If the legislation is passed, it’s intended that a rate capping system would then be operational for the 2019/2020 financial year.
Some of the key aspects of the Government’s proposed rate capping model include:
- The Essential Services Commission of South Australia (ESCOSA) will be responsible for making rate cap determinations, assessing applications from councils for variations to the rate cap, and reporting on the outcomes of the system.
- ESCOSA will determine the basis of the rate cap. For example, whether it will relate to a price or particular index
(such as CPI or LGPI) and whether the cap will include any efficiency or productivity component. The details of how the rate cap will be determined will be subject to ESCOSA guidelines that are yet to be developed.
- A cap may be determined for councils generally, a class of councils or individual councils. There is no definition provided for a ‘class’ of councils.
- The cap will be applied to a ‘base standard rate’, which is a nominal rate that is arrived at by dividing the total annualised general rate revenue for a council area by the number of rateable properties in that area at the end of a base year (30 June). This model accounts for growth in the number of rateable properties over the course of a year.
- A council may apply to ESCOSA for a variation from the rate cap for a maximum period of up to five years. In applying for a variation, councils will need to provide the reasons for the variation application, evidence of community consultation, and an assessment of the likely impact on ratepayers.
- Councils will be expected to make efficiencies across their operations before applying for a rate cap, and will need to demonstrate they have considered funding priorities and alternative sources of revenue.
- Consistency with long term financial plans and infrastructure and asset management plans will be a critical component of an application for a variation.
- ESCOSA may charge councils a fee for assessing a variation application and applications will need to be lodged by 31 March.
- Further details of the variation process will be provided through ESCOSA guidelines that are yet to be developed.
- Separate rates and service rates and charges are excluded from the rate cap calculation, but a council must inform ESCOSA if they propose to introduce a separate rate or service rate or charge, as this will be taken into consideration when they set the primary rate cap for that council.
- ESCOSA must monitor and review councils’ compliance with the system and prepare reports on the effects of rate capping on councils, and any trends that may arise as a result of
the rate capping scheme.
- The Minister may take action in relation to a council under Section 273 on the basis of a report by ESCOSA. Currently this provision includes ICAC, the Auditor-General and/or the Ombudsman.
- A review of the legislation will be required before 31 December 2023 (five years from the proposed commencement).
The Bill will need to be passed by both Houses of Parliament to be enacted as law, and there is no certainty at this point that it will be successful in the Upper House.
Labor, SA BEST and the Greens made pre-election commitments to oppose rate capping at the behest of councils and the LGA, and we will confirm their positions after
reviewing the detail of the Bill.
We certainly have some questions around the details, such as how the model will deal with cost shifting, the independence and accountability of ESCOSA and potential for political interference, and how the cap itself will be determined, and will be writing to the Minister to seek clarification.
The LGA will take a close look at the Bill over the next few days, and provide further analysis to all members as soon as we can.
However, as a membership association, we will be seeking the views of councils before finalising a position on the legislation.
A date and venue for a Special General Meeting will be confirmed next week, and I look forward to
hearing your views on rate capping and how the LGA can advocate on your behalf to secure the best local government reform outcomes for South Australian communities.