Why do we need to increase rates via a Special Variation project?

The funding of local government is complex. The work we do is largely funded by general rates and charges, user fees and charges and a Financial Assistance Grant from the Australian Government. We also receive grants from the state and Australian government for certain projects, programs and services. Our fixed income base is from general rates (the base rate and ad valorem) and this is set each year by the rate peg controlled by the Independent Pricing and Regulatory Tribunal (IPART). Over the years, the annual rate peg increases have not kept pace with the inflation and rising costs. Our delivery costs have increased significantly – fueling our vehicles to repair roads, clean toilets, mow lawns, pay wages, etc – and the costs involved in purchasing materials, hiring contractors and paying suppliers has also increased. We have continued to deliver grant-funded assets to increase livability and amenity in our community and this, combined with external influences such as rising costs, material shortages and unexpected expenditure associated with multiple disasters and the pandemic, has gradually led to the problem we seek to address.

If we don’t improve our financial position over the longer term, services may need to be reduced and assets may not be renewed when needed. The real value of our cash and investments may also continue to decline. The gap between the increasing cost to support our assets and deliver services, and the fixed amount of income we collect is widening, so applying for a Special Variation is a financially responsible decision.

Every Council is required to develop a Long-Term Financial Plan (LTFP) that looks at the financial sustainability of Council over the next 10 years and forms part of Council’s Resourcing Strategy.  The LTFP is formulated using a number of estimates and assumptions to project the future revenue and expenditure required by Council to deliver those services, projects and programs expected by the community. In doing so, it considers the resources that impact Council’s ability to fund its services and capital works whilst remaining financially sustainable.  Council has developed and adopted multiple LTFP’s, which in the last three years have all indicated the need for a substantial special variation project to increase revenue to close the widening gap between income and expenditure.