What is a Special Rate Variation?

    A special rate variation (SRV) allows a council to increase its general rates income above the annual rate peg.

    The NSW Independent Pricing and Regulatory Tribunal (IPART) sets the rate peg and determines applications for a SRV.

    What is a Rate Peg?

    IPART annually reviews council rates and sets the maximum increase councils can apply to their general rates income – this is called the rate peg.

    The rate peg is mainly based on the Local Government Cost Index (LGCI) and may include a reduction for productivity gains. The LGCI measures price changes over the previous year for the goods and labour an average council will use. The rate peg applies to existing works and services, and not to new infrastructure and/or additional service needs.

    IPART has advised councils to assume a rate peg increase of 2.5% for future years.

    What is IPART?

    IPART is the state’s main independent pricing regulator for water, public transport, local government, electricity and gas industries, as well as the licence administrator of water, electricity and gas, and the scheme administrator and regulator for the Energy Savings Scheme.

    IPART also undertakes reviews and investigations into a wide range of economic and policy issues and performs a number of other roles at the NSW Government’s request.

    Under delegation from the NSW Minister for Local Government, IPART’s functions include setting the annual rate peg, and assessing and determining SRV applications.

    How are my rates calculated?

    Rates are levied to all rateable properties using a combination of a base amount and land valuation. The base amount is the same for all properties and reflects the Council’s assessment of costs that could reasonably be said to be common to all ratepayers regardless of property use or location, while the land value is determined by the Valuer General of NSW.

    Rates levied on property owners based on land value vary according to:

    • Your land category or sub-category (e.g. residential, farmland, business).

    • Your land value (not including the value of your home or other structures).

    • Council’s rating policy (e.g. business rates are higher than residential rates).

    In addition to rates, other charges may appear on your rates notice that are not subject to the rate peg such as a waste management charge, sewerage service charge and waste minimisation charge.

    Why is Council considering applying for an SRV?

    Like almost every other NSW council, Lismore City Council is struggling to balance community expectations for services with current levels of funding.

    The on-ground cost to deliver services continues to rise by CPI or higher annually and the state government continues to ask more of local government every year. However, Council’s revenue only rises by the legislated rate peg of 2.5%.

    The reality Council now faces is that it is unable to provide its current services without increased revenue.

    What will the impact be on my rates?

    You can find full details about how this will affect rates in our Rates Consultation Fact Sheet. This covers average residential, farmland and business rates under each of the proposed SRV options, as well as a detailed overview of impacts based on the rateable value of properties.

    The land valuations used to calculate the SRV’s impact on rates in the fact sheet is current, however, the NSW Valuer General will issue new valuations in 2020. This will change rates from 1 July 2020. It is not possible to pre-empt what the change in valuation will be at this time.


    What will the SRV funds be used for?

    Council proposes to use additional income from the SRV to deliver better roads and increase economic development activity.

    We will rebuild more roads and undertake increased gravel road maintenance. The additional funds will also be used to improve the local economy by enhancing our CBD and riverbank areas and provide incentives for new businesses to open. Please read the Rates Consultation Fact Sheet for more detailed information.


    How will pensioners be affected?

    Pensioners will continue to receive the statutory pensioner rebates from Council and the state government.

    I do not pay rates but I live in the Lismore LGA. How will the proposed SRV affect me?

    Council rates are levied on property owners. However, higher rates form part of costs which non-ratepayers may bear, including tenants currently paying rent in the Lismore LGA, and the cost of goods and services. Infrastructure, facilities and services are provided by Council for all residents of, and visitors to, the Lismore LGA. Building better infrastructure, facilities and improving services benefits everyone.

    I own property and pay rates but live elsewhere. How will the proposed SRV affect me?

    Improved infrastructure, facilities and services benefit both tenants and non-residents as well as those living in Lismore. All ratepayers of Lismore received information with their rates notice in July 2019 about the process and the opportunities to find out more and provide feedback on this proposed SRV.

    If Council’s SRV application is successful, the rate increase would apply to all ratepayers, including residents and non-residents.

    What is the SRV application process?

    Applications for a SRV are assessed by IPART against criteria set by the NSW Office of Local Government.

    These criteria state that Council must:

    • Clearly articulate and identify in the council’s strategic documents the need for, and purpose of, the SRV.

    • Ensure community awareness of the need and extent of the proposed increase in rates.

    • Show that the impact on affected ratepayers is reasonable.

    • Ensure that Council’s strategic documents are exhibited and adopted by Council.

    • Council must explain the productivity improvements and cost containment strategies that have been realised and are planned to be realised.

    The Council will decide in November 2019 if it will make a SRV application. If an application is to be lodged, it must be submitted to IPART by February 2020. IPART will determine the applications in May 2020.

    How do our rates compare to other councils?

    Lismore is a regional city and has a total population of 43,843 – the second largest population in the region after Tweed Shire.

