Port Phillip is currently undergoing machinations over a rate increase of either 2.8% or to a maximum 3.5% as a stipulated maximum by the Victoria State Government. The obvious answer, if Councillors were not so tone deaf to the concerns of the average punter, is for a zero increase in rates for 2023-2024. Constituents have over the last 18 months, seen a massive increase in their cost of living. Some raw data is as follows.

Interest rates and Mortgage and Rental stress

• For those with a housing loan of $500,000, the increase in interest is $908 per month ($10,896 p.a after tax),
• For those with a housing loan of $750,000 the increase in interest is $1362 per month ($16,344 p.a after tax),
• For those constituents classified as poor, on average 50% of household income goes into rent.
• For those constituents classified as middle class, on average 30% of household income goes into rent.

Utilities

• Victorians have a disproportionate use of gas as a fuel source for heating. Gas has risen between 8 and 10% and will increase to over 20% later this year as the new tariffs come into effect.
• The average constituent will pay a further estimated $400 per year on gas.
• Other utilities like electricity are looking to exceed 10% in increases.

Vulnerable Members of the Community

• Pensioners average cost of living in 2022-2023 is around 7.3% increase.
• Self-Funded Retirees’ average cost is around 7.6% increase.

Clearly large sections of the community are doing it tough, while real wages continue to fall as the economy adjusts to supply side constraints.

On the Council budgeting side there is no financial stress, in fact, largess remains the continued narrative. There is approximately $160 million in reserves/current assets. This alone has the potential to generate a further $4 million annually in interest, if properly invested.

The CoPP runs on large surpluses annually. In 2021-2022 the surplus was $26.5 million. In 2020-2021 the surplus was $12.4 million. An estimated surplus of $10 million is budgeted for 2023-2024.

The extraordinary advocacy by some Councillors for surpluses of up to $10 million for 2023-2024 on the back of a full rate rise of 3.5% is more galling when we consider there is $160 million in Council reserves that can act as a cushion during difficult times. After all, what are reserves for? Certainly not for the rainy day that never comes. Also ask yourself why the Council does not have a rigorous reserving policy to cap the amount in reserves that sit on the balance sheet at any given time?

Councillors who argue that a reduced rate rise of 2.8% translates into an $11 million negative impact in revenue over 10 years, ignore offsets of any long-term revenue loss through potential efficiency gains. For example, if a modest $2 million or 0.9% (yes less than 1% based on 2021-2022 actual expenditure) was extracted from an efficiency review, it would more than double the compensation for any reduced rate increase in 2023-2024, extrapolated out to ten years. In the private sector a minimum 2% efficiency gain would be a more reasonable number to work from and if translated into current expenses, we could expect a minimum $5 million in savings, or the equivalent amount of the 2.8% rate increase mooted for 2023-2024.

A modest $2 to $5 million in savings could be found through a combination of measures and could be phased in through a staff freeze, natural staff attrition, or review of non-core activities. Of course, some Councillors will jump up and down trying to equate budget cuts to an attack on community grants. Such an argument is nothing but a disingenuous ploy to effectively maintain the status quo. Effectively, a leaderless call to do nothing. There is plenty of waste, staff under deployment, excessive use of consultants and inefficiency internally without combing through community grants while looking for savings.

Sadly, Councillors tend to only focus on revenue and pay little attention to the expenditure side of the equation. Building up surpluses does of course have a political angle - having a cash surplus means more money to splash on pet projects, pander to sectional interest groups and meeting directives from Spring Street. 

It is even more disappointing that some of the Councillors who are now pushing for the full rate rise, have no property ownership in Port Phillip and hence do not pay rates. A clear case of spending other people’s money, with no skin in the game themselves! If they did have skin in the game, they may be more cautious with their decision making.

The reality of course is that with any rate rise (along with the recently introduced State Government increase in land tax and mandatory utility checks), all will flow back to the punters in increased rents causing further hardship for constituents whose real incomes on average will continue to fall. It is even more dire when we consider that nearly 50% of all constituents in the City of Port Phillip are either in rented or assisted accommodation.

When it comes to spending money in these challenging times, it is not hard to know who needs it and who will utilise hard-earned money the most efficiently.  Is it mums and dads, the aspirational, the young couples buying a home, residential and business owners or alternatively - the City of Port Phillip who for too long have treated the rate payers as the local ATM? 

When I see the breakdown of our once vibrant retail strips of Fitzroy, Clarendon, Acland and Carlisle Streets, the failure to make progress on the St Kilda Triangle, the millions in underutilised funds in Council reserves, I know the City of Port Phillip are not the best managers of the people’s money, nor do they necessarily always have our best interests at heart.

If ever there was a need for Council restraint in rate increases, it is now. Good fiscal leadership looks internally for expenditure reductions, freezing new hires, trimming the budget surplus, and utilising some of the extraordinary build up in excessive reserves. The people need a break and the ratepayers who basically fund the CoPP deserve a break too. 

And to the Councillors sitting on the fence regarding the amount of any rate increase - history tells us that only those that buck the trend, ignore the politics, and listen to a community doing it tough are remembered. What legacy do you want Councillors?