IPART Decision on Council Special Variation Application Approves 25.2% Permanent Increase
IPART Chair Carmel Donnelly said the Tribunal approved the special variation applications from Federation Council, Gunnedah Shire Council, Shoalhaven City Council and Upper Hunter Shire Council, partially approved the special variation application from Northern Beaches Council, and did not approve the special variation application from North Sydney Council.
The Tribunal also approved a minimum rate increase application from Gunnedah Shire Council and did not approve a minimum rate increase application from North Sydney Council.
The partially approved application from Northern Beaches Council is for the first two years of the SV of permanent increases of 12.1% in 2025-26 and 11.7% in 2026-27 - or 25.2% according to IPART and the NBC's original application document.
This will generate additional annual income ($‘000) of $23,920,000.00 in 2025-26 and $25,928,000.00 by the 2026-27 financial year and then ever after, and increase annual rates by thousands of dollars for many Pittwater residents, especially those with waterfronts or beachfront homes.
The approval is subject to certain conditions, including that the council:
- uses the additional income for the purpose outlined in its application
- reports in its annual report for 2025-26 until 2032-33 the actual program of expenditure funded by the additional income and the outcomes achieved
Last week the Minns NSW Government announced, as part of its response to the NSW Parliament’s Upper House inquiry into the ‘Ability of local governments to fund infrastructure and services’, that the Special Variation process will return to being used solely by councils to fund specific projects or programs supported by the community, and be time limited, not permanent.
To make its decision, IPART assessed the council’s SV application and supporting materials against the 6 criteria set by the Office of Local Government (OLG) in its Guidelines for the preparation of an application for an Special Variation to general income (OLG Guidelines). IPART found the council met 5 of these 6 criteria.
For criterion 1 on financial need IPART found on balance that the council has not demonstrated a financial need for the SV as set out in its application. IPART found it has demonstrated a need for additional funds for the first 2 years.
Criterion 1 states:
The need for, and purpose of, a different revenue path for the council’s General Fund (as requested through the special variation) is clearly articulated and identified in the council’s IP&R documents, in particular its Delivery Program, Long Term Financial Plan and Asset Management Plan where appropriate. In establishing need for the special variation, the relevant IP&R documents should canvas alternatives to the rate rise. In demonstrating this need councils must indicate the financial impact in their Long Term Financial Plan applying the following two scenarios:
- Baseline scenario – General Fund revenue and expenditure forecasts which reflect the business as usual model, and exclude the special variation, and
- Special variation scenario – the result of implementing the special variation in full is shown and reflected in the General Fund revenue forecast with the additional expenditure levels intended to be funded by the special variation.
The IP&R documents and the council’s application should provide evidence to establish this criterion. This could include evidence of community need/desire for service levels/project and limited council resourcing alternatives. Evidence could also include analysis of council’s financial sustainability conducted by Government agencies.
In assessing this criteria, IPART will also take into account whether and to what extent a council has decided not to apply the full percentage increases available to it in one or more previous years under section 511 of the Local Government Act. If a council has a large amount of revenue yet to be caught up over the next several years, it should explain in its application how that impacts on its need for the special variation.
IPART stated in its report that:
We consider the additional income under the approved 2-year SV to be sufficient for the council to achieve financial sustainability and still accrue surpluses to fund expansions in environmental and natural disaster risk reduction programs and long-term investments in major infrastructure renewals. It would also have a smaller impact on ratepayers in an economic environment where inflation has put considerable pressure on the cost of living.
Many stakeholders told us that the council’s proposed rates increase is likely to create affordability challenges in the current economic climate. We found that the council demonstrated the impact on ratepayers is generally reasonable, considering its current rates and the community’s capacity to pay. The population of its LGA has higher levels of socio-economic advantage as measured by SEIFA rank and higher median household incomes compared to the average of its OLG Group. The council has a hardship policy and has programs in place to waive charges and fees under certain circumstances.
The approved SV, for a lower amount of 25.2% compared to the 39.6% proposed by the council, will have a smaller impact on ratepayers. With the approved SV, the council’s average residential and business rates are expected to be slightly higher than the average rates for both nearby councils and councils with a similar level of socio-economic advantage.
We also found that the council made a significant effort to reach the community and ratepayers to inform them about the proposed SV scenarios and the reasoning behind the proposal. The council used a number of engagement channels and provided opportunities for the community to give feedback. The council received over 5,500 responses to its survey, with 49% of respondents supporting a special variation of 31.1% or higher. The council considered this feedback, and decided to apply for a lower special variation increase than initially intended in consideration of the impact on ratepayers.
