BALLARAT City Council will face a choice of increasing rates or cutting its organisational size after a $10 million superannuation bill was revealed, mayor Mark Harris said yesterday.
Cr Harris said future council budgets would require at least one per cent of rates to pay the city’s super bill which this week was revealed to have jumped from a projected $4 million to $10.2 million.
Councils around the state have been hit by a shortfall due to liabilities to the former Local Authorities Superanuation Fund defined benefit scheme.
Cr Harris slammed operating fund Vision Super and the Municipal Association of Victoria for underestimating the liability in what he called an “incompetent process”.
The statewide bill is expected to be as high as $700 million, with Ballarat set to use existing cash reserves to pay its share.
“We had provision for about $4.4 million on the information we had up until budget time...but we will have to run down our cash reserves for the next couple of years which will give us very little flexibility to run projects,” Cr Harris said.
“I have talked openly with councillors about withdrawing from the MAV, as I think this has been an incompetent process and I still don’t have any concept we are being represented effectively.”
He called for changes to the way the fund is administered and said Ballarat had sought more information and better processes before the shortfall was revealed.
Cr Harris said structures dating back to the mid-1990s could be overhauled as local government organisations had the capacity to meet pension liabilities on a year-to-year basis.
“We will put a budget to council next week, but we are only able to do that because our cash reserves will be altered,” he said.
The City of Greater Bendigo this week forecast a super bill of up to $11 million.
Councils are not required to pay their liabilities until July 1, 2013 but Ballarat will move quickly in order to minimise interest on the payments, Cr Harris said.
“There’s no way to sugarcoat this. In the end we have to find the money and so for the next budget I am sure the advice will be to put rates up for this one per cent alone.
Council might take the decision to downscale the organisation, but there’s no way to mitigate the need for the one per cent rise.”
The Municipal Association of Victoria was not available for comment yesterday.