7:11 AMManningham council has a new number to play with.
Some time back, I wrote about a claim by Manningham council in their 2014/2015 budget that Average Weekly Earnings would increase by 4.5% in 2014/15 and subsequent years. Please see page 1300 of the minutes of the council meeting for 29 April 2014 to see where the council made this claim.
It seems, from the context in which this number appeared, that Manningham council sought to justify increasing rates by 4.5% by appealing to this 4.5% increase in Average Weekly Earnings.
The average weekly earning of rate payers is very important to Manningham council. This is because Manningham council does not increase their rates because of increases in costs, as many of us think they do. Their budget process consists of compiling a list of items and projects they think should be done in the coming financial year, putting a cost on the items and then asking whether or not the ratepayers can sustain that increase to their rates. With this type of budget process, the increase in Average Weekly Earnings is very important.
In that previous article, I examined the validity of this claim of a 4.5% increase in Average Weekly Earnings. I examined all the ABS data on all wage indices that I could find. This included the ABS data for the Average Weekly Income, Average Weekly Cash Earnings and Wage Price Index.
None of them, absolutely none of them, were any where near 4.5%.
This figure of a 4.5% increase in Average Weekly Earnings used by the Manningham Council is, as far as I can tell, a complete and total fabrication.
Having exposed Manningham Council's claim that Average Weekly Earnings would increase at a rate of 4.5% for 2014/15 to 2017/18, let us now see how Manningham Council responds.
Manningham Council fabricates an entirely new number to put in front of us.
If you look at the minutes of the meeting of 21 April 2015 and the council summary for the 2015/2016 budget, we find Manningham Council has an entirely new figure to put in front of us.
Please see page 1066 point 1.18. Again this new number is put to us in the context of Economic and Fiscal Influences on council costs.
We read this claim:
"Costs associated with building materials and construction is forecast to increase by 4.0%"
If this figure of 4.0% were true, then it would certainly make Manningham council look good and would be good justification for the 4.5% in our rates.
The council are praising themselves for delivering an average rate increase of only 3.5%.
(This 3.5% increase is actually an average increase based on 4.5% increase in council rates along with a 2.0% decrease in waste charges.
If the council's claim is true, we have an important cost to Manningham council increasing by 4%, and the council put up their rates by 4.5%. So the councils rate rise does not seem that unreasonable.
But I hope to show you that this new number provided by Manningham council is also just another total and complete fabrication.
Let us look at some real statistics.
Let us first consider the figures produced by the Municipal Association of Victoria. You can download this document from the MAV website. It is the Local Government Cost Index 2013/14
Admittedly it is a bit dated. But as far as I can tell, this is the latest version of the 'Local Government Cost Index' released on the MAV website to date (as at 31 May 2015).
I have taken the following table from page 5 of their document. Note that the figures for 2011/12 are actual figures and the figures for 2012/13 and beyond are forecast figures.
The forecast for the increase in the average construction cost increase shown in the MAV table is 3.0% and not the 4.0% figure used by Manningham council. Why is that? Is this just Manningham council over-estimating cost increases to justify their rate increases?
Please be aware that I regard all the above increases in council construction costs produced by the MAV to be complete nonsense. This is because these increases reflect the fact that councils generally (like Manningham council) are completely incapable of controlling costs and instead allow suppliers to charge the most outrageous prices. The increases shown in the table above have a built in component to allow for waste and mismanagement. I have said repeatedly that Manningham Council has neither the skills to control costs nor do they have the incentive or interest to do so.
For Manningham Council there is always more money where the last money came from. They do not need to complete with anyone to earn it, Manningham council does not need to provide value for money to the public, they do not need to be responsive to economic pressures felt by the public. Manningham council merely declare what they are going to take from us and then take us to court if we do not pay what they demand.
So what are the real cost increases in that industry for the rest of us?
What are the cost increases for the rest of us in that same industry. What are the cost increases for those who have to earn their money in a competitive environment, provide real value for money, so our customers and clients choose us voluntarily over other suppliers?
Let us look at the ABS data again.
To find out the increase in costs for the rest of us, we need to go to the Producers Price Index. This is a complicated data set with cost increases broken down by different industries and by state.
