Victorian councils may face “difficult” financial decisions in coming years if revenue growth does not resume post-Covid-19.
The warning is contained an Essential Services Commission report on the impact of rate capping on local councils.
The Local council outcomes report 2021 found that the sector’s financial health remained strong in general, “putting it in a position to meet short- and long-term liabilities”.
Between 2016-19 (when rate capping started) and 30 June 2020, revenues had grown, largely due to developer contributions and government grants.
As such, ratepayers had paid lower rates than they would have done in the absence of capping, the report said.
The commission’s executive director of pricing, Marcus Crudden, said many Victorian councils kept rates below the approved cap this financial year, and some kept rates steady, in response to the financial difficulties possibly facing ratepayers.
“However, councils may face some difficult decisions to maintain their long-term sustainability if revenue growth does not bounce back from the impact of the coronavirus pandemic,” he said.
The commission says it will continue to monitor the outcomes of rate capping and release a third report in 2023.