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Tenterfield Shire Council Proposed Rate Rise

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Frequently Asked Questions

Why is Council concerned about its financial position?

Over the past decade, Tenterfield Shire Council has maintained high levels of service; maintaining roads, re-building bridges, running libraries, parks and gardens. However, in the past four years, prolonged drought, bushfires, COVID-19 and floods have all impacted Council’s finances. At the same time, cost-shifting from the State government and significant reduction of the Financial Assistant Grants (FAGs) by the Federal government have had a significant impact on our bottom line.

While service levels have been maintained, Council’s income has remained fairly static while input costs have soared with significant cost increases attributed to renewal and maintenance of assets. Council has also seen a significant cost increase in legislative compliance, (e.g. audit and risk, grant applications, reporting and acquittal) insurance and workers compensation. As Council operating expenses are exceeding our operating revenue a deficit shortfall is generated which accumulates each year impacting Council service delivery to the community.

Council acknowledges that its cash reserve’s within the General Fund is of high concern and despite implementing effective short-term strategies to cut costs, including a freeze on staff hiring, Council’s financial position is unsustainable without rate rises.
The proposed rate rise is critical because the gap between what we receive in rates into the General Fund and what we need to spend maintaining and upgrading Council owned assets (Shire buildings, 695km of sealed and 1043km of unsealed roads and bridges etc.) is currently $4.5m per year.

Like most businesses, the impacts of the past three years have forced Council to stop and reset. With a new Council in place, we need to look at how we do business, where we can improve our revenues, create efficiencies, find savings and how we can ensure financial sustainability for the residents of Tenterfield Shire well into the future.

It should be noted that Council has separate funds for waste, water and sewerage. These funds are self sustaining and include asset management, maintenance and renewal costs. These funds cannot be used for any other purpose.

What has Council done so far to save money?

We are focused on improving our productivity, streamlining services, containing our costs, and increasing own source revenue.

Even prior to being hit by the drought, bushfires, COVID-19 and the floods, it was recognised that Council had some budgetary challenges despite continuing to deliver a broad range of services, invest in local infrastructure, grow our economy and make Tenterfield Shire a great place to live work and visit.

Council’s Long-Term Financial Plan (LTFP) is the tool used to effectively plan for and deliver long-term sustainability. For some time, the LTFP has identified this year and next as being tough with operational costs associated across all operational areas negatively affecting the budget.

Like many other businesses around the world, the past two years have also impacted Council’s budget. Costs associated with construction and transport have significantly increased. Major storms and flooding have increased our maintenance costs, insurance and diverted funds away from planned projects.

Despite these efforts, our financial forecast has shown that if we keep going this way, we’ll spend more on our services than we can afford. We need to make real changes.
We know COVID-19 isn’t over and other economic factors such as inflation and indicators of a global recession are biting, so it’s important we take steps now to ensure Council is financially sustainable in the long-term.

In addition to the above, Council has already commenced efficiency measures and reductions in operational expenses. Council currently has 24 vacancies within its current organisational structure and is disposing of non-essential Council assets.

The shortfall of staff will result in reducing service delivery, increasing fees and charges, despite looking at new revenue streams.

What does it mean to reduce services?

Reducing services does not mean we stop delivering services, our role is to look after Tenterfield Shire and deliver on the community’s vision for our place.

What you may see though is a reduction in the service level delivery, this might mean we mow our parks less. It could mean we postpone the resurfacing of a road, we push back maintenance of a sports building or not replace older failing assets. Other services that could be impacted include opening times of our community libraries, our Visitor Information Centre or other facilities.

In order to weather the financial storm of the past couple of years Council has already curtailed many areas of spending, reduced services and delayed projects. This was a necessary measure to ensure we stayed within our means. Further long-terms cuts to resourcing and service delivery will have a visible impact on the community.

As the elected Council look for savings further engagement will be undertaken with the community to ensure Council, where possible, can continue to meet expectations while reducing services.

What is a rate cap?

Each year, the NSW Government sets the percentage councils can increase their total rate income by for the following year. This income amount is known as the rate cap.
The rate peg is the annual percentage the cap can increase by.

The rate cap is based on the Local Government Cost Index (LGCI) which looks at last year’s cost increases for items typically purchased by councils. Sometimes, the rate peg is lower than LGCI to ensure councils focus on finding savings and operating productively. When forecasting their budgets councils are advised by the Independent Pricing and Regulatory Tribunal (IPART) to assume a 2.5% rate peg. However, historically, the rate peg does not meet all increasing costs and is not enough to meet new infrastructure and additional service needs. The rate cap only applies to rates, being the top two lines on your rate notice.

