On 9 November 2023, IPART released its Final Report for our review of the rate peg methodology.

This final report outlines our decisions on the new rate peg methodology that will apply from the rate peg for the 2024-25 financial year and how the changes to the methodology will be implemented. This report also outlines our recommendation for the NSW Government to commission an independent review of the financial model of councils and other mechanisms to improve financial sustainability, accountability, and community trust within the sector.

Our new rate peg methodology is simpler than the old method and will result in rate pegs that more accurately reflect changes in the costs NSW councils incur in providing their current services. The new methodology will:

  • measure the annual change in councils’ base costs for 3 groups of councils instead of one that includes all NSW councils

  • use a new simpler model with forward-looking indicators to measure changes in councils’ base costs, the 3 components include employee costs, asset costs and all other operating costs

  • make an explicit and separate Emergency Services Levy factor, lagged by one year, that is council-specific

  • make adjustments to capture costs driven by external factors that affects councils, where councils have engaged with their community

  • continue to add a population factor but use a refines approach to more accurately measure the change in councils’ residential populations

  • retain the productivity factor and set this to zero until we have sufficient information to develop a new approach for estimating the productivity factor.

During our review we undertook extensive consultation and sought to hear views of both ratepayers and councils across NSW. Our consultation included input from councils and ratepayers through workshops, focus groups, submissions, and a public hearing. We received more than 169 submissions to the issues paper and draft report and there were nearly 3,400 responses to the survey of ratepayers. The consultation has been very helpful, and we have made major changes to IPART’s rate peg methodology as a result.