Annual Report 2018-19

We approve higher rate caps for councils, produce reports on council compliance and on outcomes in the sector, provide advice to the Minister for Local Government, and conduct inquiries and reviews.

Our year in review

We assessed higher cap applications from Mansfield and Warrnambool 

We assess and approve higher rate caps proposed by councils. In 2018–19, we received two applications for a higher cap. 

We approved Mansfield Shire Council’s proposed higher cap for 2019–20 of 13.94 per cent (including the minister’s rate cap) to transfer $1.2 million from waste charges into general rates.

We partially approved Warrnambool City Council’s proposed higher cap of 4.5 per cent (including the minister’s rate cap), approving the higher cap for two years, instead of the three years sought by the council. The higher cap will raise an extra $3.4 million for spending on assets including bridges, footpaths, cycleways and parks.

We published our annual council compliance report

We monitor and report on whether councils comply with their rate cap based on data provided by the councils. 

One council (Yarriambiack Shire Council) did not comply with their rate cap, however we were satisfied with their explanation that it was due to late property valuations. The council will rectify this mistake in 2019–20. 

All other councils substantially complied with their rate cap.

We published our first outcomes report

Every two years, we report on the outcomes of rate capping in Victoria and identify any impacts or trends that might be emerging across the local government sector. In 2018–19, we released the first of these reports (covering the years 2016–17 and 2017–18), which provides information about councils’ service, infrastructure and financial outcomes following the introduction of rate capping. 

The report also includes fact sheets on the impact of rate capping for each council and for each of the five council groupings.

Progress report, 2018–19

Key focus: monitoring council compliance
Status: Complete

• Undertake random audit activities and assess annual compliance with caps to minimise the incentive for councils to circumvent the cap.
• Ensure the higher cap application process is clear and does not impose unnecessary burdens. 

Outputs    

Published our annual compliance report. Random audits are currently in the planning stage.

Outcomes

Annual compliance checks found only one council materially non-compliant.

Councils did not report that our processes are an unreasonable barrier to submitting higher cap applications, but did tell us how to continue to improve our processes.

Key focus: monitoring the outcomes of our rate cap regulatory framework
Status: Complete

• Highlight the potential impact of rate capping in our outcomes report.

Outputs    

• Published our first outcomes report, including analysis of trends in financial position, services, and infrastructure asset renewal and maintenance in the first two years of rate capping. 

Outcomes

• Communities, councils and the Victorian Government were informed about early trends following the introduction of rate capping.

Key focus: higher cap applications 
Status: Complete

• Ensure our 2019–20 higher cap decisions are consistent with the long-term interests of ratepayers and the financial sustainability of councils.
• Provide guidance to councils on what is required in a higher cap application.
• Promote best practice community engagement in the local government sector.

Outputs

• Published updated guidance for councils on our rate cap regulatory framework.
• Published decisions on higher cap applications received for 2019–20.

Outcomes

• Published special orders of approved higher caps.
• The applications we received covered all legislative matters and reflected the councils’ consideration of the long-term interests of ratepayers and the community. 
• Higher cap applications we received indicated councils are doing a good job at community engagement. We provided feedback on areas for improvement.

Key focus: advising Victorian Government stakeholders 
Status: Complete

• Provide timely and robust advice to the Minister for Local Government on rate caps and any other requested topic.
• Liaise with Local Government Victoria on any changes to the framework as a result of the proposed new Local Government Act.
• Identify emerging issues relating to the rate capping framework and engage with Local Government Victoria where appropriate.

Outputs

• Provided advice to the minister, as requested, on setting the average rate cap for 2019–20.

Outcomes

• Provided the Minister for Local Government with relevant, timely and high quality advice.
• While amendments to the Local Government Act are pending, we continue to liaise with Local Government Victoria on any changes to the framework.

Measuring our success in 2019–20

Goal	Objective	What outputs do we intend to produce?	What outcomes do we intend to achieve?
Goal 1	Key focus: monitoring council compliance Undertake random audit activities and assess annual compliance with caps to minimise incentives for councils to circumvent the cap. Ensure the higher cap application process is clear and does not impose unnecessary burdens.	Publish our annual compliance report, including the results of any audit activities.	Annual compliance and random audits find no significant non-compliance with the appropriate rate cap. Councils do not report our processes as an unreasonable barrier to submitting higher cap applications.
Goal 3	Key focus: higher cap applications Ensure our 2020–21 higher cap decisions are consistent with the long-term interests of ratepayers and the financial sustainability of councils. Provide relevant guidance to councils on what is required in a higher cap application. Promote best practice community engagement in the local government sector.	Publish updated guidance for councils on our rate cap regulatory framework. Publish decisions on higher cap applications received for 2020–21. Publish special orders of approved higher caps.	Higher cap applications outline all legislative matters and reflect councils’ consideration of the long-term interests of ratepayers and the community. Higher cap applications we receive from councils show they are improving their community engagement practices.
Goal 3	Key focus: advising Victorian Government stakeholders Provide timely and robust advice to the Minister for Local Government on rate caps and any other requested topic. Liaise with Local Government Victoria on any changes to the framework as a result of the proposed new Local Government Act. Identify emerging issues relating to the rate capping framework and engage with Local Government Victoria where appropriate.	Provide advice to the minister, as requested, including advice on setting the average rate cap for 2020–21.	The Minister for Local Government receives relevant, timely and high quality advice. Local Government Victoria understands how the new Local Government Act and associated guidance might affect our role in rate cap regulation.

Environmental factors

The main environmental factors influencing our work are:

• The Victorian Government is currently reviewing the Local Government Act 1989, which makes up part of our local government regulatory framework. The proposed updates to the legislation have implications for how councils operate, although they don’t seem to affect the regulatory framework we use to assess higher cap applications.
• As part of its oversight of Local Government Victoria, the Environment and Planning Committee of the Parliament of Victoria is undertaking an Inquiry into Recycling and Waste Management. The committee’s terms of reference were handed down on 6 March 2019 and it will produce a final report by November 2019, an interim report was released in August 2019.
• The government has commenced an inquiry into the local government rating system to identify changes designed to improve its fairness and equity. The Minister for Local Government has appointed a panel to lead the Victorian Local Government Rating System Review, which will provide recommendations to the minister in March 2020.

Cost of our local government activities

In 2018–19, the total cost of our local government regulatory activities was $2.00 million. The cost includes the direct costs incurred by the team plus an allocation for overhead costs.