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Councillor Induction Day

Municipal Association of Victoria. Councillor Induction Day. 15 November 2012. Welcome Rob Spence CEO, Municipal Association of Victoria. Getting started – what you need to know Rob Spence CEO, Municipal Association of Victoria. Governance, accountability & reputation Alison Lyon

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Councillor Induction Day

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  1. Municipal Association of Victoria Councillor Induction Day 15 November 2012

  2. Welcome Rob Spence CEO, Municipal Association of Victoria

  3. Getting started – what you need to know Rob Spence CEO, Municipal Association of Victoria

  4. Governance, accountability & reputation Alison Lyon Deputy CEO and General Counsel, Municipal Association of Victoria

  5. Contact details Alison Lyon (03) 9667 5522 alyon@mav.asn.au

  6. Morning tea

  7. Understanding planning • Liz Johnstone • Executive Officer, Planning Institute Australia

  8. This Presentation • What is Planning? • Councillors roles • Current operating environment, challenges and opportunities • How to be effective & what to look out for

  9. About PIA • National professional body for planners • Professional disciplines of • Urban & Regional Planning Urban Design • Social Planning Environmental Planning • Economic Planning Transport Planning • Planning Law • Professional Development, CPP • Policy and Advocacy • Publications – e-news and monthly Journals • Events

  10. Planning • Regulates the use and development of land, and provides clear processes to manage change • The Planning and Environment Act (1987) • Toolkit: VPP, zones, overlays, policies & codes • Balances private & public interests for a ‘net community benefit” • Performance based, future focussed, • Open, transparent and fair – lots of checks & balances • At times frustrating, time consuming and unrewarding…..

  11. Roles • “Responsible Planning Authority” • Planning Authority: Future focus - Scheme; Policy; Amendments; MSS & Local Policy • Responsible Authority: Permits; compliance and enforcement • Role clarity – tensions with being an advocate, leader, representative, and decision maker.

  12. Context • Operating environment - Complex, costly & controversial • Challenges • Policy: macro (employment, affordable living, sustainability) and micro (neighbourhood character, tree retention) • Resourcing: technical and financial • Opportunities • Metro Strategy(MPS), Regional Growth plans. • Reform: zones, VicSmart, STEP, • Working as a council and as a sector

  13. Being Effective • Reputation matters • Be clear and be consistent, be strategic – take the time to ensure you understand each other and staff understand you early • Think about how you want to use your time • Take advice, ask questions and listen “stand by your plan” or work to change it • Be careful about what you say • Conflict / perceived conflict of interest & bias

  14. MAV planning programs & activities • Gareth Hately & Michelle Croughan • Planning Project Officers, Municipal Association of Victoria

  15. MAV and land use planning… • Metropolitan strategy • Regional growth planning • Hazards – fire/flood • Planning reform and advocacy • Planning system reform – initial report of the Victorian Planning System Ministerial Advisory Committee • Developer contributions – Standard Development Contributions Advisory Committee report • Reformed zones for Victoria – Ministerial Advisory Committee Report

  16. Key planning projects and programs • STEP Planning program • Metropolitan Planning Reference Group • How to manage small rural lots through the planning scheme • Planning enforcement – risk assessment model • Growing efficiently – understanding the cost of different settlement types

  17. Staying informed and opportunities to get involved • Land use planning bulletins • Rural land use planning forums • Rural & regional planning conference • MAV planning committee

  18. Contact details Gareth Hately 9667 5596 or ghately@mav.asn.au Michelle Croughan 9667 5541 or mcroughan@mav.asn.au

  19. Emergency management • Russell Rees • Risk Advisor, Municipal Association of Victoria

  20. The last few years in emergency management in Victoria

  21. The next few years in emergency management in Victoria THE WHITE PAPER !

  22. The problem of emergency management in local government • The legislation is out of date • Everyone thinks we have lots of resources • Everyone treats us like a joined up state based emergency response agency • We don’t always play to our strengths • We don’t always work together as well as we should • We don’t always speak with one voice

  23. So what are we saying generally (apart from waiting for the White Paper) Some key principles: • Resilience not dependency • Three tiers of planning (maybe four) • All agencies • All hazards

