Call for feedback on Victorian local government efficiency measure

The Victorian Essential Services Commission is seeking feedback on a proposed efficiency factor designed to promote productivity in the local government sector with gains then being shared with ratepayers in the form of lower rates.

The Commission provides advice to the Minister for Local Government on an appropriate rate cap for the year ahead based on the consumer price index and the wages price index, and an efficiency factor.

The Commission has undertaken a productivity study, Measuring productivity in the local government sector which looks at productivity trends in the sector and identifies options to estimate an efficiency factor.

The commission’s Andrew Chow said the Commission had been working with the sector and experts to look at different ways to estimate an appropriate efficiency factor.

“We found while each approach has strengths and weaknesses, there is not enough reliable data about the impact of rate capping on local councils at this time for us to confidently adopt some approaches,” he said.

Mr Chow says while a number of councils and peak groups have differing views, we’ve been encouraged by the level of interest and participation in this work.

“There is some qualified support for adopting either a notional value or an efficiency factor based on results from data analysis.

“There are limitations to fully adopting the data analysis approach at this time because the effects of rate capping on the efficiency of councils is not fully known.

“A small notional value meanwhile is simple and predictable and consistent with the aim of encouraging the sector to pursue longer term productivity gains,’ he said.

Balancing the need for simplicity against a more complex but also more accurate model, the commission is proposing to adopt a notional approach at this time, moving to a data analysis approach as more information becomes available.

Comments on the proposal, are due by 14 February 2018. More information is here.

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