The NSW Government will look at creating “greater flexibility” in the current rating system to allow councils to generate the income needed to support population growth.
This would include creating additional rating categories and greater use of differential rating within urban residential rating systems.
The proposal follows the Government’s decision to decline Independent Pricing Regulatory Tribunal advice to allow NSW local council rates to be calculated on the Capital Improved Value (CIV) of land rather than on the Unimproved Value (UV).
IPART said a shift away from UV to CIV would allow councils to rate residences and businesses “efficiently, equitably simply and transparently”, and enable rate income to grow sustainably as new capital is invested and costs increase.
In its review of the LG rating system – designed to identify reforms to enhance councils’ ability to implement sustainable and equitable fiscal policy – IPART recommended that non-metropolitan councils be given the option of choosing between the CIV and UV method for setting rates because the benefits of CIV are less clear in regional areas.
Responding to the IPART report, the Government said it “remains unconvinced of the merits of moving to a system of valuation based on CIV … given the significant potential impact to local residents, substantial implementation costs and the inconclusiveness of extensive public consultation.
“Additionally, it is unclear how the introduction of CIV may unfairly impact particular groups of ratepayers or result in unintended, real-life consequences for families and businesses.”
The Government said it is committed to making the current rating system easier for councils to navigate, while “highlighting the variety of mechanisms already available to councils in designing a fairer and more equitable rating structure for their local government area (LGA)”.
However, it is “strongly supportive” of rate pegging.
In related news, IPART has published information on its approach to assessing land costs in local infrastructure contributions plans that councils submit for review.