[Andrew Butcher]

The rate peg for 2024-25 has not yet been released – this will be later this month.

In summary the final report says:

Based on our analysis and consideration of stakeholder views, we have developed a new rate peg methodology that we will use to set the rate peg for the 2024-25 financial year, if it is feasible to do so, and onwards. The new methodology for setting the rate peg will use forward-looking measures of councils’ base costs. This addresses the issue of using lagged data in a volatile economic climate. The new methodology will result in rate pegs that more accurately reflect changes in the costs NSW councils incur in providing their current services, and our changes also more accurately consider the diversity of councils across the State.

Under the new rate peg methodology, we will:
• Measure the annual change in NSW councils’ base costs for 3 groups of councils (instead of one that includes all NSW councils) to better account for the diversity of their base cost patterns. These groups are metropolitan, regional, and rural councils.
• Use a new, simpler model with forward-looking indicators to measure this change instead of the LGCI. This measure, the Base Cost Change (BCC), comprises 3 components that we consider better capture councils’ costs: — Employee costs (primarily wages, including superannuation guarantee) measured by the Local Government (State) Award. — Asset costs measured by the Reserve Bank of Australia’s (RBA’s) forecast change in the Consumer Price Index (CPI), adjusted to reflect the average difference between changes in the Producer Price Index (Road and bridge construction, NSW) and changes in the CPI. — All other operating costs (including administration, utility costs, insurance but excluding the Emergency Services Levy (ESL)) measured by the RBA’s forecast change in the CPI.
• Include a separate council-specific ESL factor, lagged by one year,d that reflects the annual change in each council’s ESL contribution. This provides for councils to fund their required contributions to support the NSW State Emergency Service, NSW Fire and Rescue and NSW Rural Fire Service without needing to reduce other council services or erode their financial sustainability. In addition, when changes in this contribution impact the rate peg, the approach will ensure this impact is transparent to councils, ratepayers and all stakeholders.
• Maintain our existing approach and make additional adjustments for costs driven by external factors outside councils’ control as needed, if ratepayers will benefit from these costs and we have the information we need to calculate the necessary adjustment. These costs may include managing climate change impacts and cyber security threats, for example.
• Continue to add a population factor but use a refined approach to more accurately measure the change in councils’ residential populations by deducting prison populations from the residential population in a council area and then calculating the growth in the non-prisoner residential population of a council area for the relevant year.
• Retain the productivity factor in the rate peg methodology and for it to remain as zero by default unless there is evidence to depart from that approach. This may include further analysis and consultation on the factor and considering outcomes of other local government reviews which could inform other ways of driving productivity and determining the appropriate role of the productivity factor. We decided not to release an indicative rate peg in September and a final rate peg in May each year as proposed in the Draft Report.

Our draft decision was to set ESL factors in May to incorporate actual ESL contribution costs for the year the rate peg is to apply, once this information is available in late April. This would allow councils to recover these costs in the year they are payable, therefore, removing the lag from this measure in our old methodology. May is the earliest possible release date for a final rate peg to include up to date ESL contributions. Most stakeholders told us that a May release is not practical as it would impact existing planning and budgeting processes and impact the time available to engage with the community. As a result, we have decided to maintain the lag in this measure of ESL contributions.

You can find the full report by following this link: Final report

Regards,
Andrew

[Edwin Athaide]

Thanks Andrew
I understand the peg is due for release on Tuesday 21/11/23

[Andrew Butcher]

Hi Edwin

That is my understanding too.

Regards,
Andrew

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