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Rate freeze marks economic rebuild

09 Jun 2020

Rate freeze marks economic rebuild Image

By Sean Car

Despite unsurprisingly recording its first deficit in more than 30 years as a result of COVID-19, the City of Melbourne has made the symbolic move to implement a freeze on rate increases over the next financial year.

Having lost more than $100 million since the outbreak of COVID-19 in March, the release of the council’s draft annual plan and budget on May 19 was unfortunately marred by a significant $57.4 million deficit.

Despite the financial setbacks of COVID-19, however, years of strong fiscal management and economic growth has meant the council’s finances are in good shape as it forecasts a return to surplus by the 2022-23 financial year.

The $632 million draft budget is underpinned by a substantial $168.5 million capital works program, $41 million investment in transport infrastructure as well as a $50 million COVID-19 recovery package to assist small businesses and precincts.

“Years of disciplined financial management means the City of Melbourne can step up in these unprecedented times,” Lord Mayor Sally Capp said.

“This year, for the first time in more than 30 years, the budget will have a deficit. We are deliberately investing in our community now so we can support businesses and deliver infrastructure and stimulus as a platform for recovery.”

Having made a habit of underspending its capital works budget for the best part of the past decade, CEO Justin Hanney told Southbank News that new measures had been taken to ensure that trend wouldn’t continue.

“Our investment on capital works has been prioritised with a focus on projects that will help our city recover from COVID-19,” he said. “Internal project reporting has also been enhanced to track and manage the progress of capital projects.”

Headlining the infrastructure spend is a $45 million investment to ramp up the renewal of Queen Victoria Market, $12.8 to progress Southbank Boulevard and $6.5 million to restore Melbourne Town Hall.

The $41 million towards transport will also see car parks replaced with footpaths and 12 kilometres of pop-up cycling lanes to cater for social distancing as part of its COVID-19 recovery strategy.

The impacts of COVID-19 could likely see the council draw on its five-year $75 million line of credit from ANZ Bank for the first time, however Mr Hanney said it would only be used on a “needs basis” to meet capital works requirements.

“The loan expires on June 30, 2021 but there are options to extend if required,” Mr Hanney said. “The interest rate is 0.74 per cent and is very competitive.”

The City of Melbourne’s 1425 staff, 30 fewer full-time than last year, are the best-paid in the country and are expected to cost the council $165.9 million during the 2020-21 financial year.

With the majority of council services delivered through its staff, the budget promises a reduction on expenditure on purchasing, contractors, consultants and administration and will look to “redeploy staff into areas with higher demand.”

Mr Hanney said the current enterprise bargaining agreement (EBA) had expired and the agreement process was on hold while the council prioritised essential services in response to COVID-19.

“We have had positive discussions with unions and will revisit the new enterprise agreement in the coming months,” Mr Hanney said.

In addition to providing rate relief at a cost of $18.9 million, the council will also not increase fees and charges for 2020-21 for community services such as recreation centres, children’s services and libraries.

Parking revenue is forecast to decline significantly due to a decrease in the number of cars in the city during the COVID-19 lockdown. Parking fee revenue is budgeted at $28 million, down 33 per cent from $43 million the previous year. Naturally, parking fine revenue is also budgeted down at $16 million.

Overall, 64 per cent of council fees remain unchanged or are only increasing according to consumer price index (CPI).

Deputy Lord Mayor Arron Wood said the budget was putting “people and businesses first.”

“We are freezing rates with a zero per cent rate rise. In every announcement since the pandemic hit, we’ve focussed on fixed costs for businesses and residents,” he said.

“By not increasing rates and delivering essential services, programs and support packages, we are doing our bit to rebuild the local economy.”

Lord Mayor Sally Capp said the council was also preparing a package of “shovel-ready” projects to present to the federal and state governments to help stimulate the economy and create jobs.

Public submissions on the draft annual plan and budget 2020-21 are open until 5pm on June 17 •

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