Maribyrnong council faces a $110 million black hole in its budget under the state government’s plans to cap rates from 2016.
Analysis by the council has found a Consumer Price Index (CPI) cap would cut $110 million from rate income to council coffers over the next 10 years.
The Labor state government made a pre-election pledge to cap annual council increases at the inflation rate, tasking the Essential Services Commissioner with developing a statewide capping framework for council rates from July 2016. The Commission’s framework report is due at the end of October.
In a submission to the Commissioner, Maribyrnong council notes it has capped rate increases since 2006 at CPI then added two per cent to allocate directly to infrastructure renewal.
“This strategic approach has meant that council has been able to maintain its operating costs and plan for essential infrastructure while reducing debt.”
The council has slashed a $30 million debt to $3.5 million but faces a $55 million infrastructure renewal backlog.
Its submission warns the rate cap would have “severe consequences” on infrastructure maintenance and lead to service and job cuts.
Maribyrnong mayor Nam Quach said the 3.7 per cent rate rise proposed in the 2015-16 budget is the lowest in a decade.
“This budget strikes a balance between affordable rate rises and the ability to provide quality services and long term infrastructure improvements,” the mayor said.
Local Government minister Natalie Hutchins said the election commitment to cap council rates at CPI was to keep rates in check with the cost of living. Finance Minister Robin Scott said the change would mean more efficiency and accountability in the way councils increase rates.
The Australian Services Union argues the rate cap looms as the biggest threat to local government in decades. ASU branch secretary Richard Duffy said it will lead to job losses, weakened economies and cuts to services.
“Despite rate capping not coming into effect until the 2016-17 financial year, some councils have already commenced restructuring and making jobs redundant.”