However, most of the submissions pointed out 83% of respondents rejected an expansionist service agenda and all pointed out the survey they were steered towards as the way to 'have your say' was structured towards achieving the council's wanted result - examples from the submissions to IPART included:
- The survey carried out by the Council during its own consultation period was heavily slanted towards a particular result so it was not a fair reflection of community views
- The online survey was biased, with forced ranking options that pre-determined support for a rate increase
- The community 'preferred option survey' deliberately employed a methodology which enabled Council to avoid hard meaningful data. Unlike the rigorous stratified random probability sampling methodology (as per all national polling), the opt-in survey method measures the responses only of those community members interested enough to reply (in this case approx. 6,000 of the 170,000-adult population). In no way can results be said to be representative of the NBC population; nor can one apply typical reliability and confidence measures, as per properly constructed surveys. (Such a sample of 400 residents could have been conducted for around $50,000 to deliver an accurate and projectable community response.) NBC management belled the cat when they revealed they had used the data from the $170,000 survey to structure a 'thematic' approach, using its data along with a range of other inputs to develop said themes to inform their final decision. This is simply marketing camouflage. It was a deliberate choice by NBC management needing flexibility to, as we have said, 'orchestrate' their desired result.
As to affordability, several submissions pointed out:
- The affordability survey carried out for the Council is capable of more than one interpretation. For example, The LGA has, from information previously furnished by the Council, a proportion of the population which is aged or retired which is considerably above the average for New South Wales LGA’s. These people generally own their own homes but do not have mortgages; they are also likely to be on fixed incomes. All of this means a significant proportion of the population who are not able to afford the proposed increase of rates but their position is not recognised in the Council’s affordability study. In any case, this was only a “study of studies” – there was no on-the-ground research. There are also a number of pockets of less well-off residents.
- We challenge the methodology of the Morrison Low capacity to pay report as relied on by NBC as it appears to rely heavily on the relative advantage of the Northern Beaches region in comparison to other regions without sufficiently addressing the actual capacity to pay significant rate increases. In particular, the report documents that the Northern Beaches has slightly lower mortgage stress than other regions, but fails to show how the 17% of households with mortgage costs exceeding 30% of income would manage to meet this significant rate rise without having to move to other areas. Similarly, with significant business rates increases, there appears to be little consideration given to whether a large percentage of businesses might be pushed to close by such significant rate increases.
Equally, many pointed out the failure of the forced amalgamation of May 12 2016 to meet 'scale and capacity' and reduce costs - a few days afterwards, nine years on, residents stated in their submissions to IPART:
'In its documentation, the Council claimed that the net present value of cost savings from the merger was $161.6 million but offered no further information. How were these savings realised, how is the sum calculated and on what has the money saved to date been spent? If these savings will be realised over the next 10 years, how is the Council currently in financial difficulty?'
There were also questions about what the increase in income will be allocated to - although some of this is available in the council's Draft Delivery Program for 2025-2029 currently open for feedback (marked on a map linked to in yellow and in a document on the webpage) - community sentiment is that there is increasing announcements about plans to draw plans and studies and 'consultations' being done but no actual works being realised, despite how much income pours into the council from areas that have been neglected since May 2016.
It is not just the potholes in roads the council is responsible for that are patched and a pothole again a few weeks later - other larger public assets are 'going downhill'.
Examples cited in submissions to IPART, from a Pittwater perspective, are:
The figures supplied to I PART as part of the application for the SRV include “Special variation for future works” totalling $296.1 million over the next 9 years. This is an awful lot of cash to be generated without a disclosed purpose but there is no information on priorities or how projects will be identified or chosen for this cash to be invested.
The Council is known to operate with an internal list of priorities which is not made available to the community whose interests the Council is mandated to serve. It should be published, in order to enable the public to know how the Council determines which services and projects to undertake and to provide a framework within which the four options for the SRV were determined.
Greater transparency from the Council on priorities and benchmarking of projects would enable better decision-making and more informed commentary by the public. This would lead to fairer and more productive allocation of funding. An example relates to tourism – the second most popular tourist destination in the Northern Beaches is Palm Beach/Barrenjoey Headland (after Manly). More than 250,000 people per annum travel through Palm Beach and Governor Phillip Park to visit Barrenjoey Headland, according to data supplied by National Parks & Wildlife. There were more than 100,000 parking fees paid in Palm Beach in 2023/2024, none of which would have been paid by ratepayers of Northern Beaches – this would result probably in the order of 300,000 visitors to the car parks per annum (these figures should not be added together – there would be double counting). Yet there is not one dollar of capital expenditure in Palm Beach in the current financial year nor the next three years in the Council’s Delivery Plan to help service the needs of this flow of tourists who spend time and money in the area and the condition of the assets they use such as Governor Phillip Park is poor and lack, for example, adequate toilet facilities.
However, former Warringah residents have told the news service they cannot afford the increase and that in their experience Warringah is 'suffering the most since the merger' - although Manly residents, especially businesses, will have experienced an almost 70% increase in rates since 2021 and the 'rates harmonisation' of the same.
