Dear Independent Planning and Regulatory Tribunal.
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Congratulations to IPART for insisting that Councils, which want to increase rates by more than the 1.5% annual peg, must first consult their local communities, and then lodge an application for a Special Rate Variation (SRV)!
Shortly before the recent local government elections, the outgoing Bellingen Shire Council committed its successor to a Long Term Financial Plan which envisaged ongoing rate rises of 6% every year from 2017-18 to 2023-24. This was well above the projected rate of inflation; it was the maximum which Council thought it would be allowed to impose without having to apply to IPART for Special Rate Variations. The Plan had few commitments to future cost savings. The current Council has endorsed a slight variant of this Long Term Plan. There is to be a single rate rise of 6% in 2017-18. There is more emphasis in the Plan on cost savings; subsequent rises above the IPART rate peg will only be sought if Council makes inadequate progress on future cost savings.
The proceeds of the 4.5% increase above the 1.5% peg are allegedly to be spent on urgent investment in resealing rural roads. The need for this resealing has supposedly been identified in "a condition assessment of the local road network that has just been completed".
I don't doubt that the roads need re-sealing. However, it appears a dubious justification for the proposed SRV. First, Council hasn't yet revised its overall proposed road investment programme in any coherent way. The total projected levels of investment, in the current variant of the Long Term Financial Plan, appear to be unchanged from those in the previous version, released in May 2016 (i.e. there has been no change to total projected roads investment as a result of the current "condition assessment").
Secondly, road investment is clearly a high priority for Council. In developing the Long Term Financial Plan, Management presented two scenarios to Council. Model 1 (the one adopted) contained the 6% rate increases. Model 2 (not adopted) kept rate increases to the IPART inflation peg. In Model 2, it was recurrent expenditure, not road investment, which was to be cut to keep total expenditure in line with income. In other words, if Council doesn't gets its SRV, the road investment will most likely still be funded, while adjustments are made elsewhere in Council's budget. It would appear that the extra money from the SRV will effectively disappear into Council's general pool (thus reducing the pressure for efficiency gains, or allowing other lower-priority spending).
Thirdly, the Long Term Financial Plan adopted by the previous Council was drawn up to implement that Council's Strategic Plan. That Strategic Plan aimed to "have a system of safe, well-maintained roads including car calming infrastructure". However, the Plan itself contained no performance indicators. Moreover, the "updated" Delivery Programme distributed in support of the proposed SRV merely refers to a Road Asset Management Strategy, which hasn't been updated on Council's website since 2012, and which seems to contain no targets for service delivery levels. In other words, neither the previous (nor the current) Council has any objective basis to determine the proposed level of future road investment (nor to judge their performance).
The rush by the present Council, to endorse the previous Council's Long Term Financial Plan, makes a mockery of the strategic planning process which it has only just begun. Each new Council is supposed to begin its term by developing (in consultation with the community): a Strategic Plan which sets out what it is aiming to achieve over its four-year term; the performance indicators by which it will be judged; its four-year delivery programme to achieve the Strategic Plan; and how this will be resourced and financed. The Long Term Financial Plan should be developed in conjunction with the Strategic Plan and Delivery Programme in such a way that each is consistent with the others. It makes no sense for the current Council to lock itself into a particular pattern of future rate increases, set by the previous Council, in advance of its wider strategic plan.
In short, the proposed SRV seems an ill-considered knee-jerk reaction to an IPART rate peg which is lower than management had anticipated. Council had a better-than-expected financial outcome in 2015-16. It therefore has no urgent need for an immediate increase in rates above the IPART peg. IPART should reject any proposal by Council for an SRV in 2017-18. It should require that Council should first complete its strategic planning process. The planning process should include a full consideration of options for future road investment and how it is to be funded. Only then should Council contemplate approaching IPART for an SRV, if it decides one is needed from 2018-19 onwards.