Ahead of a critical Kempsey Shire Council meeting on Tuesday, November 21, Macleay Argus reporter Mardi Borg sat down with Director Corporate and Commercial, Stephen Mitchell, to discuss the big ticket item on the agenda - a proposed special rate variation.
Councillors will decide whether or not to apply for an SRV of 42.7 per cent to address a predicted budget deficit of $79m.
Our questions to Mr Mitchell include some provided by members of "Figure It Out KSC", the community group opposed to any rate rise. His responses have been edited only for brevity.
- Why have you ruled out two of the options presented in the proposed SRV?
The 85 per cent and the 94 per cent increase options have been ruled out. The reason is, we've heard loudly and clearly from the community, and also from the work that the independent consultant has done in our analysis, that options two and three are just not viable. We've then looked at option one, which was the 51 per cent increase. At the same time... we've [also] gone back and looked at some of our costs, made some savings in certain areas and included a $500,000 savings target. That... has meant that [Option 1] has come down to the recommended 42.7 per cent increase that will be [put] to the councillors [through the business paper].
- How does KSC plan to financially and physically support the pensioners, social security recipients and low income families who will be seriously affected should the SRV be approved?
There are existing concessions and rebates for pensioners. The majority of those [people], I would imagine, will have been taking advantage of those. We have our hardship relief policy that will go to council and we're re-working that and looking at what support we can provide to all ratepayers. The intention is for that to go out on exhibition for a period through to mid-January, which means that all of our residents and ratepayers can then make a submission as to whether they think that's reasonable or not. What we're endeavouring to do is to make sure that we've got as much information in that policy so that people know what support mechanisms there are. We'll be looking at making sure that we got the right options [for payments] so that they are not getting behind in terms of their rates. If ratepayers then do have challenges in terms of paying their rates, we've got other support mechanisms in place and that'll all be part of this policy.
- How has council addressed the probability that rents will go up too, as landlords recoup costs?
This is a decision that needs to consider the outcomes for the whole community, and what has been recommended is what we believe will be best, taking into account the provision of the many services to the community council provides, the cost of providing these and the contribution through rates. It will be up to the property owners as to whether they pass on none, some, or all of any proposed rate increases on investment properties.
- Kempsey has a lot of empty shopfronts and commercial properties, how is council mitigating the probable effect on local business?
There's a whole stack of reasons that would contribute to those shops being empty at the moment and a number of those reasons aren't necessarily issues that are within council's control. In terms of supporting business, our economic development tourism team works closely with the local chambers of commerce and local businesses. In relation to the rate rise, we'll be working with businesses [to make sure] that they understand those impacts. What we're proposing in terms of the rate increase... will be a lower increase in the first year, which will give businesses and all ratepayers the opportunity to plan for that increase over a three-year period.
- You are in for a big and angry public forum, is there any possibility the council will be swayed by speakers or is a rate rise a done deal?
No, it's definitely not a done deal. What we've been saying for the last three months of community engagement is that no decision has been made. We've been very transparent and honest that this body of work that we're doing is very much around informing the community, giving them the information so they understand what the issues are, what some of the potential solutions are and encouraging them to have a say. We know that that this is an unpopular thing for people to consider and... we haven't taken this decision lightly. We've tried to do it in the most respectful way that we can, and tried to solve the problems as much as we can internally before we ask for an increase from the ratepayers.
- If this increase goes ahead, the community will suffer, but so will its relationship with council. What steps are you taking to rebuild trust?
I think in terms of the impacts on the community; there will be impacts on the community if the special rate variation is approved but... there will be an impact for them if council resolved not to proceed, or if IPART doesn't approve an application because council, ultimately, has a financial issue it needs to solve. So, without an increased rate income, we will need to substantially reduce costs and that will mean we'll need to look at the services that council provides at the moment and either cease providing some of those services, or drastically reduce the extent that some of those services are provided.
- What about the trust that you've lost with this?
We've undertaken a really extensive community engagement body of work over the last three months and that's involved going out and presenting it to a number of community meetings. The feedback that I've got from those community meetings, where we've had about 200 people attend, has overwhelmingly been that people have been really appreciative of the fact that we've come out to speak to the community. In some respects, I would actually say that some of that trust has improved on the back of having honest conversations around the issues that we're facing. Going forward, regardless of the decision, we will continue... to engage with the community and be honest and transparent with them so that that trust exists.
- Could this council be sacked for falling into so much debt?
Let me just clarify one thing, we don't have a huge level of debt. The issue that we've got is the future financial forecast. So, I think that's another common misconception, that council's got all this debt. The issue is that the financial forecast is projecting that our cost will outstrip our income and that's where that issue is.
(*Council has since confirmed that it's current debt - as of June 30 - is $52m.)
- Councils have been the beneficiaries of post-COVID-19, post-flood and post-Black Summer grants. Has Kempsey over-reached by proposing big ticket items, to which council needs to contribute, such as the Adventure Park.
There's a misconception around grant funding. Grant funding is good when it's for the right projects. Some of the funding we've got in relation to natural disasters has been to repair assets. Grant funding for new assets is also really good when it ties into our adopted strategies and the grant funds that we've received over the last sort of four or five years haven't, and are not responsible, for putting us into the position that we're in. The issue that we're dealing with is not what's happened necessarily in the past, it's what the forecast looks like over the next 10 years. New assets do come with additional cost to maintain, so if you do have a grant funded project then there will be a cost to maintain that... but the fundamental issue we're trying to solve... is that the costs [council services] are greater than our income.
- Has KSC factored in the new changes to rates calculations recently announced by IPART (to come into effect 2024/25) and should the SRV be approved, how will it affect Kempsey?
The final report of the new rate peg methodology was issued on Friday, November 10... it is going to stipulate a new methodology that IPART will use to calculate the rate peg. That doesn't actually solve our financial situation, and the fact that council has still got this gap between our income and our expenses. The other thing is that they've also recommended a review of the financial sustainability of the local government sector of NSW, noting that there were so many councillors that are having special rate variations. That's an indication of the fact that the rate peg methodology doesn't fund councils to the level that they need to operate.
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