Council notes the Independent Planning and Regulatory Tribunal’s (IPART) determination approving Council’s Special Rate Variation application.
This has been incorporated into Council’s draft 2019/20 Budget and Operational Plan, which was on pubic exhibition from 21 May to 17 June and will be presented to Council for adoption at its next meeting.
Further details about the Special Rate Variation and the IPART process can be found in the frequently asked questions below.
Under the provisions of the Local Government Act 1993 (NSW), a special variation allows a council to increase its general income above the rate peg. Special variations can be for one or several years, and can be temporary or permanently retained in the rates base.
Each year, councils wishing to apply for a special variation make a formal request to the Independent Pricing and Regulatory Tribunal (IPART) in February. The applications are assessed against criteria listed in the Office of Local Government’s Guidelines.
The criteria include demonstrating the need for the variation through key legislated planning documents, including the Community Strategic Plan, Long Term Financial Plan and Resourcing Strategy, ensuring community awareness of the need and extent of the proposed increase in rates, and consideration of the impact on ratepayers as well as the community’s capacity and willingness to pay. In addition, councils must meet criteria related to productivity improvements.
The Independent Pricing and Regulatory Tribunal is the main independent pricing regulator in NSW. IPART sets prices for water, electricity, gas and transport businesses. They set the rate peg for local councils.
The rate peg is the maximum percentage amount by which a council may increase its general income for the year. For most councils, general income consists entirely of rates income. The rate peg does not apply to stormwater, waste collection, water and sewerage charges.
IPART has set the rate peg for 2019/20 at 2.7%.
Council’s Long Term Financial Plan has identified a gap between current projected funding for operation, maintenance and renewal of our assets, and what is needed to ensure they are maintained to an acceptable level into the future in line with the service expectations of our community.
Sutherland Shire Council’s rates model has not changed in decades. In considering how to address the financial challenges in continuing to maintain assets and provide services, Council has now reviewed the rates model and is proposing a fairer way forward for our community.
Council’s current rate structure is based upon land value only, not the market value (land and dwelling). A minimum rate is applicable for units and apartments, and this is currently set at $602.30 for the majority of units and apartments in the Sutherland Shire, this amount is significantly less than houses of comparable market value.
The proposal being considered is to raise the minimum to $900, to create a fairer distribution. The additional income generated will be used to continue to maintain and deliver assets and services into the future.
If the new proposal is approved by IPART, it would be expected that rates will rise from the first rates notice in June 2019. This is subject to Council adopting any recommendation received from IPART.
New unit developments do provide an increase in income to Council which has been included in Council's Long Term Financial Plan. However, new dwellings put increased pressure on our community assets - our roads, parks, playgrounds and facilities such as libraries and leisure centres – and as a result, the cost to Council of maintaining these assets also increases.
Further, as many units only pay the minimum rate, the increase in income does not fully address the ongoing asset maintenance backlog, which is projected to increase to $176 million by 2027/28.
Council manages and maintains local infrastructure assets worth over $2.7 billion that helps shape the quality of life enjoyed by our community. Council’s assets are available to the whole community to utilise and enjoy, and the income from rates enable us to deliver and maintain these assets which include roads, footpaths, libraries, stormwater and waterways, parks, bushland, sportsgrounds, playgrounds and more.
The Special Rate Variation would generate an additional $7.255 million per year in rates income. The rates increase will help to fund the infrastructure backlog and services to meet the needs of the community and ensure that Council is financially sustainable in the long term.
In addition to the proposed change to the minimum rate, Council must also consider a range of financial strategies to ensure its long term financial sustainability. This may include decisions around the prioritisation of assets and services, efficiency improvements, user fees and charges or asset consolidation.
Council will continue to consult with the community to explore the community’s desired service levels and infrastructure needs, reflective of income available.
The minimum rate is currently set at $602 per annum, which is applicable for units, apartments, and some villas, town houses and duplex. If you take a look at your rates notice you will be able to see if you are currently paying the minimum.
(See highlighted red box in the image below)
Anyone currently paying under the new proposed minimum would see their rates increase to $900 per annum. For example, someone currently paying $800 would also be increased to the new minimum of $900. If a property, whether it be a unit, town house or villa, is already paying more than the $900 then they will only experience a rate increase equal to the rate peg amount set by IPART of 2.7%.
If you would like further clarification on the impact of the special rate variation on your rates, please give us a call on (02) 9710 0585 and we will be able to provide you with an answer for your specific circumstances.
Councils have no say in how the rate peg is set. The rate peg is set by IPART and is based upon the Local Government Cost Index (LGCI).
The LGCI measures price changes over the previous year for the goods and labour an average council will use.
Rate pegging determined by IPART limits the amount by which councils can increase their general income for the year. IPART announced the 2019/2020 rate peg limit at 2.7%. A special rate variation allows councils to increase their general income above the rate peg.
Council is proposing to apply for a special rate variation to increase its general income by 8.8% in 2019/2020 (inclusive of the rate peg of 2.7%).
Properties above the minimum rate will have an increase equal to the rate peg of 2.7%, which mostly applies to houses.
It is important to note that the rate increase will not affect utility charges including waste and stormwater charges that are calculated and levied separately.
Under the proposed model, the minimum rate would increase to $900. Any residential unit/apartment owner currently paying less than this amount will be impacted.
There are currently 20,531 residential unit/apartment owners paying the current minimum rate of $602.30 – which represents 25% of total rate paying households in the Sutherland Shire.
Under the proposed model, 33% of total rate paying households will pay the new minimum.
Owners of dwellings that already pay more than $900 will only experience a rate increase by the rate peg amount set by IPART of 2.7%.
