Special Rate Variation
Upper Hunter Shire Council Public Consultation on Special Rate Variation (SRV)
Community Consultation has now closed
Upper Hunter Shire Council is seeking community feedback on a proposed Special Rate Variation (SRV) to secure the necessary funding to maintain current service levels and address essential infrastructure needs. This consultation aims to provide clear and comprehensive information about the SRV options and their impacts.
What is a Special Rate Variation (SRV)?
In New South Wales, councils can apply for a Special Rate Variation (SRV) to increase rates beyond the standard rate peg set by the Independent Pricing and Regulatory Tribunal (IPART). This ensures councils can meet financial and service delivery obligations when costs exceed revenue generated under the rate peg.
There are two types of SRVs:
- Temporary SRV: Applied for a fixed period only, after which the rates revert to previous levels with normal rate peg applied. Typically these SRVs are specific in nature for a set capital fund raising process to deliver one-off projects.
Note: We are not considering this type for the current proposal
- Permanent SRV: Applied for an indefinite period, remaining in the rate base permanently.
Note: Both SRV options we are considering are of this type.
Why is Upper Hunter Shire Council Considering an SRV?
Upper Hunter Shire Council is committed to providing essential services and maintaining the infrastructure that our community relies on. However, rising costs and the need for sustainable financial management necessitate a thorough examination of our funding mechanisms. To continue delivering essential services and to maintain our infrastructure, Council is considering a Special Rate Variation (SRV). Here are the key reasons why this SRV is necessary:
Maintaining Current Service Levels
The SRV will ensure that we can continue to provide essential services such as road maintenance and community facilities without interruption. Without additional funding, there is a risk of service reductions or closures.
Funding Infrastructure Renewal and Maintenance
Our community benefits from a range of infrastructure, including roads, bridges, water and sewer networks, and public facilities. Many of these assets require ongoing maintenance and periodic renewal to remain safe and functional. The SRV will provide the necessary funds to keep our infrastructure in good condition.
Addressing Financial Sustainability
Over recent years, the costs associated with delivering services and maintaining infrastructure have increased significantly due to inflation and other economic factors. The SRV will help bridge the gap between our revenue and expenses, ensuring that Council can operate sustainably without depleting cash reserves.
Impact of Natural Disasters
Upper Hunter Shire has faced severe weather events, including droughts and floods, which have significantly impacted our road infrastructure and other community assets. Additional funding is required to repair and maintain these critical infrastructures to meet community expectations and safety standards.
Reduction in External Funding
While Council has been successful in securing capital grants in the past, the availability of such funding is not guaranteed. With tightening budgets at the State and Federal levels, we cannot rely on external grants to fund essential projects. The SRV will provide a stable funding source that Council can depend on.
Cost Shifting
Cost shifting occurs when the State or Federal Government transfers the responsibility or costs of providing certain services, assets, or regulatory functions to local councils without sufficient funding. This forces councils to divert funds from planned projects or essential services to cover these costs.
Cost shifting has significantly increased financial pressures on Upper Hunter Shire Council. For example:
- Emergency Services Levy: Funds a portion of emergency services costs, which are shifted to councils.
- Waste Levy: Paid by waste facilities to the NSW Government and passed on to ratepayers.
- Underfunded Programs: Programs like libraries are underfunded by the State, leaving councils to cover the shortfall.
Due to cost shifting and rising operational costs, we need to consider a Special Rate Variation (SRV) to maintain essential services and infrastructure.
For more details on cost shifting, read the full LGNSW report here.
Compliance and Regulatory Costs
Council faces increasing costs associated with compliance and regulatory requirements imposed by State and Federal governments. Examples include the Emergency Services Levy and the Waste Levy, which have increased over the years without corresponding increases in funding. The SRV will help cover these mandatory expenses.
SRV Options
Council is considering two SRV options:
- Option 1: A cumulative permanent increase of 33.10% over three years.
- Option 2: A cumulative permanent increase of 33.55% over four years.
At the conclusion of both options, rates will continue to increase by the annual rate peg set by IPART. The tables below compare the two options over four years for clarity.
