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Council feeling taxed

Wednesday, 7th December, 2011

By Craig Brealey

A tiny increase in residential rates to help councils with the cost of the new carbon price was not enough, given the size of electricity bills these days, according to Mayor Wincen Cuy.

Councils in NSW will be able to raise their rates by 3.6 per cent next year and a fraction of the increase - 0.4 per cent - is meant to compensate councils for the forthcoming carbon tax until the real cost of it was known.

The rise, known as the rate peg, is the maximum allowable by the Independent Pricing and Regulatory Tribunal (IPART) which sets the peg. 

Mayor Cuy said that power prices had risen by 80 per cent and councils just had to lump it.

“We have to absorb the costs and there is no way we are going to raise more revenue so that means extra things have to be cut,” he said.

IPART announced the rate peg this week and said that it would cost ratepayers less than a dollar a week, on average, over the year.

The average residential rate assessment in NSW was about $830 this financial year, according to IPART’s Chief Executive Officer, Jim Cox.

“The rate peg applies to a council’s income, not to an individual’s rates, but if we assume that a council increases residential rates in line with the rate peg, the decision implies a rate increase in 2012/13 of around $30 for the year, or less than one dollar per week.”

Mr Cox said the rate peg was determined by how much costs had risen for councils over the financial year but this year IPART had added 0.4 per cent to help councils meet the higher costs stemming from the introduction of the carbon price.

“We are including an advance in the rate peg to allow councils to meet higher prices for the goods and services they buy,” he said.

“Given that it is uncertain how quickly the carbon price will flow into prices, we have set the amount of the advance conservatively.”

Mr Cox said that the 0.4 per cent increase would apply only to next year’s rates because by the September quarter of 2012 the real impact of the carbon price would be reflected in local government costs over the financial year.

“By reversing the advance, we will ensure that the impact of the carbon price is not counted twice in our rate peg decisions,” he said.

Councils usually adopt the maximum rate set by IPART and Mayor Cuy said City Council will examine it early next year.

“We will consider it when we are looking at our budget early in the new year,” he said.

“It has to go before a full Council committee to be adopted.”

According to IPART, a survey of councils showed that the biggest cost to councils in the financial year 2011/12, on average, were employee benefits and costs (41.9 per cent).

This was followed by construction work such roads, drains, footpaths, kerbing and bridges (13.5 per cent); buildings (6.5); business services including contractors and consultants (6.0); plant and equipment (4.1) and building material for roads, kerbs drains etc., (3.0).

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