The 2021-2022 Budget increased Business Rates for Pittwater and Manly from between 42% to 24% as part of a 'rates harmonisation' process required by the then State Government.
In 2021, business rates in the former Pittwater area saw a 24% increase as part of the broader council's rates harmonisation, or an average annual increase of $465.00. Manly's business rates increased by 42% during the same period, leading to an annual average increase of $1272.00. Ad valorem rates increased by 25% for Manly. Warringah Council average annual rates were reduced under the chosen scenario.
On May 14th 2021 then Minister for Local Government Shelley Hancock said the Local Government Amendment Act 2021 implements the Government’s response to IPART’s review of the rating system and a range of other changes.
“These decisions are based on our assessment against the Office of Local Government criteria, taking into account the issues raised by stakeholders during our submission period,” IPART Chair Carmel Donnelly said.
“The councils with approved increases are encouraged to consult with the community to decide how best to implement the allowed increase.
“It’s important to note that elected councillors can choose when they implement the approved increase in rates income, including deferring any increases for up to 10 years and also how they set rates across the rating categories.”
The council released a statement on Friday May 16 which says:
'Funding in the first two years will allow Council to invest in the maintenance of core infrastructure which has fallen behind in recent years due to rising construction costs. Currently Council has a critical shortfall of $25.5 million every year to maintain assets.
The third year rate increase was to be allocated to investment in significant infrastructure projects. Under new NSW Government changes to the IPART Special Variation process, councils will be required to apply for specific infrastructure project funding separately in the future.'
Mayor Sue Heins said the IPART decision recognised the considerable pressures on Council’s budget.
“IPART has acknowledged the critical need to address the shortfall in Council’s budget caused by high inflation and increasing costs," Mayor Heins said.
“The approval gives us the opportunity to achieve what we set out to do – maintain core infrastructure and secure financial stability.
“Council now has the ability to confidently move forward and continue to repair and renew roads, footpaths, rock pools, stormwater infrastructure and other community facilities.
“It allows for a correction in rates to better meet the real cost of maintaining our community assets which has increased significantly over many years alongside the financial impacts of multiple natural emergencies**, cost shifting and other budget pressures.
“This has been a tough conversation to have with our community in this economic climate and we appreciate the feedback and input from our ratepayers.
"We can get on with the job of delivering for our community as we continue to focus on efficiencies and delivering value for money to ratepayers."
'The removal of the proposed third year of rate increase will likely result in some larger renewal projects like the Warringah Aquatic Centre or Manly Lifesaving Club redevelopments not proceeding without significant external funding or a separate IPART application', the council said in its statement.
'The elected Council will review the IPART decision along with the draft Delivery Program and 2025/26 Budget at the June 17 Council meeting.'
IPART sets a rate peg annually for each of the 128 councils in NSW which caps each council’s increase in the income they collect from ordinary rates. For 2025-26, the core rate pegs range from 3.6% to 5.1% across NSW, and 72 of the 128 councils also received an additional allowance to reflect an adjusted population factor of up to 3.8%.
The rate peg for Northern Beaches Council has been set at 3.8% for 2025/26. The application for the rate increase of 12.1% in 2025/26, inclusive of 3.8% rate peg.
Reports on each of the 6 council special variation decisions, 2 minimum rate decisions, and related documents are now available on the IPART website.
Zali Steggall, MP for Warringah, stated:
''Today’s decision by the Independent Pricing and Regulatory Tribunal (IPART) to reject North Sydney Council’s proposed 87% rate rise, and to significantly reduce Northern Beaches Council’s requested 39.6% increase to 25.2%, will be reassuring to many in the community who are already grappling with cost-of-living pressures.
It was clear that both of the rate rises proposed were too far reaching and were proposed without sufficient consultation or explanation.
Whilst I support councils being financially sustainable and able to deliver vital local services, it is essential to find the right balance between maintaining financial sustainability and being transparent and accountable about the services they are providing to their communities.
I strongly urge both councils to first look internally to prioritise cost savings before they propose cutting important community projects or services that are long overdue and much needed by the community.
It’s also time for State MPs to step up and take responsibility for the growing cost shifting onto local councils from state governments. This has occurred under the previous Liberal and current Labor state government. State MPs should be actively working with councils to identify ways the NSW Government can provide greater support and ensure councils aren’t left to shoulder responsibilities without adequate funding from state government.
When Federal Parliament returns, I will continue to push for an increase to Financial Assistance Grants—from 0.5% to 1% of Commonwealth taxation revenue—so councils can deliver for their communities without overburdening ratepayers.
I will also continue to work with both Northern Beaches and North Sydney Councils to identify whether existing federal grants or funding programs could assist in offsetting additional costs.
