May 2022
Michael Courtney
Managing Director
Sustainable Councils Post COVID-19 : Time for a Reset
With the recovery from COVID-19 ongoing and continuing to impact Councils, continuing rate capping or pegging in many jurisdictions, and the greater demand for community consultation and scrutiny, Local Government is being held to account like no other level of government.
The impact of rate capping is beginning to bite in Victoria with Councils operating costs being squeezed as a result of loss of revenue raising capacity.
CT Management Group has calculated the average rate increase, (average of all Councils) between 2006/07 to 2015/16 across Victoria at 6% p.a. pre rate capping.
The average of the ESC approved rate cap increases between 2016/17 and 2021/22 was 2.2% – an average loss of 3.8% compounding per annum, per Council for the last 6 years!
Enormous loss in revenue raising capacity in Victoria!
The 2021/22 rate cap was set at 1.75% and we now have inflation set to hit 5% by the end of 2022.Recent increases in fuel alone will have impacted Councils Budgets.
In NSW we have assisted Councils with SRV applications to ensure they can continue to invest in their community infrastructure.
In Queensland we are assisting Councils with the development of service catalogues and reviewing service costs over the long term.
The common thread over the jurisdictions is Council’s financial sustainability and their capacity to continue to provide the current range of services at their current level over the long term is compromised by falling revenue raising capacity.
At the same time service levels are increasing in response to community demands.
All jurisdictions are required to maintain financial and fiscal responsibility with financial principles mandated in every State.
We believe post COVID is the perfect time to review the strategic direction and reset the service offerings to a sustainable footing.
This, in our view should be a feature of deliberative engagement with the community, – Council cannot continue to deliver its current range of services at their current level with erosion of their revenue base due to rate capping/pegging.
In simple terms, in Victoria for example, how can a balanced budget be produced when 60% of the revenue base (rate revenue) increases by 1.75% against an operating cost base of labour and materials that well and truly exceed that!!
At CT Management Group we provide Service Planning consultancy to assist Councils define their:
• Levels of service
• Understand demand for each service, its impact on service cost over time
• Priority of services one to the other- can Council afford to provide low priority services?
We produce a Service Plan per service along with a financial sustainability analysis of the Council’s long-term viability based on the outputs of the Service Plans.
Increasingly Councils are reviewing their service catalogues and contrasting these to their strategic plans (Council Plan, Community Strategic Plan or Corporate Plan) to ensure service provision reflects the priorities of Council and the community.
Finally, a comparative choice process can be facilitated through community consultation utilising the outputs from the Service Planning process to assist reset the service priorities.
Our service prioritisation method is enshrined in our Service Cost Evaluation Model that we utilise to collect and analyse the data from Council in undertaking the service planning project.
Of the 30 or more Councils we have undertaken Service Planning with the vast majority have or will make adjustment to services either through cessation of particular services or the lowering of levels of service.
It is a rarity that an adjustment to operating costs is avoided.
It is a rarity that Council seek ESC or SRV applications.
The knowledge gained enables Councils to design a preferred future based on sustainable outcomes, as opposed to a probable future that is unplanned.
We look forward to continuing to assist Councils remain sustainable in the long run able to fulfill their promises to their communities.
Perhaps the MAV or LGNSW should undertake a study as to the impact of rate capping and pegging on long term service provision and asset renewal – one for another day.
Should your Council require a Service Planning exercise to develop service catalogues, plan or to undertake a financial sustainability exercise please contact Merv Hair at CT Management Group on 1300 500 932 or submit the form below.
Michael Courtney
Managing Director
CT Management Group