Rate capping identified as big risk for SA councils but report says there are measures to counter this

RATE capping’s affect on finances is the biggest risk for SA councils, a study has found, but local governments may be able to find new ways to make ends meet.

• Minister warns councils to back cap or face backlash
• LGA reveals cost of anti-rate capping election campaign
• Union warns rate cap could trigger job losses
• SA council rates rise at three times inflation

LOSS of revenue from capping rates is the one of biggest cash risks facing SA councils, a study has found.

Plugging repeated rate rises was a crucial election policy by the Liberal Party, who argued council rates were rising at three times the rate of inflation.

A national report by Aon Risk Solutions found monetary stability was one of the major risks facing councils — but this could be countered by councils tendering for their insurance.

Aon’s national local government boss, Paul Crapper, said some councils in Victoria saved up to 50 per cent by adopting alternative insurance schemes.

“The community want better services but don’t want to pay more in rates,” he said.

“Council will have to look at cost structures.”

The Mornington Peninsula Shire saved a whopping $700,000 when it tendered its insurance ahead of its 2015/16 budget and Mr Crapper said South Australian councils had yet to go down that path.

“Some councils have saved as much as 50 per cent ... which can be invested in other areas,” said Mr Crapper, a one-time director at Darebin City Council in Melbourne.

The State Government now plans to put legislation enabling the cap to Parliament by mid-year.

They argue an independent regulator should set the rate rise councils are allowed to apply based on the cost of services councils provide.

Since coming into power, Local Government Minister Stephan Knoll says analysis shows council rates have soared at almost three times the pace of inflation over the past decade.

He said Burnside Council’s proposal to increase rates on commercial properties by up to 100 per cent as reasons why rates should be capped.

“[South Australian council’s] currently use a local government scheme, and they have been in place since the late 1980s maybe 1990s and they have never been tendered. Council’s have just used those schemes without going into the competitive insurance market,” said Mr Crapper.

LGA chief executive Matt Pinnegar said membership of the Schemes were voluntary but some councils had investigated alternative insurance arrangements.

“Despite this the Schemes have retained 100 per cent membership, which is evidence of their value,” he said.

“Importantly, it also fosters confidence with the State Government and the delivery of cooperative arrangements unique to South Australia, such as the Treasurers Indemnity that allows the Schemes to provide members with unlimited civil liability protection in the event of catastrophe.”

Victoria and New South Wales are the only states that have rate-capping.