Municipal Association of Victoria says tiered rate cap attractive but unlikely

The clamour for a tiered rate-capping system – whereby different sized councils could be allowed to set different rates – is attractive in principle, but is not supported by much political will, the Municipal Association of Victoria’s chief executive says. 

The idea has circulated local government spheres since rate capping was introduced in 2015, but has struggled to gain traction on a state level given rate capping was a key election promise of the Labor government, MAV CEO Rob Spence said.

In principle, small, medium and large councils would have different rates, as would ‘regional cities’, with metropolitan councils staying at the government imposed cap, which has hovered around the consumer price index over the past two years.

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

Growth areas that required greater revenue would also be allowed to set different rates under the hypothetical plan, as would councils whose main revenue source was rates, Mr Spence said.

Despite rate capping being a popular measure among ratepayers, some residents in localities have told the MAV they would happily pay extra rates if it meant a certain amount of services were provided. 

The current rate-capping system, which is the subject of an ongoing parliamentary inquiry, was “inflexible”, given the only option to increase revenue was through an application to the Essential Services Commission.

City of Greater Bendigo CEO Craig Niemann said there was an appreciation at a state level that not all local government’s were the same, but they had to comply with the same legislation.

In the interim, councils could help one another by pooling resources and administrative and IT services, for example, he said.

Mr Niemann said having emergency management resources available as a region rather than a municipality would support areas where recovery from natural disasters, like floods and fires, can take many months.

A spokesperson for local government minister Marlene Kairouz said: "Our ‘fair go’ rates system is designed to protect rate-payers from uncontrolled hikes."

"Councils can still apply to raise their rates above the cap - but their case needs to be supported by evidence and be backed by their community."

The shadow minister for local government, David Morris was contacted for comment.