  • Emergency Services Levy (ESL) subsidy catch-up: The CRG discussed different options and mostly supported making a recommendation to the Tribunal that the 2025-26 rate peg allows for the full catch-up of the increased ESL costs that were not captured in previous rate pegs when these increases were subsidised. The ESL subsidy ceased in 2023 which led to increases in councils’ ESL costs that councils have had to fund from limited income.[1] The CRG preferred giving councils the discretion to phase in increases using the rate peg ‘catch-up provision’[2] rather than having IPART decide the rate at which this is passed on to ratepayers. This could enable councils to manage the impacts on their ratepayers.
  • Cost of running the local government elections: There was general support for a proposed temporary council-specific adjustment for the change in election costs (as IPART has applied in the past), noting that some councils spread the cost over multiple years. The CRG supported this recommendation being made to the Tribunal for the 2025-26 rate peg. It also intended to explore another option when it discusses ‘other costs’. This item was deferred to the next CRG meeting.
  • Cyber security costs: The CRG discussed the growing costs of cyber security due to increased obligations on councils. It questioned if the rate peg is an appropriate funding source and whether grants are better suited to support councils under a coordinated whole-of-government approach. The rate peg could be used for some portion of ongoing costs, however consistent data across councils is not readily available to measure these costs. They noted efficiencies can be found under a co-ordinated approach. The CRG will revisit this issue for consideration in future rate pegs and will not make a recommendation to the Tribunal for the 2025-26 rate peg.
  • Increased cost of audits: The CRG discussed changes in audit costs, audit scopes and increased resourcing to manage audits. There was some support for a 5-yearly rate peg true-up for smaller councils. The CRG will revisit this issue in the future and will not make a recommendation to the Tribunal for the 2025-26 rate peg.
  • Asset costs: The CRG questioned how the rate peg could better measure asset costs given increasing asset costs and costs not captured by the rate peg such as depreciation and maintenance due to the cost of renewing, upgrading and expanding councils’ assets. It was indicated that asset data is inconsistent across councils and noted that there was insufficient data to include depreciation in the rate peg methodology. It was noted that most if not all councils were regarding increases in their depreciation costs as a consequence of periodic asset value review obligations. The CRG will not make a recommendation to the Tribunal for the 2025-26 rate peg.
  • Labour costs: The CRG discussed increased labour costs and overall challenges to fund and attract staff. It noted council diversity (including service levels and community expectations), the need to engage higher skilled staff in various technical areas and increased market demand for more traditional roles creates challenges to manage these in the rate peg methodology, and that increased labour costs may improve efficiencies elsewhere. The CRG agreed to examine this issue in further detail and will not make a recommendation to the Tribunal for the 2025-26 rate peg.

The CRG moved the discussion of ‘other costs’ intended for this meeting to the next meeting on Tuesday 3 September.

See the agenda here.

Council Reference Group members

In attendance at the Council Reference Group meeting on 12 August 2024:

  • Amishi Handoo, Senior Policy Officer, Office of Local Government
  • Andrew Butcher, President, NSW Revenue Professionals 
  • David Reynolds, Chief Executive Officer, Local Government NSW
  • George Cowan, General Manager, Narrandera Shire Council
  • Glen Magus, Director Corporate Support, Hornsby Council
  • Ian Clayton, Manager Property and Revenue, Mid-Western Regional Council
  • Michael Chorlton, Manager Financial Services, Tweed Shire Council
  • Richard Sheridan, Chair of the Local Government Finance Professionals Network, and Director City Performance, Bayside Council
  • Seon Millsteed, Revenue Accountant, Tamworth Regional Council, NSW Revenue Professional
  • Shaun McBride, Chief Economist, LGNSW
  • Tina Baldock, Principal Projects Officer, Office of Local Government
  • Wayne Rogers, Director Corporate Services, Blacktown City Council 

We note that the United Services Union has withdrawn from the CRG. 

[1]       While IPART’s new rate peg methodology captures the year-on-year changes in ESL invoiced costs through an ESL factor, the factor however does not capture the change in costs due to the cessation of the ESL subsidy in 2023. In the 2024-25 rate peg, IPART included an ESL subsidy catch-up adjustment for some councils to partially catch up on these costs and decided to consult with stakeholders on how phase these costs in over time. 

[2]       If a council increases its rates income by less than the rate peg in a given year, it has up to 10 years to catchup this shortfall.