    Council provides the necessary services and infrastructure to support a regional city. With major public and private hospitals, tertiary education services, a regional airport, retail services and large sporting and cultural events, Lismore is a place of work for thousands of daily visitors and a destination for thousands of tourists each year.

    Comparing our rates with that of other councils does not necessarily provide a relevant comparison, as we are a regional city and as such provide more services than other Northern Rivers towns.

    The additional income generated by this proposed SRV would place Council’s rating structure in line with that of other regional cities in NSW. The comparison table shows how Lismore measures up against other regional cities. This is more relevant than comparing ourselves with surrounding councils in the Northern Rivers.



    Why can't Council rely on other forms of income?

    Yes. Council has considered other ways to fund road improvements and economic development initiatives. Other options Council has looked at are:
    1. Funding the required increase from its general revenue – this would require substantial cuts or even elimination of services in other areas.
    2. User fees and charges – this was not considered feasible and would be impracticable to implement. Council does not have authority to implement tolls on its roads for instance. Section 94 charges are already in place for traffic generating developments, such as new subdivisions, but these funds cannot be used to undertake other major roadworks.
    3. Borrowings – this was not considered feasible as there is a need for recurrent funding on an annual and ongoing basis. Large one-off borrowings would further exacerbate Council’s debt. These borrowings would need to be repaid thus further impacting other services.
    4. Reserves – these funds have already been set aside to bolster delivery of essential maintenance/reconstruction of roads where necessary.
    5. Grant funds – Council could seek to rely on grant funds, however, there are no grant programs that deliver ongoing funding to the level required to address the roads backlog and implement ongoing economic development initiatives.

    What else is Council Doing to improve its financial management and efficiency?

    • In January 2019, Council undertook a due diligence study that recommended a range of strategies to improve efficiency within Council. These included implementing technology and software upgrades to limit manual data entry and double handling; improvement of governance and procurement procedures to streamline these areas; and a reconfiguration of the organisation to utilise staff skills more effectively. These are all currently being implemented.
    • During the 2019/20 budget process, Council resolved to cancel or defer 33 projects from the Imagine Lismore Delivery Program 2017-2021. Staff resources that were being used to progress these projects are now being used for other core activities.
    • Council is undergoing internal reviews to find further efficiencies with no impact to service delivery.
    • Council is investigating new revenue streams to ensure a financial return that helps fund the ongoing costs to maintain Council facilities. An example of this could be the introduction of entry fees and/or other reasonable user charges to cover operating costs.

    Does Council's recent budget deficit have anything to do with this SRV?

    No. At its budget meeting on 25 June 2019, Lismore City Council forecast a cash surplus of $957,400 – turning around the cash deficit that was discovered in January 2019.

    Council made cuts across almost all areas of Council to resolve the cash deficit problem. However, this did not provide a solution for the long-term delivery of services. Council is still financially vulnerable.

    The reality Council faces is that it is unable to provide its current services without increased revenue. This is why Council is proposing an SRV.

    How do we know Council will spend the SRV funds on what it said?

    Council is required to spend the SRV funds only on what Council has written in its application to IPART. Council will inform the community in its Annual Report each year about the activities undertaken with SRV funds. This ensures that the community has confidence about how the funds are spent.

    Will roadworks funded by the SRV be undertaken by Council staff or contractors?

    Contractors will be used where necessary to complete additional works. The $4.5 million in additional SRV funds would be expended every year on road reconstruction and gravel road maintenance.

    Why did Council create a new proposal halfway through the consultation period?

    Lismore City Council has been undertaking a community consultation on rates since 1 August.
    Council put a proposal to the community for an SRV with a year one increase of 17% and a year two increase of 6.9%.

    Feedback from the community told us that the year one increase was higher than expected.
    Council has listened to this feedback and developed a second proposal in response to the community. Council has developed
    an additional SRV option with smaller annual increases spread over a greater number of years.
    This new proposal would result in less net revenue to Council and smaller annual increases to the community.

    Do I need to complete the survey again to give feedback on the new proposal?

    Yes. Council has closed the original survey and launched a new survey that includes a second option for an SRV. This was in
    response to community feedback.
    The round two survey asks the same questions as the round one survey, but has an additional SRV option for the community to
    consider.
    All feedback from the first round of consultation as well as the second round will be presented to Councillors so they can make
    an informed decision.

    How does IPART assess Council’s application for an SRV?

    IPART requires councils to actively engage residents in discussions about the proposed Special Rate Variation.
    IPART will consider how effective each council’s community inclusion has been before making a decision on its application.
    Councils need to show IPART there is:
    • community awareness of their plans
    • a demonstrated need for higher increases to charges
    • a reasonable impact on ratepayers
    • a sustainable financing strategy
    • a history of well-documented council productivity improvements
    In addition to council’s evidence, IPART will assess any other information it considers relevant, including letters from ratepayers.