$194 million budget shortfall over 10 years due to rate capping, Bendigo council says

Bendigo council CEO Craig Niemann
Bendigo council CEO Craig Niemann

The City of Greater Bendigo believes rate capping could result in a budgetary shortfall of $194 million over the next 10 years.

Council chief executive Craig Niemann gave the estimate to a state government inquiry into the sustainability of rural and regional councils this week. 

Mr Niemann also said the freezing of federal assistance grants for three years put another $2.7 million hole in their balance sheet.

The $194 million figure is far removed from a previous estimate of $25 million over seven years given by the council in May.

The council said that estimate was based on annual rate increases of 4 per cent each year for seven years, rather than the 5 per cent in its long-term financial plan for 2016.

Related:Streamline services to survive – CEO

The 2.5 per cent difference in the first year, then three per cent difference for the next nine years, on a cumulative basis, accounts for the difference in estimates, council said.

The state government introduced an indefinite rate cap in December 2015, which it said was in response to uncontrollable rate rises from local governments. 

A 2.5 per cent cap was in place in 2016-17 – in line with the Consumer Price Index (CPI) – while local government minister Natalie Hutchins announced a 2 per cent cap for the 2017-18 financial year in December.

Local governments can apply to the Essential Services Commission for a rate cap variation, however Bendigo has not done so over the past two years. 

However Mr Niemann indicated to the Environment, Natural Resources and Regional Development committee it hadn’t been seriously considered.

Related:Shires count cost of rate capping

“Yes we could go to the state (government) and advocate for a higher (rate) level, but we know the community is not going to accept that,” he said.

“No one enjoys it (rates), but I don’t think people understand the value they get from it.

“We as a council understand the broad community need.”

Since 2008-09, council’s annual rate rises before the cap was introduced averaged 5.2 per cent, peaking at 6 per cent in 2013-14 and 2014-15. 

The inquiry, which held a number of regional hearings recently, will report back to the state government in March 2018.

Reduced rate revenue would affected the city’s ability to deliver certain infrastructure projects, Mr Niemann said.

City of Greater Bendigo rate rises over the past 10 years

2008-09 – 5.0%

2009-10 – 4.0%

2010-11 – 4.5%

2011-12 – 5.9%

2012-13 – 5.5%

2013-14 – 6.0%

2014-15 – 6.0%

2015-16 – 4.75%

2016-17 – 2.5% - Rate Capping introduced, no application for variation lodged

2017-18 – 2%  – No application for variation lodged