Special Variation to Rates
The Council's application was made under Section 508A of the Local Government Act 1993 and will be made available shortly.
The application for a Special Variation is a key component in the resourcing of the Council's 2010-2020 Integrated Plans and Strategies. For more information click here.
In response to community feedback that indicated that support for the increase to rates would be more favourable if the increase was implemented at a more level over the five year period than was originally proposed, the Council resolved to change its proposed rate increase of 10.12% in year 1 and 4.6% in the following four years to 7% in year 1 and 5.99% annually in the following four years.
The Minister for Local Government, the Hon Barbara Perry MP, announced on 2 July 2010 that she has partially approved the Council's application for a Special Variation to rates. To read the Mayor's letter to the community and ratepayers on the result of the Council's Special Variation to Rates application, please download "Result of Special Variation Application" at right.
Many issues were raised in the formal submissions received by the Council on the proposal. The most often raised issues, and the Council's response to these are below:
1. Council should consider and/or implement alternative means of achieving savings or additional revenue
Just under 50% of submissions raised this issue and suggestions to save money included reducing staff/ staff salaries especially for senior management, reducing Councillor salaries, reducing council vehicles, reducing expenditure on programs not considered essential or core business such as the Sister City programs, reducing expenditure on Councillor travel and food, introducing user pays, planning better, using resources more efficiently and selling off under performing assets.
Council's response to this issue
Many of these suggestions had considered by the Council prior to considering an application for a Special Variation to rates as follows:
- Reductions should be made in staff numbers - in 2005 the Council restructured and moved from a five group structure to a three group structure, resulting in the reduction of two Group Managers, four Branch Managers and four administration positions resulting in a saving of $860,000 in salaries, wages, vehicle and oncosts. Currently employment numbers are fixed and all vacant positions are reviewed by the Executive Management Team prior to replacement. Any further cuts to staff would result in a cut to the services provided by the Council to the community.
- Reductions should be made to salaries for staff and senior management - staff salaries are based on the relevant awards and salaries for senior management are market rate.
- Reductions should be made to salaries for Councillors - Councillors are paid a nominal fee for the services they undertake on behalf of the Council, which is set by the NSW Local Government Remuneration Tribunal. As part-time elected representatives the allowance for Blue Mountains’ Councillors is 44% less than the basic wage. Each year the Tribunal reviews the fee and determines the annual percentage increase.
- The number of council vehicles should be reduced - council vehicles are provided to enable staff to carry out their duties including site visits and meetings, as well as to certain staff as part of their salary package. These cars are available for use during business hours by all staff on a booking system.
- Expenditure on non-essential business like Sister City programs should be reduced - the Council participates in two Sister City programs (Sando, Japan and Arizona, USA) and one community development program in East Timor. These programs are run by community members to foster relationships with other communities and in the case of East Timor assist with the rebuilding of one of the world's poorest countries with community projects which have included installing water tanks and solar panels. The Council provides a minimal contribution to these programs, with most of the funds provided by volunteers and the community. Exact amounts of funds allocated to these programs can be found in the Council's Annual Report.
- Councillor food expenses should be reduced - in order to service the community and perform their duties, the Mayor and Councillors attend weekly Council meetings or briefings which are usually held out of working hours (evenings and weekends). As required, modest meals and refreshments are provided to the Councillors who attend these meetings and briefings.
- Councillor travel expenses should be reduced - the Council pays for the travel expenses of the Councillors for attending meetings. The Council has not paid for any recent overseas travel costs. Any recent overseas travel undertaken by the Mayor or Councillors has been at the expense of the host country. Exact expenditure of travel expenses is available in the Council's Annual Report.
2. Inability of pensioners and low income residents to be able to afford the rate increase
Twenty seven percent of submissions raised this issue.
Council's response to this issue
As a result of feedback from the community expressing concern for the ability of pensioners to be able to afford the increase to rates if the Special Variation is approved, for 2010-11 the Council will increase the Pensioner Rebate by $20.00 per rateable property. As well, the Council will review its Hardship Policy and Hardship Relief Protocol and assess further options available to assist pensioners including determining the impact to the Council of increasing the Pensioner Rebate as well as approaching the State Government for a greater contribution.
