Voiceover: IPART is required to set the maximum percentage amount by which councils can increase their general income each year. This ceiling is known as the rate peg.
The primary purpose of the rate peg is to protect ratepayers from excessive increases in their rates bills. IPART has carried out this role under delegation from the Minister for Local Government since 2010.
IPART has set the 2020-21 rate peg for NSW councils at 2.6%. This represents the maximum increase in each council’s general income for the 2020-21 financial year.
Paul: We base the rate peg for that on underlying costs faced by councils. Those costs have gone up by 2.6%.
Voiceover: The rate peg is set by IPART each year based on the change in the Local Government Cost Index, which comprises 26 cost components to measure price changes experienced by the average council. This is similar to the Consumer Price Index that measures inflation over time.
The rate peg of 2.6% for 2020-21 is similar to the 2.7% we set for the current year, and broadly in line with the last 5 years.
Employment costs and construction costs are the expenses that have contributed most to the increase in the rate peg. These increases are partially offset by lower telecommunications, IT and energy costs.
Paul: The 2.6 that we have determined is a ceiling that council rate revenue can increase. It’s at their discretion as to how much of that 2.6 they increase rates. As well, councils are free to decide how they spread that rate increase.
Voiceover: Councils have discretion to determine how to allocate this increase between ratepayer categories.
Councils wanting a larger increase in rates revenue can apply to IPART for a special variation after they have consulted with their local community. We will consider special variation applications for 2020-21 early next year.
We will conduct a cost survey of councils in November this year. The results of this survey will be used to ensure the Local Government Cost Index is as accurate as possible.
For more information on this year’s rate peg, and our rate setting process, please visit the IPART website.