A RATE cap of three percent has been set for Victorian councils by the state government for the next financial year. The rate cap limits the amount of revenue that councils can raise from general rates and municipal charges. It will be three percent in the 2025/2026 financial year, a small increase on the 2.75 percent rate cap in effect for the 2024/2025 financial year.
Local government MP Nick Staikos said the rate cap “will mean local councils are able to raise necessary revenue for the services they provide, without adding cost of living pressure on households.” “‘Fair Go’ rates are there so families have certainty over their council rates, and next financial year the increase will again be in line with the inflation rate,” he said. “The rate cap has made a real difference to household budgets since it was introduced”.
Frankston Council and the Mornington Peninsula Shire each made submissions to the state government’s inquiry into local government funding and services prior to the local government elections last year outlining concerns about cost shifting onto councils.
Frankston Council’s submission to the inquiry, signed by then-mayor and current Liberal Dunkley candidate Nathan Conroy, read “the current rate cap system is not providing sufficient rate revenue to match the actual increase in the cost base of existing services and infrastructure.” Frankston Council called for the introduction of a “Local Government Cost Index for the setting of the Victorian rate cap, that reflects the cost factors of local government.” (“Mayor calls for rate cap review” The News 22/7/2024).
The Mornington Peninsula Shire’s submission read that cost shifting would result in an increase of $38.1m in operational costs for 2023/24, with projections reaching $234m over the next five years.
“The ongoing practice of cost shifting by the state and federal governments over the years has posed a significant financial challenge, jeopardising both the provision of essential services and the financial sustainability of local government. Examples include the recent kindergarten reforms, the Recycling Victoria kerbside reform and the management of the expansive foreshore. However, these mandates often come without sufficient funding, considering the level of service expected,” the shire’s submission read.
Both the mayor Cr Anthony Marsh and deputy mayor Cr Paul Pingiaro campaigned on pushing for a rates freeze, with the focus returning to core services and eliminating unnecessary spending. “The three percent cap is the maximum increase allowed, but of course, that doesn’t mean we must lift our rates by three percent,” Marsh told The News.
“Rather than automatically increasing rates by the cap, we need to challenge our costs before we can justify any rate increase” “Naturally, the shire will always find ways to use extra revenue, but all public spending needs to be in the best interests of our ratepayers”.
First published in the Mornington News – 7 January 2025