It is also essential that state, territory, and federal governments address the growing costs to local governments from escalating climate risks and I have proposed a federally funded $10b climate resilience fund to support local governments by backing the development of climate resilience infrastructure projects around the country.'' Ms Steggall said
25% rate hike a blow to residents, says Pittwater MP Jacqui Scruby
A 25% rate rise over the two years approved by the independent regulator is still a blow to families and businesses already struggling with the cost of living, independent Pittwater MP Jacqui Scruby said.
“If backed by councillors, it's five times the rate of inflation and will make a real dent in household and business budgets,”
“While everyone will be relieved the proposed 40% rise was rejected, a 25% increase is no cause for celebration, especially as this is less than the options put forward, which may result in increased rates to only maintain services rather than invest in upcoming community projects.”
“What this decision shows is that IPART is a robust body that has critically analysed the proposal put by council. They’ve held the council to account and that’s a good thing.”
Its findings indicate that there will still be opportunities for investment, despite council considering that level of rise would only cover existing services and maintenance.
Ms Scruby, who opposed the original proposal, acknowledges funding is an issue facing many councils across NSW, but has called for urgent NSW Government reform to stop ratepayers bearing the brunt of state cost shifting and rising costs. She has raised the issue in parliament, made a submission to IPART, and urged Minister for Local Government Ron Hoenig to invest more in local government, for pot holes, beach maintenance and flood damage, but also compel them to cut costs.
Ms Scruby has also called on Northern Beaches Council to look at efficiency measures and rationalise senior management and Dr Sophie Scamps to be putting pressure on the Federal government to invest more in local government.
Earlier this week the NSW Government announced plans to reform council financial management with extra support and transparency.
“The Minns Government’s reforms are a start, but they don’t fix the real problem: councils being handed more responsibilities without funding, and rising costs. You can’t patch a pothole with a policy review. We need to have systematic changes to fund our local councils into the future.”
Ms Scruby supports calls to lift federal funding to councils from 0.5% to 1%, and ensure outer metropolitan councils like Northern Beaches aren’t overlooked.
“The community does want to see more investment in surf clubs, wharves and the Aquatic Centre, and with the rate rise being limited to covering existing services, there is more pressure on the NSW Government and Federal Government to invest. I’m happy to keep putting pressure on the NSW Government to come to the table.”
Submissions to IPART on the Northern Beaches Council application to permanently increase rates by 39.6% attracted the highest amount of feedback at 558 responses, with North Sydney Council's application for 87.05% over 2 years from 2025-26 to 2026-27 receiving 322 submissions and Gunnedah Shire Council the least at 18.
The processes since, the 'rates harmonisation' of 2021, and the current SRV process, has renewed the resolve among Pittwater residents to see Pittwater Council reinstated, which residents continue to maintain did a lot more for a lot less and a much quicker.
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NBC Carrying $8 Million Climate Change Deficit
During the ‘Ability of local governments to fund infrastructure and services’ NSW Parliament Inquiry a question to the Chief Financial Officer, Northern Beaches Council revealed a deficit of almost $8million in costs sustained by weather events.
The CFO's Answers to Questions on Notice the response to 'What types of costs are incurred in response to a natural disaster?' was:
The Northern Beaches is highly exposed to a raft of natural hazards with current data indicating:
- Over 22,000 properties are affected by flood;
- 19,000 properties are bush fire prone;
- 63,000 properties exposed to moderate to high geotechnical risk, and
- close to 5000 properties affected by coastal hazards.
The recently released NSW State Disaster Mitigation Plan estimates that by 2060 the Northern Beaches will have the highest Total Average Annual Losses in NSW by 2060, with estimated losses of close to $1 billion dollars per annum to the built environment alone.
The following table sets out the types of costs incurred by Council in the past 5 years for natural disasters. Northern Beaches Council Natural disaster declarations - 2019/20 to 2023/24:
Previous reports:
- Government Response to Upper House inquiry into the ‘Ability of local governments to fund infrastructure and services’ signals Special Rates Variations will be tied to specific projects - time limited
- IPART Consult on NBC SRV Now Open: Closes March 17, 2025
- Outraged Pittwater Community Fights To Stop Rising Costs Of Failed Merger; Renews Call To Reinstate Pittwater Council
- Northern Beaches Council Passes Motion to Apply for a Permanent 40% Increase in Rates
- Rates Variations Options 1 to 4 Prompt ‘Option 5’: Reinstate Pittwater Council
- Council Consultation on Special Variation to Rates to commence this week
- Northern Beaches Council's Budget 2024-25 passes - just!
- Incoming Rate Rises of 26 - 44% May change our Village Retail Centres, exacerbate anti-council sentiment
- Business rate rises of up to 27 per cent proposed for Pittwater next year