3. Lack of local services currently provided
Just under 20% of submissions raised this issue, particularly in relation to lack of footpaths, sealed roads, kerb & gutters as well as opening hours for pools and libraries.
Council's response to this issue
The Council currently provides a wide range of services and facilities to meet the broad needs of a diverse community. To be able to do so within the Council's budget requires the Council to carefully prioritise the allocation of funding to its various activities to satisfy the needs of as many of its community as possible.
While it is desirable to provide footpaths, sealed roads and kerb and guttering in all streets in all townships, the cost of these works is high and the Council has determined that other works - including the maintenance of existing infrastructure which is ageing and in need of repair, should take priority.
The opening hours of facilities such as the City's five pools and six local libraries also needs to be considered not only in the needs of the users of these facilities, but also in regards to the costs required by the Council to run these venues. At this stage, the Council believes that the opening hours for the pools and libraries currently meet the needs of the majority of the community.
4. Poor performance with investments
Just under 15% of submissions raised the issue of poor investment performance, heavy financial losses of millions of dollars, particularly in the collapse of Lehman Bros or through other overseas investments. Submissions also raised the issue of why the Council has an investment portfolio at all, with suggestions that these investments should be realized and the funds made available should be directed to the shortfall.
Council's response to this issue
Recent global financial events have impacted on the Council's investment portfolio with real monetary losses to date totalling $500,000 from a Commonwealth Bank issued security. To date, the Council has marked down the book valuation of its investments by $4.9 million. As these are unrealised capital losses, it is possible that as the market improves so could the value of the Council investments however it is expected that the Council will incur some further real monetary losses. The Council has set aside $2.8 million in cash reserves which will fund any real capital losses that may eventuate.
All investments made by the Council comply with all relevant legislation and the Council's independent advice has given assurance that all investments comply with the relevant legislation and are highly rated investments.
The Council's investment portfolio is $29 million and this is at original face value as highlighted in the Monthly Schedule of Invested Monies Council Business Paper. The $29 million investments have an estimated $23.5 million market valuation if the Council were forced to sell these investments. Alternatively stated, the Council investment fair book values have reduced by $5.5 million. It is interesting to note that the market valuations have improved by $1.2 million dollars this financial year and the fair book values as at April 2010 are now behind original face value by $4.9 million not $5.5 million.
5. Council should live within its budget
Eleven percent of submissions raised this issue, stating that the Council should limit its spending to its available budget and if necessary make cut backs.
Council's response to this issue
Over the past few decades, the costs the Council faces in delivering services and facilities to its community have increased at a faster rate than the Council's ability to generate income. A major contributor is the result of 35 years of rate pegging (the State Government's annual rate increase limit) which is generally below inflation. Many of the Council's costs have increased by a greater percentage than rate pegging (and in many cases greater than inflation).
The landscape of the Blue Mountains region, with 27 towns and villages spread along a 100km transport corridor with many outlying small settlements, all surrounded by a World Heritage National Park, adds to costs for the Council.
As a primarily residential local government area with little industry and business and almost no new land available for development, the Council is greatly restrained in its ability to generate additional revenue.
The result of these factors is that the Council has a diminishing amount of revenue available to meet the costs of upgrading and replacing its built facilities and infrastructure.
The Council has worked hard over the past years to contain its expenditure and save money with operational efficiencies. This has been very successful and any savings have ensured that levels of service provided to the community have continued. While the Council will continue to strive for a more efficient work place, any future savings will not be enough to continue to provide the current level of services without additional revenue.
A Special Variation to increase rates (as the Council has proposed) is the process made available to local governments by the State Government to increase rates revenue when required, particularly if funding is needed for ageing facilities and infrastructure. Annually around 20 - 30 NSW councils (of a total of around 150 councils) apply for a Special Variation and applications will only be approved by the Minister for Local Government if a council proves a sound business case, including the implementation of all possible alternatives for productivity savings and revenue raising.