What is rate capping?
Rate capping is where the State Government sets a limit on the revenue councils can collect from their community every year to fund local services.
The South Australian Government introduced rate capping legislation into Parliament in 2018, but it was voted down by Labor, SA-BEST and the Greens in the Upper House in 2019.
The Government has indicated they will again attempt to introduce a rate cap for South Australian councils in 2020.
Why do councils oppose this policy?
There are a number of reasons why South Australian councils do not support rate capping.
- Rate capping takes decision making away from locally elected council members, who understand what’s important for their community.
- Rate capping creates more “red tape” for councils, reducing the funding available for local services.
- Rate capping is unnecessary. Average council rate increases have been steadily decreasing, and in 2019/20 were well below increases to State Government fees and charges.
- Rate capping does not address the increased costs put onto councils by the State Government. This can be through forcing councils to take on new responsibilities, or increasing the taxes and levies that councils are required to pay (such as the Solid Waste Levy, which increased by 40% in 2019/20).
- Rate capping forces councils to delay maintenance on roads, bridges, footpaths and other infrastructure, which means the cost of replacing these things is left to future generations.
The local government sector supports evidence-based reforms that will improve the efficiency and transparency of councils while driving downward pressure on council rates. The LGA’s submission to the State Government on local government reform can be downloaded here.
Councils collect less than 4% of taxation, while providing hundreds of facilities and services that improve their communities.
Councils in South Australia are already legally 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.
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 would reduce a council’s ability to get this balance right.
Every council can already cap its own rates each year, based on the needs of their community and their capacity and willingness to pay.
Only two states in Australia have rate-capping - New South Wales and Victoria.
In NSW, where rate capping has been in place since 1977, it has resulted in loss of council services, in council amalgamations, in significantly higher user fees and charges, and decaying infrastructure.
Rate capping was introduced in Victoria in 2016, and there is growing evidence that the process is complicated and costly, and diverting resources away from community services.
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