The Essential Services Commission’s third biennial report found that, to the end of the 2021–22 financial year, ratepayers paid less per property on average under rate capping than they paid before rate caps. However, as the report only covers up to the end of June 2022, any challenges councils have faced in the last 10 months are not reflected in this report.
The commission’s executive director of pricing, Marcus Crudden says based on the pre-cap trend, ratepayers are paying lower rates than they would have if rate capping had not been introduced.
“Average annual increases in revenue per property from rates and charges fell from three per cent above inflation in the three years prior to rate capping, to -0.4 per cent below inflation in the six years since.”
That equates to an inflation-adjusted decrease of $7 per year in revenue from capped rates over the six years of rate capping. In the three years prior, the average increase was $52 per year.
“Overall, ratepayers have paid lower rates than they would have without rate capping. However, the experience of individual ratepayers varies due to factors outside the rate capping system such as relative property values and differing rates for various property types. For example, revenue per property from capped rates has increased for rural properties more than other property types.”
The report found that, each year where a revaluation took place, more than half of all ratepayers experience either rate decreases, or increases below the rate cap.
Ratepayers have also paid more in service charges (which are outside the rate cap) each year, due to changes in the waste market and the introduction of new charges by some councils. The scope of services delivered and the types of costs recovered through waste charges varies between councils. These differences are reflected in the range of service rates and charges revenue per property that can be observed across the sector (from $41 to $469 in 2021–22).
While there has been a deterioration in the sector’s financial health, in general, it remained sound to the end of June 2022. The sector as a whole had a positive operating position and the ability to meet short- and long-term liabilities, though results for individual councils varied. The ‘small shire’ council group on average reported a negative result, and may face difficulty in continuing to deliver services at existing levels without increasing their revenue or reducing their expenditure.
“Some councils may face some difficult decisions to maintain their long-term sustainability if higher inflation persists,” Mr Crudden said.
There were mixed results in service quality and satisfaction measures, with some improvements on average across the sector.
Fact sheets on each council’s revenue, expenditure and financial sustainability before and after rate capping are available on the commission’s website.
