City's chief warns of $10 million rate cap revenue loss

Justine Linley said the implications of the state government’s current rate cap for this financial year, and the forecast rate cap for next year, would have a profound impact on the council’s $180 million budget. 

She said cuts the council’s more than 100 services across the region were inevitable.  

Ms Linley also predicted significant impacts on the city’s long-term financial plan, including funding gaps which would leave the council unable to afford maintaining and renewing infrastructure.

“The combined effect will mean a loss of some $10 million in revenue over the two years that council had previously planned for in its long term financial plan,” she said.

 “It effectively means millions of dollars we don’t have for community services and capital works.”

It comes as Victorian Minister for Local Government Natalie Hutchins set the cap on the state’s council rate rises for 2017-18, matching the 2 per cent Consumer Price Index (CPI) forecast by the Department of Treasury and Finance.

Next year’s cap is 0.5 per cent lower than the 2.5 per cent cap set in 2016-17.

Ms Linley said a 1 per cent increase in rates raises $850,000 for the council. 

The council already cut $1 million of capital works this year and reviewed its service provision as a result of rate capping being rolled out. 

Ms Hutchins went against the advice of the Essential Services Commission, which recommended a cap of 2.15 per cent.

She said the Government’s Fair Go Rates system protected Victorian ratepayers from uncontrolled rate rises.

Ms Hutchins said in the last decade council rates increased by an average of 6 per cent per annum. 

“Victorians have told us they want more of a say in council decision-making, and now is the time for councils to speak with their communities about their budgets for next year,” she said. 

But Victorian Local Governance Association President councillor Sebastian Klein said a two per cent rate cap would mean a further rationalisation of services and add pressure on council infrastructure spending and asset renewal.

Ms Linley said it remained unclear where cuts would be made. 

She said councillors will meet next year to determine to discuss the impact of the rate, determine cuts and build a new four year plan and strategic resource plan based on the estimated financial loss.