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Get the facts on rate capping

The LGA is strongly opposed to rate-capping and forced amalgamations. We are focused on intelligent local government reforms such as boundary reform, benchmarking and shared services, which will deliver efficiencies and better outcomes for communities.

Summary of LGA's key advocacy messages in response to rate capping

  • Rate-capping centralises decision making about council rate revenue and shifts accountability from community representatives to an unelected bureaucracy. 
  • Rate-capping interstate has resulted in more red tape and bureaucracy and has increased administration costs for councils and state government, diverting funds at away from core services. 
  • The role of councils to work with communities to develop an annual business plan and budget would be duplicated at the state level, where a rate cap will be determined with no community input. 
  • Rate capping does nothing to address the shifting of costs and responsibilities between state and local government and the pressure this creates on local government rates.
  • Rate capping shifts costs to future generations as councils will not be able to raise the revenue required for the maintenance and renewal of assets forecast in long term management plans.

Background

Councils in South Australia are legally already required to:

  • continually strive to improve the efficiency and effectiveness of their services; and
  • consult with their community on the setting strategic priorities, annual business plans, and rates.

Rate-capping is an externally imposed maximum percentage council rates revenue may increase from one financial year to the next. In this form, it has been in place since 1977 in New South Wales and was re-introduced in Victoria in 2016.

Local government is the level of government closest to the community. It is also the most trusted level of government, when compared to the State and Federal governments.

The LGA welcomes discussion on setting of rates, as it focusses attention on why and how council rates are raised. However, the local government sector is firmly opposed to proposals under which unelected bureaucrats would effectively take over the role of elected members chosen by communities to represent their interests.

The LGA agrees that it is essential for councils to engage with communities. Councils already work with their communities to strike a balance between expenditure, revenue and the types of services expected by the local community.

An externally imposed rate cap will reduce a council’s capacity to get this balance right.  Rate-capping will introduce an expensive bureaucratic process that will restrict vital service delivery to the community or, if services are maintained, postpone the financial burden of today’s services and infrastructure onto future generations.

Should rate capping be introduced, it would impose an extra layer of bureaucracy and two extra decision makers – the Essential Services Commission of SA (ESCOSA) and the Minister for Local Government on top of what is already a legislative requirement for councils to consult with their communities.  However, unlike the councils, neither ESCOSA nor the Minister would be directly accountable to the affected ratepayers.

Only two states in Australia have rate-capping; New South Wales and Victoria.  There is considerable evidence in NSW, where rate capping has been in place since 1977, to show that rate capping has resulted in loss of council services, in council amalgamations, in significantly higher user fees and charges, and in decaying infrastructure as maintenance levels decline and costs are shifted onto future generations.

In 2016, rate-capping was introduced in Victoria where evidence is already mounting that the process is cumbersome and costly while diverting resources away from community services.

Impact of Rate Pegging on SA Local Government report

Empirical research from University of New England Professor Brian Dollery shows four decades of rate capping has not made NSW councils more efficient. Download report: Impact of rate Pegging on SA local government

Rate Capping Information Pack

The LGA has also prepared an information pack, including Frequently Asked Questions, to assist councils and their communities to understand the real impact of rate capping on their communitites.

Click here to download: Rate Capping Information Pack_web.pdf

Further information on Council Rates

For further details of council rates in South Australia, including fact sheets on the range of services funded by council rates, property valuations and rebates, please click here: LGA Council Rates.

Overview of the Local Government (Rate Oversight) Amendment Bill

The Government introduced rate capping legislation into the South Australian Parliament on 19 June 2018.

A copy of the Bill and explanatory paper can be downloaded below:
Government of South Australia - Local Government (Rate Oversight) Amendment Bill 2018.pdf
Government of South Australia - Explanatory Paper - Local Government (Rate Oversight) Amendment Act 2018.pdf

A copy of the LGA's analysis of the Bill and overview of the Victorian model can be downloaded below:
LGA - LGA analysis of Local Government (Rate Oversight) Amendment Act 2018
LGA - LGA overview of the role and decisions of the Victorian Essential Services Commission in administering the local government Fair Go Rates system

LGA Submission to inquiry into local government rate capping policies

On 15 May 2015, the South Australian Parliament’s Economic and Finance Committee resolved to undertake an inquiry into local government rate capping policies.  Following consultation with member councils, the LGA provided a submission the Committee on behalf of the local government sector.  In addition to this submission, the LGA also appeared before the Committee to provide evidence on the impacts of rate capping on local communities. 

For a copy of the Economic and Finance Committee's terms of reference please click here: Local Government Rate Capping Inquiry - Call for Submissions(97 kb)

For a copy of the Economic and Finance Committee's Final Report, including a copy of the Minority Report, please click here: Economic and Finance Committee - Final Report(1498 kb)

For a copy of the LGA submission to the Committee please click here: Economic and Finance Committee Inquiry LGA Submission(314 kb)

Further information on the Committee, including all submissions provided, may be found on the Committee's website: https://www.parliament.sa.gov.au/Committees/Pages/Committees.aspx?CTId=5&CId=173 

To review the Council services at risk click here

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