Economic and financial viability assessment

The situation:

The Victorian Government legislated the Local Government Rate Cap in 2016 to balance ratepayer interests with council financial sustainability. An independent review was mandated under section 185G of the Local Government Act 1989 (now 2020) to evaluate the rate-capping framework’s impact across 79 councils.

The task:

Grosvenor was engaged to assess the economic and financial viability of the rate cap mechanism, administration, and processes, as required by the Act. The review involved collaboration between Local Government Victoria and the Essential Services Commission (ESC). It included surveys, focus groups, and interviews with various stakeholders, such as government representatives, sector bodies, local governments, and ratepayer associations. It also included an independent analysis of the financial impact on councils over the period.

The review aimed to determine the appropriateness and effectiveness of the rate cap mechanism and included a process evaluation, providing findings and recommendations to ensure the framework’s continued relevance and potential need for amendments.

The outcomes:

The recommendations of the report were supported by the Government, with an extract from their official response here:

“The Government is pleased that the review has reaffirmed the importance of the rate cap mechanism and notes that the report is clear that the rate cap mechanism continues to support the long-term interests of ratepayers with the financial sustainability of Victorian local governments. The Report’s recommendations cover a range of reforms to improve the rate cap mechanism.

The Government’s response is supportive of the recommendations to improve communications about the rate cap mechanism to better articulate its purpose and function.  It is also supportive of improvements to the arrangements for councils to seek a higher cap amount.  The Government is supportive in principle of the recommendation to shift the rate cap amount decision from December to an earlier date.  The Government will consider the most effective means to implement this recommendation. ”

See the full report and Government response here:

Local Government Rate Capping Mechanism Reivew Final Report

Government Response to the Local Government Rate Capping Mechanism Review Updated

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