Posted 22/5/10 

The MAV Local Government Cost Index 2010 is available at: www.mav.asn.au

MAV Media Release

Latest Local Government Cost Index released

22 May 2010

The Municipal Association of Victoria (MAV) has released its Local Government Cost Index for 2010, which forecasts that council costs will increase an average of four per cent in the year ahead.

Cr Bill McArthur, MAV President said that local government costs didn’t move in line with the Consumer Price Index for three practical reasons.

“Council services rely primarily on staff, contractors and construction materials - not household costs reflected in the CPI - making it difficult to meet ratepayer expectations of rate increases below three per cent.

"It would be impossible to deliver more than 100 services to communities, or maintain and renew more than $55 billion worth of community infrastructure without the staff, contractors and construction materials necessary to do this work. These costs are different to a basket of common household goods and services.

“In 2010-11 it will cost Victorian councils an average of four per cent more just to deliver the same level of services and capital works as last year.

“The second reason rates rise beyond CPI is that as demand for many iconic services grows, funding contributions from the State and Commonwealth are often indexed below CPI. This leaves councils to prop up the growing funding gap for public libraries, community care, school crossing and many other programs.

“While annual council costs rise by four per cent, Commonwealth financial assistance grants to local government and funding for home and community care will increase by less than three per cent.

“As funding had failed to keep pace with real costs growth over many years it meant councils were increasingly forced to rely on higher ratepayer contributions to avoid service cuts.

“And thirdly, rate increases beyond CPI allowed councils to boost their spending on asset maintenance and renewal to help reduce the $133 million annual infrastructure spending shortfall.

“If assets aren’t properly maintained, replacement costs would be prohibitive for future ratepayers. It is not in the best interests of councils or their communities to let assets and facilities fall into disrepair,” he said.

The MAV Local Government Cost Index, calculated annually, uses a combination of established indices that reflect average wages, construction and materials costs that best represent councils’ spending profile.

Cr McArthur said that councils were ever-mindful of delivering value for money and the MAV was urging councils to examine all possible opportunities to trim non-essential costs.

“There will be some community members who experience difficulty paying increased rates, particularly those on low and fixed incomes.

“The MAV is exploring opportunities to work with welfare agencies to develop standard definitions of hardship for use by councils, and to call on the State Government to increase its pensioner rate rebate.

“But the reality is that unless the Commonwealth provides funding streams that recognise actual local government cost movements, councils would always need to go cap-in-hand to ratepayers,” he said.