This year the rate peg for Tenterfield Shire was set at 0.7% - significantly lower (1.8%) than the budgeted 2.5%. The NSW Government recognised the lower-than-expected rate cap was a problem for councils across NSW and introduced the Additional Special Variation (ASV) process to bring the rate peg for 2022-2023 financial year back up to 2.5%. However, Council through resolution decided not to proceed with the extra increase of 1.8% after undertaking a cost benefit exercise and assessing the impact on community considering special rate variation discussion was already underway.

What is a special rate variation?

The Independent Pricing and Regulatory Tribunal (IPART) sets the rate cap each year. It also assesses council requests for a rate rise more than the rate peg which is called a special variation. Special Rate Variations can be either for a single year or for multiple years and can be temporary or permanently retained in the rate base. Council needs to follow IPART’s guidelines and make a formal application showing how they have demonstrated each criteria in the guidelines.

How do our rates compare with other Councils?

Tenterfield Shire has the lowest average residential and farmland rates compared with other shires in our region.

Contrary to claims made by some people during our community meetings, figures from the Office of Local Government (table below in Downloads section) show Tenterfield Shire’s ordinary residential rates are the lowest in the region and our average ordinary farmland rate is well below the average for other shires.

You can view the Rates Comparison Table in the Downloads section below.

Have other Councils applied for a rate variation?

Yes. It is unfortunate that all councils at some point will face periods of challenging financial sustainability caused by the constraints and influences on local government. A Special Rate Variation is becoming a more common tool that Councils use to adjust their fixed income when reducing operating expenses alone does not balance the budget.
This year, the Independent Pricing and Regulatory Tribunal (IPART) has approved all applications made by New England councils and eighty-one other NSW Councils to increase their rates above the level of the annual rate peg.

While Tenterfield Shire Council did not apply for a special rate variation for the 2022-2023 financial year, it has resolved to submit an application by November for the next budget year.

Like Councils across NSW, Tenterfield is grappling with soaring costs for materials, fuel, electricity, insurance and inflation (annualised at 7%, well above the 2.5% rate cap). Cost-savings have been implemented. Nevertheless, Council needs higher rates revenue to ensure sustainability.

Council is aware that many other councils in NSW are also in discussions with their communities about significant rate rises.

Please see the Download section below for a graph.

How are my rates calculated?

Rates are calculated according to the property land value, determined by the NSW Valuer General.

Rates are charged to property owners and will vary according to:
• Your land category and sub-category (e.g. residential, farmland, business)
• Your land value (not including the value of your home or other structures)
• Council’s rating policy (e.g. business rates are higher than residential rates)

There are other charges that may appear on your rate notice that ARE NOT subject to the rate cap such as waste management charges, waste service charges and sewage management fees.

To see how this may impact you, please use our Rates Calculator below this section.

How did Council work out what the proposed rate increase should be?

When determining rate increases, Council considers its Long-Term Asset Management Strategy (over 10 years) and calculates the costs associated with renewal, maintenance, upgrade and acquisition of new assets within the asset classes Council controls.

Based on current service levels, asset data and Council’s forecast operating result, the gap in the General Fund and what Council should be spending on assets is currently $4.5m per annum (conservative estimate).

The proposed 43% rise will result in additional income of approximately $2.081M in the 2023/24 financial year and a further $2.976M in 2024/25, resulting in $5.057M additional rates income over two years bringing total annual rates income of $9.897M.

Why are our costs so high?

Council services and infrastructure costs to landowners are driven by different factors.
Tenterfield Shire has a small rate base of 5,078 assessments compared with its large infrastructure and assets base. One of the largest costs for Council is roads.

More than 70% of Council’s budget is spent maintaining and upgrading the Shire’s 645km of sealed roads and 1043km of unsealed roads and associated infrastructure, including bridges and causeways.

These assets are expensive to maintain, and more so in recent years with the big increases in the cost of fuel, bitumen, concrete and steel.

What will happen to our rates?

Rates increases applied by councils are determined by the Independent Pricing and Regulatory Tribunal (IPART). Each year, IPART determines a percentage we can increase rates to meet increasing costs – this year it is 0.07%.

Currently, Tenterfield Shire has the lowest average rates across our region, charging less than Uralla, Glen Innes, Gwydir and Kyogle (apart from the average ordinary business rate for which Uralla is lowest). For average ordinary residential rates, we are 25% lower, for business rates 23% lower and for farmland 90% lower.

We have managed this low rate base for some time. Nevertheless, forecasting tells us this will no longer be sustainable and if we maintain rates at current levels our service levels will need to reduce.

After providing this information to the community, if Council elects to move forward with a variation to the current rates, a formal application to IPART will be required.

What will the increased rate income be used for?

Council is facing a forecasted financial shortfall of more than $47 million over 10 years. That means our costs are rising faster than our income, and the gap between our income and the funds needed to upkeep infrastructure assets and services to a level expected by the community and required by legislation is growing.

