State Government’s Economic and Finance Committee – Rate Capping Enquiry

The average South Australian rates bill is $150 more expensive than the national average with NSW rates being $274 less than in SA despite their higher average income.

I make this verbal submission in my capacity as Mayor of the City of Unley. I have been an elected member of Unley Council for almost a decade, four years as a Councillor and almost six as Mayor. I do not make this deputation on behalf of the Council as the Council does not have a stated position on this topic.

My position on Rate Capping is nothing new. Over two years ago, in February 2014 I wrote on my online blog that I believed the concept of rate capping was worthy of consideration. This is a view I hold today and it is the reason for my deputation to the Economic and Finance Committee of SA.

I will make two points during my deputation in support of rate capping

  1. South Australian Rates are the highest in the nation
  2. Rate Capping is best practise

South Australian Rates are the highest in the nation.

South Australian Local Government sector churns through over $2 billion dollars annually. The Rates component of this is a 1.3 billion dollar tax in the South Australian economy and a tax which accounts for over 60% of the South Australian Local Government sector’s revenue[1].

When I started as Mayor, in 2010-11 South Australia’s rates were the highest in the nation. Rates averaged $668.89 per person which was almost $100 more than the national average[2].

In the most recent Local Government National Report 2013-14 South Australian remained the State with the highest average Local Government rates per person at $774.22. This figure jumped by 50% to almost $150 more than the national average of $628.20[3].

These figures are taken from the total rates income and the total population figues. When you remove people aged under 18 across these time frames the average rates paid per person increases by approximately $100.

The reality is that the average wage in South Australia is lower than the national average.

With the average wage in South Australia at $46,551[4], the average South Australian paying the average SA Council rate pays over 1.8% of their annual take home pay in rates each year. An average South Australian wage earner has to set aside 1.8% towards their council rates each year.

Comparing South Australia to the nation: the average Australian wage is $51,923[5] and the average Australian Council rate $628.20. This means the Average Australian wage earner paying only 1.2% of their wage on Council rates.

Coupling South Australia’s higher average council rate with a lower average wage we can see why rates in this state bite so hard.

Yet ironically, whilst Councils in South Australia have the highest rates notices in the nation, we also have the lowest income per person when all other sources of income are added together. These other sources of income are largely grouped into, Sales of Goods and Services, Interest, Grants and Subsidies and Other.

Every property owner pays rates but these others income streams are generated by user pay fees or businesses that other local government jurisdictions have established. As an example, I believe the NSW model of developer fees or contributions should be adapted to our system.

So an average property-owner in New South Wales receives an average rates notice of just $500.15 which is $274 dollars less than in SA. However; NSW Councils generate almost $1,000 more per person through these other revenue streams versus SA Councils generating only $450 more per person from other sources of revenue[6].

Rates account for about about 38% of local government revenue across Australia but here in SA, our rates make up 63%[7].

The reliance on rates has increased to 63% in the last three years rather markedly from a fairly static 57% over the preceding 10 years. A large part of this can be attributed to a loss in grants and subsidies. If I did not acknowledge this fact I would be ignoring an important element of the equation. Yet even accounting for the relative loss in subsidies, South Australia has always had the highest rates over this period both as a percent of revenue and as the actual amount that each property owner pays.

In rounding off this point, let me say, it is the failure to address the blatant need to diversify SA Council’s sources of revenue that has made the sector have the highest rates in the nation and why I support rate capping. I have raised the issue of South Australian Councils needing to diversify their sources of income over several years and whilst there has been some successes, they have been more theoretical than practical, and I am frustrated with the slow recognition that things need to change and so I believe rate capping will better enable the SA Local Government sector to emulate other state LG jurisdictions so that the average rate does not consume such a large proportion of the average wage and so that the average wage earner in SA does not have to pay $274 more that the average wage earner in NSW (who earns more anyway) and $150 more than the average national wage earner in rates.

 

 

Rate Capping is best practice

South Australian local Government has rightly been commended by the National Government for the high standard of annual reporting and ten year planning systems. However; this doesn’t mean the sector should rest on this laurel.

Not all rate capping models are good. With numerous rate capping models now functioning in Australia and other parts of the world, we should be able to cherry pick the best parts, to learn from the mistakes of other jurisdictions and run an effective rate capping regime. Can I commend the NSW model to you? I think it has some excellent aspects to it in relation to the quality of information it provides to the State and general public. These positive attributes are being recognised nationally[8].

All councils in New South Wales report under an integrated planning and reporting framework. This is designed to improve councils’ strategic community planning, including long-term financial and asset management planning, as well as to streamline reporting to the community. Councils’ long-term financial planning and asset management planning has improved and will continue to do so as the New South Wales Office of Local Government continues to work closely with councils to ensure ongoing improvements across New South Wales.

There are elements of this model which should be applied to all government departments in order to avoid costly budget blowouts which erodes public confidence in governments.

Section 122 of, The Local Government Act 1999 (SA) has seen improvements in the way Council’s develop and adopt Long Term Financial Plans as well as infrastructure and asset management plans.

Rate capping must take these measures to the next level and again the NSW model sets a good example for areas into which these accounting practices can be expanded.

Local and State Government must work hand in glove. Our state needs streamlined infrastructure spending that marries State demands with local capacities.

Local Governments serve to enable local communities to raise money to spend for the benefit of local communities and South Australian Local Government can be proud of being the cradle of Australian democracy. Local Governments were formed so that communities could use their money to fund critical infrastructure projects.

There is still a role for this function but was always intended for it to be closely aligned with the direction of the state. Rate capping is an effective measure to ensure adequate oversight and integration of the two spheres of government without watering down local decision making.

 

Conclusion

 

I want to make one final point. I do not see the issue of rate capping as being motivated by a political divide like the one that motivated the UK government to first introduce a similar scheme in the 1980s. This is not a debate about State versus Local. It is about all levels of government working together to evaluate who is paying what and to use politics for good, to better allocate who pays what so that the average wage earner in Mitchell, Newland, Colton, Elder and Ashford aren’t each paying $274 to Councils (than their equivalents in NSW) or anyone else in the nation.

 

Thank you for your time and for allowing me to make this deputation.

 

[1] Local Government National Report 2013-14 pg 17

[2] Local Government National Report 2010-11 pg 12

[3] Local Government National Report 2013-14 pg 5

[4] ABS Date by Region: http://stat.abs.gov.au/itt/r.jsp?databyregion&ref=cta

[5] ABS Date by Region: http://stat.abs.gov.au/itt/r.jsp?databyregion&ref=cta

[6] ABS Date, TABLE 4. Estimated Resident Populations http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/3101.0Sep%202015?OpenDocument

[7] Local Government National Report 2013-14 pg 5

[8] Local Government National Report 2013-14, pg 35 http://regional.gov.au/local/publications/reports/2013_2014/INFRA2466_LGNR_2013-14.pdf

Lachlan Clyne
Unley.mayor.clyne@gmail.com
Mayor.clyne@unley.sa.gov.au
http://about.me/UnleyMayorLachlanClyne
https://plus.google.com/102687238157322868753/posts
0427 132 494
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Categories: Lachlan Clyne - Personal Life

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