  24. MAV’s improvement program for emergency management • Six interlinked projects • Policy and role • Legislation • Funding • Capability building • Roles of Mayors, Councillors and CEO’s • Sharing services • Measuring performance

  25. The role of Councillors and Mayors in emergency management • What to expect at the council table: • Emergency management plans for endorsement • Neighbourhood Safer Place designations • Planning and building issues • Facilities and critical infrastructure • Detailed reports on recovery planning and implementation • Media management issues

  26. The role of Councillors and Mayors in emergency management • Some watch outs! • Councillors have no operational role – you are not Rudi Giuliani! • Need to work to support the community, bring issues to the table • Work with the Mayor and CEO – be an advocate • Stay away from operational areas • Be careful of having a conflict of interest • Provide pastoral support and ensure it is provided

  27. Sometimes we doubt that we can actually achieve

  28. Professional development • Andrew Rowe • Councillor Development Officer, Municipal Association of Victoria

  29. Lunch

  30. Municipal Association of Victoria Councillor Induction Day 15 November 2012 Video

  31. Finance, funding & rates • Owen Harvey-Beavis • Manager Research & Strategy, Municipal Association of Victoria

  32. Overview • Council revenue sources • Valuations and rates • Financial pressures • Financial management • Audit committees

  33. Council revenue Victorian local government recurrent revenue in 2010-11 was $6.6 billion: • $3.71 billion or 56 per cent in rates • $1.14 billion or 17 per cent in fees, fines and charges • $591 million or 9 per cent in specific purpose grants • $489 million or 7 per cent in general purpose grants • $681 million or 10 per cent from other sources Local government collects 3.5 cents of every $1 raised in Australian taxes. The Commonwealth collects 80.3% (including GST 14%) and the States 16.2% of total taxation revenue.

  34. What are council rates? • A property tax that uses property values as the basis for calculating how much each property owner pays • Can comprise up to three components: • Municipal charge (not more than 20% of total rate revenue) • Waste management (garbage) charge • General rate based on the ‘rate in the dollar’ • Councils can strike differential rates • Exemptions apply to crown land, charitable land, land used for religious purposes, land used exclusively for mining or forestry • Primary reason for rates is to raise revenue to fund local government services and infrastructure for public benefit • All property owners pay a share of rates regardless of their choice to use/not use council services, programs, infrastructure

  35. Rating process • Draft budget: • Sets priorities to meet Council Plan objectives • Identify asset maintenance and service funding needs • Estimate revenue to be collected from other sources • Identify amount of rates needed to meet financial responsibilities for coming year • Advertise and open for public comment for at least 14 days • Setting rates: • Determine any municipal and waste charges • Determine rate in the dollar (balance of required revenue by the total value of all properties in the municipality) • Individual property rates: multiply rate in the dollar by the value of a property, add any municipal and waste charges

  36. Rates example • Total income identified in Council Budget: $70 million • Other revenue (funding, grants, fees, fines): $30 million • Rate revenue needed: $40 million • $40 million  $12 billion (value of all rateable properties in the municipality) = $0.0033 (rate in the dollar) • $ Value of property x $ rate in the dollar = $ rates payable • Eg. $550,000 x 0.0033 = $1,815

  37. Valuation process • 2.5 million properties in Victoria valued at more than $1 trillion • Council valuers review property values every two years • Last valued on 1 January 2012 • Total value of all properties in a municipality is used to strike the ‘rate in the dollar’ • Up-to-date revaluations are critical to ensure property owners pay a fair and equitable share of rates • Ratepayers have a right under the Valuation of Land Act 1960 to object to a valuation

  38. Valuation process cont. • Only qualified valuers can perform municipal valuations • Amount a property would sell for on a set date (1 Jan 2012) • Assess market movements and recent sales/rental trends • Highest and best use of the property • Build profile of value levels for different areas/property types • Physical inspection of a sample of properties • Complex statistical models apply information to individual properties • Valuer general certifies council valuations met required standards • Minister declares the valuations suitable to be adopted and used • The same valuations are used for State land tax

  39. Facts and myths MYTH • Increased (or decreased) property values increase (or decrease) how much a council collects – NO (but YES for State land taxes) • Valuations change the total rates collected – NO FACT • Valuations are “revenue neutral” • Council budget is set first and determines total amount of rates to be collected • Valuations are used to apportion how the burden (the total revenue to be raised) will be shared by each ratepayer • Rate in the dollar x property value = rates payable

