Rating practices in local government

20 Feb 2013

Victoria’s 79 councils rely heavily on the revenue generated by property-based rates and charges to provide services to local communities. In 2011–12, Victorian councils generated operating revenue of $8.18 billion, with rates and charges accounting for $4.09 billion, or 49 per cent, of the total.

While councils work within a common rating framework comprising the Local Government Act 1989 (the Act) and sector guidance documents when determining their rates, these lack clarity and detail. This has contributed to inconsistencies in the rating practices of the councils audited, and the quality and soundness of council rating decisions.

The audit found there is limited assurance that all councils systematically and rigorously consider the information and evidence needed to adequately understand the impact of their rating proposals on their communities. This includes proper consideration of the principles of stability, equity, efficiency and transparency in their rating decisions. Councils do not consistently calculate, and transparently report, key rates and charges data in a way that promotes scrutiny of decisions and comparability between councils.

At the state government level the Department of Planning and Community Development, through Local Government Victoria, does not provide proactive support to councils on their rating practices, or monitor and report on their performance in this area, including their compliance with the Act.

Council reporting of rates and charges data needs to be improved so that ratepayers and the general community can easily understand and compare the information within their own and other municipalities. It is also timely to review the Local Government Cost Index to ensure there is a valid and accepted sector benchmark for rates and charges.

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