The data we want is table 17 'Output of the Construction industries'. Note that this is not house construction costs but building construction costs. This data set is the same thing that Manningham council claim will increase by 4% in 2015/16.
Please look at building construction for Victoria. As at the time of writing, the ABS has published figures to March 2015. The information in the table below is taken from the ABS data series for Building Construction in Victoria.
Please examine the above table for a moment.
Just how does Manningham council come to the conclusion that building construction is forecast to be 4% in 2015/16?
The ABS figures suggest it is not going to be anywhere near 4% in 2015/2016. A figure of somewhere near 1.4% would be a more realistic expectation. 4% is not a forecast but another outrageous overestimate used to lend support to equally outrageous increases in council rates.
My argument is that Manningham council has no basis whatsoever to claim that construction costs will increase by 4% in 2015/16. Construction costs have increased less than 2% in the preceding 4 years. The council's number of 4% is a ludicrous over-estimate that bears no relationship to the past 4 years of actual increases in this industry, as reported by the ABS.
Manningham council (and it seems the MAV also) consistently overestimate cost increases by totally unreasonable amounts and then use them to justify their outrageous rate increases.
Manningham council has again, as far as I can tell, totally fabricated a number out of thin air.
Is Manningham Council unable to manage?
Please take a closer look at the preceding table.
Consider, for instance, the actual increase in construction costs for 2011/12.
For the rest of Australia, (i.e.we who have to control costs to make a living and be careful over the money we spend), building construction costs in Victoria DECREASED by 1.1%.
Do you think councils can manage money as carefully as we do?
You have to be joking.
For councils in Victoria, including Manningham council, it actually INCREASED by 2.8%.
This is a difference of 3.9% in the same State and in the same industry.
And note that these are actual figures and not forecast or budget figures. This is what actually happened.
Manningham council (and other councils) simply cannot, or will not, manage projects or costs properly. Because they do not earn their money, as we do, they have little interest in controlling costs as we do. For Manningham council there is always more easy money from where the last lot came from.
And it appears the half-hearted and couldn't-care-less attitude towards cost control that pervades Manninham council is also prevalent in other Victorian councils. The above figures are evidence that Manningham council do not have the management skills to manage construction projects, nor contractors nor the costs associated with construction.
But their incompetence does not effect their pay.
These figures also demonstrate that Manningham Council falls far behind the abilities and skills of their counterparts in private industry in this area.
This comparison between the skills of Manningham council and private enterprise is important.
Manningham council (and probably other councils), say their remuneration packages, (that is, their pay), should be comparable to people in the private sector because they do comparable jobs.
But we see from these figures that while they may build similar things, their ability to manage the project and associated costs falls far behind their counterparts in the private sector.
And it is not as though the Manningham council are ashamed of their appalling performance and hopeless management skills.
Elsewhere on this website I look into ABS data for pay increases in Australia. Do you know that, on average, public servants are paid around $7,000 per year more than their counterparts in private enterprise? And this is not a recent development, it has been this way for years. And yet we still we hear the fraudulent and dishonest claim that public servants pay needs to 'keep parity' with private enterprise.
Not only do councils across Victoria do a much poorer job at managing project costs, they get paid more for doing it and their pay increases at a far greater rate.
Did you know that on average, according to ABS data, that public service pay rates increased, on average, by 2.1% (Nov 2013 to Nov 2014)? However employee costs at Manningham council increase well above this average. Depending on which document you read, employee costs at Manningham council increased somewhere between 3.2% and 3.4%. If you look at the MAV figures in the first table above you will see they budget a figure of 3.5% for council pay increases per year.
Manningham council are exceptionally generous toward themselves despite their incompetence and indifference towards their work.
Again we observe that Manningham Council invent numbers when ABS data does not suit. They fabricate numbers completely out of thin air, to justify their greed, indifference and lack of necessary skills.
Should we view Manningham council's fabricated numbers as fraud?
It is interesting to note that some months back Manningham Council presented their Fraud and Corruption Document (See minutes January 27 2015).
It is also interesting to note that this document does not address misrepresentation by the council toward the ratepayers.
It certainly addresses the problem of people being dishonest toward the council and obtaining council assets through fraud. However it does not address the corresponding issue of the council obtaining ratepayer assets by fraudulent means.
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