The Government has accepted 14 recommendations, accepted a further four in principle, and does not accept two ESC recommendations.

The Bill provides substantial autonomy to the Minister for Local Government to establish the detailed features of the rate capping system. The Bill does not specifically require the imposition of a rate cap; rather it provides a legislative base by which a cap can be established. 

The MAV is pleased that the Government has considered our advice in favour of greater flexibility in the cap – the proposed legislation also provides that separate caps can be set for individual councils, all councils or groups of councils. 

However, much of the detail around the framework will be established by general Orders published in the Government Gazette, so there is still significant uncertainty about the shape and operation of the rate capping framework for 2016-17 and beyond.  

What we know:

The Local Government Amendment (Fair Go Rates) Bill 2015 includes the following:

·         The Government has not accepted the ESC recommendation for a single rate cap.

·         The Bill provides that the Minister may set a cap on general rates and municipal charges, but does not require the imposition of a cap

·         The legislation proposes a cap may apply to all councils, a group of councils or a single council, and any cap must be published in the Government Gazette by 31 December

·         The rate cap will be applied to average rates per rateable assessment, with the Government noting that the average ratepayer is a notional term. A proposed amendment to the Local Government Act would allow the Minister to direct councils in an Order published in the Government Gazette, that the capped average rate must not exceed the base average rate by more than the average rate cap.

·         Individual events that allow councils to apply for a variation to the cap will not be specified, and an application for a variation will be assessed against five factors: the reason, how it takes account of community views, how it reflects efficient use of council resources, consideration given to alternative options, and consistency with long-term strategic planning and financial management.

·         It is proposed that the Minister will have the power to suspend a council if it ‘repeatedly and substantially fails to comply’ with the rate cap

·         Councils proposing a variation will prepare two budgets - one on the basis of their proposed rate level and the other on the capped rate level

·         The framework will be reviewed in 2021 and every four years after this date.

In addition to the Bill, the State Government has made a number of related policy announcements in their response to the ESC report:

·         The State will fund the full cost of the variation process for the first year only

·         There is proposed authority for the Minister to expand the cap to include other categories of rates and charges at a later date if deemed necessary to …“ensure the integrity of the system”

·         The Government has accepted in principle the ESC’s recommendation to set the cap at 60 per cent Consumer Price Index and 40 per cent Wage Price Index forecasts published each December by the Department of Treasury and Finance. The legislation provides flexibility for the Minister to set a cap using a different formula

·         The Government will require the ESC to complete a productivity assessment of councils by mid-2017 so the outcomes can be applied from 2018-19 and beyond.

·         The Government will undertake a review of councils’ statutory fees to ensure they reflect the efficient cost of providing statutory services.

What remains unclear:   

·         how many rate caps may be deemed appropriate by the Minister and by how much they will vary

·         how any councils will be categorised for the purposes of establishing alternative cap levels

·         whether the full cost of the rate capping and variation process will be borne by councils submitting applications to the ESC after the first year of operation

·         whether the Government will introduce a power to constrain service charges (waste management charges)

·         whether an efficiency factor will be included in the setting of the cap or caps determined by the Minister.