Special Rate Variation

Council is considering a permanent Special Rate Variation from 1 July 2023 to continue our existing levels of service and maintain our existing assets.


Bega Valley Shire Council logo and Special Rate Variation words.


Background

To meet the rising costs of delivering services and maintaining and renewing our community assets, Bega Valley Shire Council is considering applying for a permanent Special Rate Variation (SRV). 

SRVs allow a council to increase its income from rates above the ‘rate peg’ (the annual increase set by the Independent Pricing and Regulatory Tribunal each year), under the provisions of the Local Government Act 1993 (NSW). 

Every day our expenses are rising beyond our income and we need to either increase our income or significantly reduce the services and assets we provide across our whole community. 

We are a geographically large shire with a relatively small number of ratepayers. We also have vast areas of state and national parks and forests which don’t generate income. 

This means we need more money to look after our assets into the future – things like roads, footpaths, bridges, stormwater drains, parks, libraries, community buildings and swimming pools – and the vital services we provide to the community, including:

  • manage our sporting fields, parks, playgrounds, swimming pools, community halls and cemeteries
  • ensure our road, bridge and footpath networks are safe and accessible
  • operate our libraries, Regional Gallery, Civic Centre, Regional Learning Centre and childcare services
  • process development applications
  • conserve and rehabilitate our natural environment
  • keep our community healthy and safe by providing rangers, building inspectors and health inspectors
  • support our community and repair infrastructure when impacted by disasters.

Key points that are important to understand:

  • Before Council makes a final decision on whether to apply for an SRV, we will consult widely with the community. There are many ways to have your say and discuss the issues with Council.
  • The SRV would only be applied to the base rate and the ad valorem component of your rates bill, not your entire bill. The ad valorem is related to the unimproved land value of the property and is calculated from property valuations supplied by the NSW Valuer General. The SRV will not be applied to any waste, water or sewer charges on your rates notice.
  • In February 2023, we will need to formally decide whether to apply for an SRV.
  • The Independent Pricing and Regulatory Tribunal (IPART) will decide whether to approve or deny our SRV application. If we apply, there is a chance we will not get approval.
  • If we do get approval, the SRV will not be introduced until 1 July 2023.

Why do we need an SRV?

The funding of local government is complex. The work we do is largely funded by general rates and charges, user fees and charges and a Financial Assistance Grant from the Australian Government. We also receive grants from the state and Australian government for certain projects, programs and services.

In the past, councils received close to 1% of federal taxation revenue through the Financial Assistance Grants. However over time this has reduced to 0.55%, with no indication this declining trend will change.

Our fixed income base is from general rates (the base rate and ad valorem) and this is set each year by the rate peg controlled by the Independent Pricing and Regulatory Tribunal (IPART).

Over the years, the annual rate peg increases have not kept pace with the inflation and rising costs. Our delivery costs have increased significantly – fuelling our vehicles to repair roads, clean toilets, mow lawns, pay wages, etc – and the costs involved in purchasing materials, hiring contractors and paying suppliers has also increased.

Council has worked hard to make sure we are as efficient as possible and we continue to review ways to reduce expenditure including staff restructures, improvements in our asset management processes, zero-based budgeting, divestment of land and joint regionalisation of services and planning.  

We have continued to deliver grant-funded assets to increase liveability and amenity in our community and this, combined with external influences such as rising costs, material shortages and unexpected expenditure associated with multiple disasters and the pandemic, has gradually led to the problem we now seek to address.

If we don’t improve our financial position over the longer term, services will have to be reduced and assets will not be renewed when needed. The value of our cash and investments will continue to decline.

The gap between the increasing cost to support our assets and deliver services, and the fixed amount of income we collect is widening, so applying for an SRV now is a financially responsible decision.

The Long Term Financial Plan (LTFP) that was adopted by Council in June 2022 was based on financial modelling assumptions and estimates from March and April 2022. Since that time, we have experienced rapidly rising inflation, ongoing cost escalations, material and contractor supply issues and undertaken further revaluation of our assets.

At the time of adopting the current LTFP, it was also acknowledged that costs for renewing or rebuilding assets had been based on unit rates that were backwards looking and were expected to be underestimates based on inflationary trends at that time. In addition, further detailed work was done on understanding what our asset replacements needs are over the next 10 years. In the next 10-year period, there is a need to replace a number of large value assets that are at the end of their lives and have not yet been replaced. Many of the large value assets Council manages are long lasting assets such as pools and bridges that have 50-70 year lives. Many of our assets were built in the 1940s, 50s and 60s and are now nearing the end of their service lives and if they are not replaced, risk failure and closure.