Option 1: SRV over three (3) years
| |
2025 - 26 |
2026 - 27 |
2027 - 28 |
Cumulative |
| Permanent increase above the rate peg |
6.30% |
6.60% |
6.90% |
21.13% |
| Forecasted rate peg |
3.70% |
3.40% |
3.10% |
10.55% |
| Total proposed increase |
10.00% |
10.00% |
10.00% |
33.10% |
Option 2: SRV over four (4) years
| |
2025 - 26 |
2026 - 27 |
2027 - 28 |
2028 - 29 |
Cumulative |
| Permanent increase above the rate peg |
3.80% |
4.10% |
4.40% |
4.70% |
18.11% |
| Forecasted rate peg |
3.70% |
3.40% |
3.10% |
2.80% |
13.65% |
| Total proposed increase |
7.50% |
7.50% |
7.50% |
7.50% |
33.55% |
*The fourth-year rate for Option 1 is the assumed increase in the fourth year.
What Do the Proposed SRV Options Mean for Council?
The proposed SRV options will:
- Allow Council to maintain current service levels.
- Fund essential infrastructure renewal and maintenance.
- Address the core deficit in the General Fund.
Impact on Council's Financials:
- Operating Result: Improved financial stability and ability to meet service delivery costs.
- Cash Reserves: Maintain sufficient unrestricted cash reserves for financial sustainability.
- Asset Renewals: Ensure ongoing renewal of Council's assets to keep them fit for purpose.
- Asset Maintenance: Provide adequate funding for regular maintenance of infrastructure.
- Backlog: Address and reduce the backlog of infrastructure projects.
Rate Comparison with Other Local Government Areas
To provide further context, we have compared the proposed rates with those of neighbouring Local Government Areas. The table below highlights how Upper Hunter Shire Council’s rates, under the proposed SRV, compare to those in similar regions.
| |
UHSC |
Singleton |
Muswellbrook |
Dungog |
Liverpool Plains |
Warrumbungle |
Mid Western |
| |
|
|
|
|
|
|
|
| Option 1 |
|
|
|
|
|
|
|
| Residential |
$1,297.91 |
$1,443.00 |
$1,153.12 |
$1,778.75 |
$1,125.07 |
$767.18 |
$1,191.77 |
| Business |
$1,594.14 |
$2,978.50 |
$ 3,346.81 |
$1,843.89 |
$1,969.25 |
$2,107.91 |
$2,650.94 |
| Farmland |
$5,543.47 |
$2,961.52 |
$3,743.66 |
$4,548.26 |
$6,558.71 |
$3,912.32 |
$3,102.82 |
| |
|
|
|
|
|
|
|
| Option 2 |
|
|
|
|
|
|
|
| Residential |
$ 1,302.27 |
$1,483.67 |
$1,185.41 |
$1,828.55 |
$1,156.57 |
$788.66 |
$1,225.14 |
| Business |
$1,599.49 |
$3,061.90 |
$3,440.52 |
$1,895.51 |
$2,024.38 |
$2,166.93 |
$2,725.16 |
| Farmland |
$5,562.08 |
$3,044.44 |
$3,848.48 |
$4,675.61 |
$6,742.36 |
$4,021.87 |
$3,189.70 |
| |
|
|
|
|
|
|
|
This comparison helps illustrate how Upper Hunter Shire Council’s rates align with those in other similar areas, ensuring that our rates remain competitive and fair.
Affordability
Understanding the community’s ability to afford the proposed Special Rate Variation (SRV) is crucial for assessing its impact. For 95% of families this increase will have less than a 3.33% impact on the family budget.
Census Data for 2021:
Average income levels for households in the Upper Hunter Shire area: $1,429 per week
Impact of SRV on Household Income:
For the average residential household, the proposed SRV will amount to approximately $4 extra per week, above normal rating increases, by the final year of the SRV.
The general rate increase on the average residential household general rate by the final year of the Option 1 SRV of 10% over 3 years will be $323 or $6.21 per week and for the Option 2 SRV of 7.5% over 4 years will be $327 or $6.29 which based on the median household income of $1,429 is approximately 0.43% and 0.44% respectfully.
Therefore, the likely additional average general rate increase by the final year of the SRV options, above normal rate peg recommended by IPART, for residential households as a result of the SRV, will be in the vicinity of $4 per week above the assumed rate peg which based on the median household income of $1,429 is approximately 0.28% of total household income.
Process for Applying for an SRV
Council must apply to IPART for approval to increase rates through an SRV. The process includes:
- Engaging the community about the SRV proposal and considering their views.
- Submitting an application to IPART with evidence of community consultation.
- IPART seeking further community feedback before making a decision.
More information
What’s Next?
Community Consultation
The next step in the process is to engage with you, our community. Your feedback is essential in shaping the final proposal for the Special Rate Variation (SRV). We encourage all residents to participate in the consultation process and share their thoughts on the proposed options.
