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LGA Rate Capping FAQ

Local Government Association of South Australia Rate Capping FAQ

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.

About 70% of funding for South Australian council services comes from the only tax councils are allowed to collect – rates. The remaining 30% is made up of:

  • 3% Statutory charges
  • 9% User charges
  • 14% Grants and subsidies from the state and federal governments
  • 1% Investment income
  • 3% Reimbursements and other.

This revenue is used to provide many services to the community – some of which are legislated and others which are provided to meet community needs. Councils in South Australia operate under the Local Government Act 1999 and 67 other pieces of legislation.

Whether a service is a legislated requirement of councils or is provided by local choice, the Local Government Act 1999 requires that a council is “responsive to the needs, interests and aspirations of individuals and groups within its community” and that it must “seek to ensure that council resources are used fairly” (section 8(b) and (h)).

They do. In fact, councils are legislatively required to consult with their communities on a range of matters. No other sphere of government is required to do this.

Each council in consultation with its community is required to develop publicly available plans, including long-term financial and infrastructure plans. These plans set the long-term objectives and priorities for the community. Councils also prepare Annual Business Plans, which includes income sources, infrastructure needs, service needs and what the council believes the community
can afford in rates. Unlike other levels of government, councils release their Annual Business Plan and budget for community consultation prior to being adopted.

This consultation influences the annual budget that is presented to council for consideration and adoption. The budget can only be set at councils meetings, which are open to the public.

Constituents are encouraged to not only participate during the Annual Business Plan consultation, which typically occurs around April/May, but throughout the year. Consultation helps councils to understand the services their communities need. All councils have a community consultation policy that guides how they will seek and consider the views of ratepayers and residents. Contact your council to ask them about their public consultation 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.