IPART approves 'modest' rates rise above annual peg for Bega Valley Shire Council

The increases were approved following an additional special variation process.

Among the approved requests announced on Monday, June 20, was one by Bega Valley Shire Council to raise rates for the upcoming year by 2.5 per cent.

This is unrelated to the proposal for a 35 per cent variation, which has yet to be discussed and submitted to IPART.

IPART said the "modest increases" approved this week were for between 1.6 per cent and 2.5 per cent including the rate peg.

"Each year we calculate a rate peg which sets how much councils can increase the revenue they collect from rates," IPART Tribunal member Deborah Cope said.

"This year the rate peg was set at a minimum of 0.7 per cent, with some further increases allowed in councils with growing populations. The rate peg was lower than many councils expected. The additional special variation process gave councils an opportunity to increase this figure.

"We were careful to balance the need of councils to maintain the services and investment they had already committed to against the need to keep rates affordable for the community," said Ms Cope.

Ms Cope said the latest rate peg was determined in the low inflation environment at the beginning of the COVID-19 pandemic.

"Since then, high inflation and global uncertainty increased councils' costs. Some councils have demonstrated that without additional funds they will not be able to deliver the projects they have already consulted on and included in their budgets," she said.

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Applications were assessed against guidelines provided by the Office of Local Government. The guidelines require councils to show they had budgeted for higher income than that provided by the rate peg and that they need the additional money to deliver on the projects they had already planned and included in their budgets.

Bega Valley Shire Council said for the upcoming 2022-23 financial year it had forecast a rate peg increase of 2.5 per cent, which equated to a $509,000 increase in general fund income.

Council said the estimate was based on previous rate peg amounts and CPI, and that assumptions taking into account those previous years and emerging trends had been made when building its long-term financial model.

"The Independent Pricing and Regulatory Tribunal [IPART] notified councils in December 2021 that the rate peg increase for the 2022-23 financial year was only going to be 0.7 per cent, significantly lower than we had anticipated and well below CPI.

"A 0.7 per cent rate peg would only generate $187,500, which for us meant a shortfall of anticipated income of $321,500 which would impact our capacity to continue to maintain the assets we have and deliver the services we provide."

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Bega Valley Shire Council said the funding received through this additional special variation was not for a specific project.

"It is simply to catch up on the income we had projected in our Long Term Financial Plan. This income is very quickly consumed through the increased costs in delivering our services, such as road materials, fuel and electricity."

IPART said it was reviewing the rate peg methodology to deal with volatility in economic conditions. The review will also look at the timing of the calculations in a fast-changing economic climate.

"Our review will be looking at how to deal with this challenge in the future," said Ms Cope.