How to Have Your Say
We have set up several ways for you to provide your input:
- Online Survey
-
Drop in sessions: Community drop in sessions will be held between 17 – 19 June.
- Merriwa: Old Library Building Merriwa
17 June between 2pm and 6pm.
- Scone: Upper Hunter Shire Council Administration Building
18 June between 2pm and 6pm.
- Murrurundi: CWA Hall – Mayne Street Murrurundi
19 June between 2pm and 6pm.
- Written Submissions: Written submissions can be provided via mail, email, or in person at one of our Administration Centres.
Consultation Period: Community Consultation is now open and closes on 15 July, 2024
Timeline
- Consultation Period: Closes 15 July
- Review of Feedback: After the consultation period, Council will review all feedback received from the community.
- Final Decision: Based on community feedback and financial analysis, Council will make a final decision on the SRV proposal.
- Submission to IPART: If Council decides to proceed with the SRV, a formal application will be submitted to IPART for approval.
Upper Hunter Shire Council is committed to maintaining essential services and infrastructure for the community. The proposed SRV is a necessary step to ensure financial sustainability and continued service delivery. We value your feedback and look forward to your participation in this important consultation process.
Frequently asked questions
Why do we need a SRV?
Like everyone else, we have increasing costs. Over the last three years, we have cut our costs by over $620,000 through management cuts and achieved new income sources totalling $200,000. Additionally, operational savings of $125,000 have resulted in nearly $1 million in annual savings moving forward. We have reviewed our business and identified further opportunities for savings and new income sources in future years, but the $1 million saving is already locked into our budgets.
Despite these efforts, these savings are not enough to keep up with the rising costs of staff wages, materials, and contractors. Either an SRV needs to be applied for, or services will need to be reduced by about $1 million each year, likely impacting our road maintenance, which is our largest expense. The purpose of the community consultation period is to ascertain which solution is preferred by the community. Unfortunately, the NO SRV option is only viable if services are reduced accordingly.
How much is it going to cost me?
Everyone’s rates are different and based on land value, but for an average residential property, the total increase will be about $6 per week in the final year of application. This can be broken down into $2 that would have been applicable under normal increases form IPART and an increase at the of about $4 per week due to the SRV increase.
Why is there no “no” option on the survey?
We’re not running a poll. We’re undertaking a survey. There are only two outcomes available to Council:
- Apply for an SRV.
- Reduce services.
To that end, we are asking two main questions:
- If an SRV is introduced, which of the two options is preferred?
- If no SRV is introduced, which services are least required or could be reduced?
Our rates are already higher than those of Councils closer to the coast. Why do they need increasing?
No, they aren’t. The most likely explanation for this is you’re misreading your rate notice. Upper Hunter Shire Council rate notice includes your rates as well as charges for waste, water, and sewer. Other councils won’t have all these charges because they are provided by other organisations.
For a true comparison, you need to compare just the rate amount only. For comparison, we have provided some of our closest neighbours’ rate comparisons after the SRV options are applied so you can see where your rates would fit against comparable councils after the process is applied if Council undertakes an SRV.
Council is just inefficient and needs to cut its costs.
Upper Hunter Shire Council has undertaken significant cost cuts over the last 3 years and sought new income sources. Despite high inflation, the 2024/25 budget has only increased by 2.9% in operating costs. The Background Paper highlights the savings to date and future anticipated savings. Opportunities to cut costs further are welcomed and can be included in submissions.
How can I get more information?
More information can be obtained by reviewing the Background Paper and the Long Term Financial Plan that details the NO SRV with no service reduction, and the two SRV options being put forward for consideration. We encourage people to read these documents before completing the survey or making a submission.
How can I make a comment?
Submissions can be made by completing the survey, sending emails, or writing a letter to:
Mail:
The General Manager
Upper Hunter Shire Council
PO Box 208
SCONE, NSW 2337
Email: council@upperhunter.nsw.gov.au
Long Term Financial Plan
For more detailed financial information supporting the SRV, please refer to our Long Term Financial Plan (LTFP), which is also open for community consultation. You can review and provide feedback on the LTFP here.
Background Paper
This document provides a detailed case for the SRV proposal, outlining the financial challenges and the need for increased funding to maintain essential services and infrastructure. Read the full Background Paper to understand the reasons behind the proposed Special Rate Variation.
Download(PDF, 824KB)