Council forced to raise rate peg
THEORETICAL numbers are causing issues with Clarence Valley Council's long-term financial plan.
The Independent Pricing and Regulatory Tribunal has requested the council change their estimated rate pegging of 2% to 2.5% in their application for a special rate variation.
General manager Ashley Lindsay said while this won't mean anything for the years the council has an SRV in place, it could affect rates after the SRV is finished.
"Our long-term financial plan was based on the 2% SRV, so council's base case with a 2.5% increase puts council in a better financial position but it's only marginal,” he said.
"It's all theoretical - when you look at the last four years the average is 2%, so it's painting a picture that I don't think is realistic over the long term but that's the requirement that the guidelines say that you have to use 2.5% as your base case.”
When the council began the process of planning for the SRV, they were forced to plan from the 2017-18 information as the Office of Local Government hadn't released the 2018-19 guidelines.
"We'd used the wrong assumption that given the history of the last four years, where the rate peg had been less than 2%,” Mr Lindsay said.
"We'd said that was realistic, we were always trying to model a realistic position for the ratepayer, we didn't want to overestimate ... 2.5% based on our recent history, it wasn't realistic and we put that argument to IPART and they said, 'Well no, you have to have 2.5%.'
"It's one of those things you just don't know, in four or five years' time inflation might go through the roof, America might drop a nuclear bomb on North Korea and the whole world goes haywire and we could potentially have a rate peg increase of 5%.
"Our best information we have at the moment, over the long term, the Reserve Bank is indicating that consumer price inflation is likely to be between 2-2.5%.”
This change to their application does not mean the council will need to begin community consultation again because the SRV itself does not change.
Mayor Jim Simmons said the council will still consult with the community over the application but they were not required to begin the process again.
"Council has to between now and December go out and communicate with the community about a special rate variation,” he said.
"It's just an amount that IPART wanted us to change in our documents for consultation with the community.”
Mr Lindsay added that a lot of work had gone into the application and they intended to get it right this time.