Our Long Term Financial Plan options

For Council’s sustainability over the longer term, ongoing operating deficits must be addressed. To support our current levels of service and meet our ongoing asset management needs we need to increase our general rate income. Option A - 90% SRV (including the FY24, 4.1% rate peg) will raise additional general rates income of $23.1 million in 2023-24.

The updated LTFP 2023-32 contains 4 options. Option A and Option B will allow Council to continue to deliver the services we currently provide and support the current assets we have as well as meeting the NSW Governments financial sustainability ratios. Option A is a single year 90% permanent increase to general rates. Option B is a 45% SRV in 2023-24 and 37.2% SRV in 2024-25, inclusive of 4.1% rate peg (FY2023-24) and 2.5% rate peg (FY2024-25). Option B is a cumulative increase of 98.94% at the end of 2024-25.

  Option A Option B Option C Option D
  SRV with no service level changes - single year. SRV with no service level changes - phased over 2 years. SRV with service level changes - single year. No SRV. Rate peg only with significant service level changes.
Special Rate Variation 90% increase permanently applied. 45% in 2024 and 37.2% in 2025 permanently applied. 43% increase permanently applied. -
Service Changes This option will allow Council to meet current asset management and operational needs and financial sustainability ratios. This option will allow Council to meet current asset management and operational needs; however the rate increase will be introduced over 2 years.

Council will need to significantly reduce current levels of service by an average of $13.9 million each year.

This option prioritises catching up on our infrastructure backlog and reducing our capital program below recommended levels.

Council will need to significantly reduce current levels of service by an average of $25.9 million each year.

This option continues the unsustainable financial trajectory and will mean we are not able to manage core assets such as roads and bridges.


These options all include the rate peg for 2023-24 of 4.1%. Option B includes a rate peg of 2.5% in 2024-25.

  • Option A is a cumulative increase of 94.75% at the end of 2024-25.
  • Option B is a cumulative increase of 98.94% at the end of 2024-25.
  • Option C is a cumulative increase of 46.58% at the end of 2024-25.
  • Option D is a cumulative increase of 6.60% at the end of 2024-25.
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Rate calculator

To calculate how the options impact your rates download the rate calculator as an Excel spreadsheet.

 

Who's listening

Kaliegh Smerdon
Manager, Corporate Planning and Improvement
Bega Valley Shire Council
Phone: (02) 6499 2430
Email: KSmerdon@begavalley.nsw.gov.au

 

Keen to stay updated on the SRV conversation?

 

Timeline of works

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Who to talk to

Council is seeking feedback on the SRV from the community in a number of different ways.

Councillors and Council staff will be at markets and community events in November and December to chat about the proposal:

  • Eden Community Market, Saturday 19 November 2022 - 9:00am to10:30am
  • Merimbula Seaside Market, Sunday 20 November 2022 - 9:00am to 10:30am
  • Cobargo markets, 26 November 2022 - 9:00am to 10:30am
  • Bermagui Growers and Makers Market, 1 December 2022 - 3:30pm to 5:30pm
  • Candelo markets, 4 December 2022 - 9:00am to 10:30am

We are hosting two community events, each with four sessions. To allow us to manage numbers please register your session preference online.

  • Bega Valley Civic Centre - Monday 28 November 2022
     Sessions will run hourly: 30 minute presentation; 30 minute question and answer with panel.
    • 3:00pm to 4:00pm
    • 4:00pm to 5:00pm
    • 5:00pm to 6:00pm
    • 6:00pm to 7:00pm
  • Pambula Hall - Wednesday 30 November 2022
    Sessions will run hourly: 30 minute presentation; 30 minute question and answer with panel.
    • 3:00pm to 4:00pm
    • 4:00pm to 5:00pm
    • 5:00pm to 6:00pm
    • 6:00pm to 7:00pm

There will also be an online meeting open to all on Monday 5 December 2022 from 6:00pm to 8:00pm, comprising a 45-minute presentation and an opportunity to ask questions. This meeting will be held on the Teams platform. To join the meeting you will need to Download Teams | Join on the web

You can also join on your computer, mobile app or room device
Click here to join the meeting
Meeting ID: 467 357 217 594
Passcode: rBdekZ
Learn More | Meeting options

Have your Say by:

Feedback closes on 16 January 2023.

If Council resolves to submit an SRV application to IPART in February 2023, you can also make a formal submission directly to IPART in March 2023.

Complete the survey

 

Impact on ratepayers

An SRV is calculated on your general rates (base rate and ad valorem components) only. It does not apply to water, sewer or waste charges.

Click on the image to enlarge.

[Image Gallery]


The tables below show the average impact for each of the three rating categories – residential, farmland and business.

Please note the precise outcome for each ratepayer is dependent on the particular land valuation for the property.

To calculate how the options impact your rates download the rate calculator as an Excel spreadsheet.

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Frequently Asked Questions

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