The key purpose for Council applying for a special rate variation (SRV) is to maintain financial sustainability by eliminating the budget shortfall.

It is unsustainable for us to continue to operate as we are. The additional income raised by the Special Rate Variation would be used to cover rising costs associated with delivery services via our assets to the level of community expectation identified in our Asset Management Strategy.

How can I trust my rates are going to where you said they would?

As part of the IPART determination, Council will be required to report in its Annual Financial Statement to the Office of Local Government each year on the Special Rate Variation. Council will be required to report the increased rate revenue advised in its application and where it has been spent. The community will also be able to access the Council’s Quarterly Budget Review Reports and Long-Term Financial Plan which reflects Council’s Financial Position and the funding allocations in accordance with the Special Rate Variation.

I do not pay rates but live in Tenterfield Shire – will this affect me?

Council rates are paid by property owners. However, higher rates form part of costs that non-ratepayers may bear, including tenants currently paying rent in Tenterfield Shire, and the cost of goods and services through businesses. Infrastructure, facilities and services are provided by Council for all residents and visitors to the Shire. Having a financially sustainable Council benefits everyone.

I own a property and pay rates in Tenterfield but I live elsewhere – how will this affect me?

Having a financially sustainable Council benefits both tenants and non-residents as well as those living in Tenterfield Shire. Council rates are paid by property owners, regardless of where the owner currently resides.

Council is undertaking an extensive communication program to reach and inform landlord ratepayers.

If an Special Rate Variation application is successful, the rate increase would apply to all ratepayers, including residents and non-residents.

What happens when the rate variation finishes?

After the special variation period finishes, rates will increase only by the rate peg amount set by IPART in addition to the income from the Special Rate Variation, which will become a permanent increase. This is known as a s508A special variation.

Why can’t we just get more grant funding?

Most grants require funds to be spent on capital expenditure (e.g. a sporting field or community facility) and therefore grant funds are not normally used to fund the day to day operations of Council.

Council regularly applies for and receives government grants and will continue to do this in the future. However, there are key reasons why Council cannot solely rely on this source of income:
• In most instances, the grant requires Council to provide a financial co-contribution, up to half of the grant amount.
• Receiving grants is a competitive process and there are not enough grants available to fund all of Council’s infrastructure needs.
• Grants programs usually have requirements attached to them that may not fit with Council’s current strategies and plans.
• Budget allocations are required to maintain and renew projects and this has to be allocated in Council’s existing budget (funded depreciation).

Council continues to lobby the Federal Government for the return of Financial Assistance Grants (FAG's) through the Australian Local Government Association (ALGA) and Local Government NSW (LGNSW), in excess of 1% of Commonwealth Taxation Revenue provided by the Federal Government, which will support our ongoing sustainability.

Why are we hearing about this now?

Financial sustainability has been a long-term focus at Tenterfield Shire Council.
There has been a need for a rate increase for a long time because Council’s General Fund has not been keeping pace with the expectations of the Community concerning asset maintenance and service delivery. Council’s financial difficulties have been reported to Council as part of its suite of financial reporting most notably the Quarterly Budget Review.

The prolonged drought, bushfires, COVID-19 and flooding, meant Councillors were reluctant to increase rates when large sections of the community were suffering, unfortunately this is not sustainable.

Due to ongoing external factors influencing the cost of providing Council services, the financial situation will continue to deteriorate and needs to be addressed.

Council consulted with the community in January 2022 regarding our Community Strategic Plans, including our Long Term Financial Plan. At the February 2022 Council meeting, Councillors voted to defer a decision on applying for a Special Rate Variation for the 2022/23 Financial Year to enable further community consultation and additional time for the community to recover from drought, bushfires and COVD-19. Additionally, this allowed Council to explore avenues to further cut costs, rationalise services, and raise income from the sale of surplus or under-utilised assets.
Council also implemented more efficiencies, and reduced services for the 2022/23 financial year to reduce the impact on ratepayers. In order to apply for a Special Rate Variation commencing in the 2023/24 Financial Year to reduce the impact on ratepayers. In order to apply for a Special Rate Variation commencing in the 2023/24 Financial Year we are now embarking on further community engagement.

Councillors are committed to finding a solution to this problem and as such we are providing as much information as possible about what’s happening, so our community has a complete understanding of our financial position, and to participate in the discussion around our funded future.

When is all this happening?

August/September 2022: Community information sessions will be conducted.

Late October 2022: Council will consider all submissions, resolving their intent to apply to IPART.

November 2022: Council will submit an application to IPART

February 2023: IPART Requests public submissions

March 2023: IPART public submissions close

May 2023: IPART Final Report and Media Release

Please see Timeline in the Downloads section below.

Submit your feedback on the Proposed Rate Rise for the Tenterfield Shire
Contact the Tenterfield Shire Council with your thoughts regarding the proposed Rate Rise.