Rate Capping

May 31, 2015 | No comments | News


IPWEAvic and MWOAV have just completed a series of four seminar/information sessions on Rate Capping throughout regional Vic and Metro Melbourne with the final even being held at the Yan Yean Theatre in South Morang.

2015-05-29 09.23.51  2015-05-29 09.24.27 2015-05-29 09.26.23 2015-05-29 09.31.31 2015-05-29 09.39.12 2015-05-29 10.36.05 2015-05-29 11.18.30 2015-05-29 12.06.53  2015-05-29 12.28.34  2015-05-29 13.37.35

Some  30 to 45  members and guests attended each of  the seminars and were provided an opportunity to express their anxieties about the possible implications of the Rate Capping

framework being developed by the ESC for the State Govt.

The following matters have been raised through the engagement process and provide the basis of the feedback to the ESC.

The final forum session held on Friday 29th May provided delegates a fantastic opportunity to hear from a range of key stakeholders  on the challenges and opportunities that this new legislative control will bring.

The take home advice from this session is for professionals to proactively engage with their councillors and through them their community to ensure that Key services are recognised and prioritised and that the assets and resources needed to deliver these services are properly identified and managed for whole of life. Clearly this new measure by the state will trigger more effort in service planning and long term financial planning and both of these management tools must be effectively integrated with Asset Management Plans.

It will be in your interests to ensure you have developed and had accepted by your council and effective asset hierarchy that matches service delivery requirements and that there is objective evidence to support service delivery specification scope and unit cost definitions.

Financial resource capping by controlling the level of rating has the potential to impact adversely on service standards so that innovative measures for funding will need to be explored and sound information provided to prevent poor decisions being made.

 Challenge Opportunity
Asset renewal gap is widening Focus on service innovation to drive use of council revenue further and increase funding available to asset renewal
Community engagement is costly and resource hungry Consider use of existing community forums to engage, focus groups.  Target the silent majority rather than the vocal minority
Community reaction to any service standards reduction Face to face engagement with community using visual aids to demonstrate impact of new standards
Community will oppose service cuts or service standard reductions Community engagement to share options & cost implications and get feedback
Cost of staff and office accommodation Review workplace flexibility and work location choices (e.g. work from home)
Cost shifting by State Government (e.g. fire levy) Push back unless cost neutrality for councils guaranteed
Council legislated obligations for local roads/lanes Review local road hierarchy and road closures and sell closed road reservations
Councils get blamed for service authority & State Government defects Place markers at site of defects naming responsible authority and giving telephone number
Councils operate non-profitable businesses Rationalise businesses that incur operating losses (e.g. art galleries)
Cr knowledge of asset management & renewal gap Cr training & demonstrate evidence of renewal gap (e.g. MAV Step program audits & data from JRA)
EBA negotiated outcomes >CPI Future negotiations must seek to ‘cap’ EBA increases at CPI or State Government capped index
Environmental control impacts on maintenance budgets Review controls to simplify maintenance tasks & reduce costs (e.g. disposal of grading scrapings to landfill rather adjacent property)
Fleet management costs Review management assumptions, changeover timing, vehicle selection, private use and own Vs hire
Growth in internal governance costs Review internal charging
Impact of reduced road maintenance funding on RMPs Face to face community engagement on proposed amended intervention levels and response times.  Compare ‘reasonableness’ of proposed amended standards within region
Infrastructure budgets traditionally easy target Councils must refocus on core activities & understand impact of maintenance under-spend on asset life (particularly roads)
Local Governments capacity to run leisure facilities profitably Review council’s community service obligation and facility standards, operating hours and costs (e.g. water authority fees have risen >>CPI)
Lack of availability of local materials State Government to fund pilot programs to develop non-standard substitute products (e.g. suppliers are increasing costs >CPI + cartage $)
Lack of community awareness of council services & expenditure Use existing council communication frameworks to share/educate the community on council’s roles and responsibilities
Lack of service cost comparisons Benchmark unit rates within region and across related industries ensuring comparison of ‘like with like’
Landfill Levy increases set by State Government >CPI Request ESC to request State Government to cap levy increase to CPI
Long term impact of reduced infrastructure spend Engage with community and revise RMP on asset management and the renewal gap
Loss of staff/corporate capacity if service standards reduced Improved service specifications, contract management and auditing (service out-sourcing)
Many councils focus on new asset delivery Shift focus to asset management and asset renewal (culture shift required)
Reducing service standards to reduce costs Community engagement to share options & cost implications
Reducing service standards may require bigger costly e/ment Carefully analyse impact of service standards changes
Regional contracts -> local job losses Engage with rural communities to understand knock-on effects (social & local economy)
Regional employment losses Engage with rural communities to understand knock-on effects (social & local economy)
Regional job losses have greater impact than metro Seek to understand rural Vs metro impacts -> specify local job % in contract documents
Revenue loss impact on financial sustainability of rural councils Develop long term financial plans (10yrs min) to assess deficit budget impacts on key financial ratios and long term financial sustainability
Rural areas suffer from significantly higher material costs MAV to demonstrate cost differentials to State Government of most commonly used maintenance materials across regions
Service cost comparisons are often difficult to make Use benchmarking to identify significant cost differences and analyse the reasons to identify continuous improvement opportunities and undertake best value service reviews
Successful community engagement Development of community engagement models and tools for use across the State
Utility cost increases outside council control Request ESC to differentiate utility authority rates for local government & cap to CPI (eg water authority fees have risen >>CPI)
Utility costs growing >> CPI Councils to be granted access to CPI indexed utility rate increases
Workload on staff if staff numbers reduced Review costing shifting to local government and explore technology opportunities (eg State funded pilot programs) (eg rural councils still recovering from recent natural disaster events)

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