When preparing the Financial Strategy and Long Term Financial Plan, a key factor taken into consideration was the soci-economic profile of the Sutherland Shire Local Government Area. With rates, annual charges, and user fees and charges making up the majority of Council's total revenue, it is importnat that the capacity to pay is one of those factors. To view Council's summary analysis of Sutherland Shire's Socio-Economic profile, see our Addendum Socio-Economic profile.
Under the provisions of the Local Government Act 1993 (NSW), a special rate variation allows a council to increase its general income above the rate peg. Each year, councils wishing to apply for a special variation must make a formal request to the Independent Pricing and Regulatory Tribunal (IPART). The applications are assessed by IPART against criteria listed in the Office of Local Government’s Guidelines.
Special variations can be for one or several years, and can be temporary or permanently retained in the rates base. Special Variations can be made to increase minimum rates only.
Full details on the Special Rate Application process and guidelines can be found at: www.ipart.nsw.gov.au
Each dwelling within a residential flat building constructed in and around our village centres is levied $20,000 for the provision of additional (or improvement) of open space so that it will continue to meet the need created by the additional residents. However, there are statutory constraints that control how contributions are levied and Council must also plan for the costs of maintaining these assets into the future. A schedule that details where these funds will be spent is included in Council’s Development Contribution Plans.
The NSW government limits Council to applying a maximum levy of $20,000 per dwelling in a residential flat building. This sum is insufficient to meet the full demand for new and upgraded infrastructure that is created by new residents. Increased demand for additional parking, improved roads and stormwater drains, upgraded pools and other community infrastructure must be funded from rate revenue or grants and subsidies from other levels of government. Likewise, the ongoing maintenance of the new and improved assets cannot be funded through this levy.
For more information on development contributions visit: http://www.sutherlandshire.nsw.gov.au/files/sharedassets/website/document-library/land-use-and-planning/planning/2017-02-s94-fact-sheet-2.pdf
For more information about the Development Application (DA) process visit: http://www.sutherlandshire.nsw.gov.au/Development/Development-Applications/The-DA-Process
The Greater Sydney Commission has set 5 and 20 year housing targets based on Greater Sydney growing by another 1.7million people by 2036. The Greater Sydney Commission’s South District Plan has set Sutherland Shire a five year target of 5,200 additional dwellings from 2016 to 2021.
The State government continues policies and set population targets which all councils are required to meet. Council has a mandatory responsibility, under the NSW Environmental Planning and Assessment Act 1979, to prepare housing strategies to meet the NSW State Government housing targets, and bring them into effect through a Local Environmental Plan (LEP).
Current population projections show that NSW will grow to 9.9 million people by 2036 and these new residents will need somewhere to live. According to Profile ID (https://profile.id.com.au/sutherland) the official estimate population of the Sutherland Shire as of the 30th June 2017, is 227,546. The population has grown by just over 5,000 people, or 2.29%, over the last five year period.
There are approximately 84,453 dwellings in Sutherland Shire as of 2016 (ABS). The number of dwellings grew by a total of 1,765 or 2.1% in the last five year census period. Whilst development does add to Council’s revenue it also increases demand on our existing infrastructure accelerating changes in key benchmarks such as our Infrastructure Backlog Ratio and Infrastructure Renewal Ratio. Further information is available in on our Long Term Financial Plan.
For more information about our housing strategy and growth targets that have been set for the area, please visit: https://www.sutherlandshire.nsw.gov.au/Development/Local-Environmental-Plan-LEP/Local-Environmental-Plan-2015-LEP-2015/Key-Topics/Strategies/Housing-Strategy
Over time, the range of assets and services Council provides to meet the needs of our community has changed and grown. Our assets include roads and footpaths, parks, sporting fields, libraries, stormwater management and much more.
Our Long Term Financial Plan shows we are facing a financial challenge in considering how we maintain our assets and the level of service our community expects in years to come.
Council has been undertaking a continual replacement and upgrade program to meet the needs of our community but many assets are already due for renewal and there is a $42M renewal backlog that will only continue to grow if not funded adequately.
 The renewal backlog from the 30 June 2018 Financial Statements was $42 mil or 2.13%.
IPART sets the timeframes and detailed requirements for Special Rate Variation (SRV) applications, including ensuring the community is aware of the proposal and can provide feedback.
Key dates in the process are:
30 November 2018
COMPLETE: Council notify IPART if considering an SRV application for 2019/20
11 December 2018 – 4 February 2019
COMPLETE: Community consultation undertaken around proposal
| 4 February 2019
||COMPLETE: Special Council meeting. Council will submit an application to the Independent Pricing and Regulatory Tribunal (IPART) seeking a Special Rate Variation (SRV) to increase the minimum rate.
11 February 2019
SRV application due to IPART
|14 May 2019
IPART to notify Council of the decision on Council's SRV application.
Residents who hold their pensioner concession card are entitled to apply for a rates concession, which is split in to two components: the Government Rebate $250, and the Council’s voluntary rebate $105. Council will also continue to offer payment deferral options to all pensioners.
For more information about applying for a rates concession rebate, please see Council’s website: http://www.sutherlandshire.nsw.gov.au/Council/Council-Rates/Rates-Concessions-and-Rebates/Pensioner-Rate-Concession-Application
Council also has a range of payment options available for those experiencing significant hardship or disadvantage. Please contact our rates team on 02 9710 5533 to discuss your individual circumstances.
Policies and documents
Rates Recovery and Hardship Policy
Pensioner Rate Concession Application
Pensioner Deferment of Rates Application
Hardship Rate Relief Application
How your Rates are Calculated
Rates Statutory Declaration General
Enquiries can be directed to Rates Hotline on 9710 0585 or email@example.com