Central Victorian councils call local government funding review as rate cap heads into fourth year

The Labor government introduced an indefinite rate cap in December 2015, which it said was in response to uncontrollable rate rises from municipalities, and on Thursday set it a 2.5 per cent for 2019-20, in line with the Consumer Price Index.

The cap has been around 2.5 per cent since 2016-17. 

Bendigo mayor Margaret O’Rourke said the City of Greater Bendigo would not apply for an exemption to the rate cap, which was “here to stay”, but argued a full review of rate capping needed to be undertaken.

“It is difficult for councils there's no doubt about that, even the larger councils, and that pressure will continue,” she said. 

Cr O’Rourke said she appreciated that ratepayers preferred the certainty of having a set rate each year.

Since 2008-09, the COGB’s annual rate rises before the cap was introduced averaged 5.2 per cent. The legislative council conducted a two-year inquiry into rate capping, but produced no palpable results. 

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The legislative council conducted a two-year inquiry into rate capping, but produced no palpable results. 

The Labor government before the State Election promised to review rate capping, while the Opposition promised a category-base rate cap as an interim measure to stop inequitable rural rating systems. 

Central Goldfields Shire chief administrator Noel Harvey said the system was broken.

“Everybody knows it (rate capping) is a problem – but it’s not a terribly popular thing to take on,” he said.

“Decades of governments have shied away from the issue.”

He said the one-size-fits-all model, where rates for councils with higher-population bases in inner Melbourne are calculated the same as rural shires, which have a greater geographical area of services to provide, needed to change.

“We need a root and branch review, a holistic look at how we fund local government, but politically it’s not a winner so I don’t think it will happen,” he said.

Mount Alexander Shire mayor Bronwen Machin said in a few years the system would begin to become unsustainable for smaller regional shires.

The idea of a tiered-rate capping system for different sized councils has been suggested since rate capping began, but has not attracted much political support.

Victorian Local Government Association president Marg Attley said the “single rate is not sufficiently sensitive to local needs of the 79 municipalities across the state”.

“Communities in some rural shire councils have reached their capacity to pay for ongoing increases in their rates, while some councils, particularly those in the urban growth corridor, need additional resources to fund critical infrastructure such as footpaths and drainage to meet the demands of population growth,” she said.

Local government minister Adem Somyurek said: “Our rates cap is working – protecting Victorians from unfair rate rises and saving families money.”

“This new cap is about getting a fairer outcome for ratepayers and encouraging councils to work with their communities to deliver the things that matter most to locals.”

Macedon Ranges Shire’s mayor was also contacted for comment.

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