  40. Property revaluations Size of the pie = Council revenue to be collected (determined by budget) Slice of pie = amount each ratepayer will pay (based on value of their property) A change in property values can change the slice (amount you pay), but not the size of the pie (overall amount council collects)

  41. Revaluation example House 1-$650,000 House 1-$620,000 House 2 -$460,000 House 2 -$460,000 Unit-$370,000 Unit-$360,000 Farm-$800,000 Farm-$820,000 Business-$670,000 Business-$770,000 Property Value - $3,030,000 Rates required - $5,500 Rates required - $5,500 Rate in the Dollar Rate in the Dollar 2012 2011 Property Value - $2,950,000

  42. 2011-12 Rates: House 1: $1212 House 2: $858 Unit: $690 Farm: $1492 Business: $1249 Total: $5,500 2012-13 Rates: House 1: $1,125 (-7.1%) House 2: $835 (-2.6%) Unit: $653 (-5.3%) Farm: $1,488 (-0.2%) Business: $1,398 (11.9%) Total $5,500 (0%) Revaluation example cont. • But, what happens when councils also increase the amount of rates they collect? • Suppose the council increased the amount of rates from $5,500 to $5,800 (increase of 5.5%)

  43. Revaluation example House 1-$650,000 House 1-$620,000 House 2 -$460,000 House 2 -$460,000 Unit-$370,000 Unit-$360,000 Farm-$800,000 Farm-$820,000 Business-$670,000 Business-$770,000 Property Value - $3,030,000 Rates required - $5,500 Rates required - $5,800 Rate in the Dollar Rate in the Dollar 2011 2012 Property Value - $2,950,000

  44. Revaluation example cont.

  45. LG cost pressures • Intergovernmental funding – declining • Councils’ growth in costs – LG Cost Index, not CPI • Asset management – funding the infrastructure renewal gap • Defined benefit superannuation

  46. Intergovernmental funding • GST was implemented in 1999 - Australian Parliament rejected that states should fund local government through GST • Responsibility remains at the federal level • Financial Assistance Grants to local government have declined from 1.2 per cent in 1993-94 to 0.62 per cent of Commonwealth revenue in 2011-12 • Funding indexed by CPI & population (not real costs growth) • Gap in state and federal funding for home and community care, kindergartens, school crossings, public library services • Shortfall is either paid for by ratepayers, service cuts and/or reduced asset maintenance/renewal spending

  47. LG Cost Index • Consumer Price Index (CPI) measures household goods & services • LG Cost Index measures costs to deliver council goods & services • Staff costs are the main driver as most services are delivered by people to the community • Second largest expense is asset maintenance and construction inc. staff/contractors and materials • LG Cost Index is determined using: • Average Weekly Earnings (AWE) Index • Engineering Construction Index • LG Cost Index has averaged 4% over the 5 years to 2011-12 and was estimated at 3.9% for 2012-13.

  48. Asset management – structural adjustment • Local government is capital intensive • $60 billion in assets - level of government that spends the highest proportion of its revenue on infrastructure • Adoption of accrual accounting (mid 90s) - councils explicitly recognise deteriorationof their assets for the first time • At the same time, rate capping and rate cuts led to councils spending less on ageing infrastructure • Rate increases in excess of the LG Cost Index help to close the ‘asset renewal gap’ – that is, assets declining faster than councils can fund their renewal costs

  49. Asset renewal gap challenges • 2002: Auditor General says renewal backlog is $1.5 - $2.7 billion • 2007: MAV Step Asset Program identified an annual underspend of $280 million • Equivalent to annual av. 12% rate rise for next five years • 2010: councils reduced their annual infrastructure renewal shortfall to $100 million • Achieved through better data collection; increased funding (rates and borrowings); and asset rationalisation • Further investment still needed by councils to continue reducing the asset renewal gap • Deferred spending = higher costs for future ratepayers

  50. Defined Benefit Superannuation • $400 million call due 1 July 2013 • Established an MAV Taskforce which will make recommendations in early 2013 • Recommendations likely to include: • Access to borrowings • Changes to information and advice provided by Vision Super to employers • Potential options to reduce the risk of future calls

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