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New ratepayers will shoulder the increased cost of a new council rating system aligned with population growth. The new system is set to take effect in most of New South Wales in July 2022.
The state government has gotten behind the recommendations of an Independent Pricing and Regulatory Tribunal (IPART) report and says it is “committed” to launching the new rating system, according to a report by The Australian Financial Review.
Shelley Hancock, minister for local governments, said councils needed to raise more revenue in order to properly fund infrastructure, and the new rating system was the fairest way to do so.
“This revenue injection will be pivotal in helping local councils overcome growing pains with a reliable and sustainable revenue stream,” Hancock told AFR. “It will provide key infrastructure for growing communities into the future, including roads, drainage and open space. importantly, it’s the new residents moving into these areas who will primarily cover the extra rating incomes.”
Deborah Cope, acting chair of IPART, told AFR that the level of rate income received by councils is “generally not enough to cover the increased costs associated with population growth.”
Under the current scheme, NSW caps the total amount of revenue councils can collect through a rate pegging system that doesn’t account for population growth.
“For councils with growing populations, this can result in a reduction in service levels or deteriorating assets because they do not collect enough revenue,” Cope said.
Cope estimated that costs rise at about the same rate of population growth. She said that had the new rate collection plan been in place over the past four years, it would have raised an additional $116 million for NSW councils.
“We have looked at a way of incorporating population growth into the rate peg,” she said. “The methodology we have proposed will ensure councils maintain their rates income in a per capita basis as their population grows. While the impact on individual ratepayers may vary, on average new ratepayers will pay most of the additional revenue. Given this, our view is additional protections for existing ratepayers are not necessary at this stage.”
Population growth estimates will be based on Australian Bureau of Statistics data, AFR reported. The new plan will apply across all of NSW except for the City of Sydney council area.
“Our analysis indicates that the relationship between costs and population growth for City of Sydney is not linear and a different approach may be necessary to account for this,” Cope told AFR.
“Local councils across NSW need to be in a position where they can provide the infrastructure their growing communities want and need,” Hancock said. “In our response to the IPART rating review, the NSW government has stated it will allow for rating incomes to align with population growth to generate additional revenue for this purpose.”
Hancock said the new plan will undergo a consultation process, and stakeholders must submit feedback by Aug. 6. IPART is due to lodge its final report with the government in September, according to AFR.
Ryan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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