3:07 PMMore Deception By Manningham Council
Concerned residents continue to question Manningham council over the exorbitant property rate increases. A question was asked at the April 29, 2014 council meeting. It was:
“If CPI increases at 2.4% then why do our property rates increase at almost twice this amount, that is at 4.5%?”
Manningham's Chief Executive Officer tried to justify the increase. As before, I hope to demonstrate, that at times he was being misleading. The questions asked can be seen at agenda item 15.1 in the meeting minutes. The CEO's replies were not included in the minutes. They are only available in the forth audio recording for the meeting.
Arguing the rates down by one third?
In his reply to this question, the CEO made these comments.
“..when you take the headline rate of 4.5% and you collapse it together with the waste charges the effective average household will experience a rate increase of 3.8% ...”
And this is correct.
The average property rate for 2013/14 was $1480.00. For 2014/15 it will be $1546.57 (page 1296 of minutes for April 29, 2014 meeting). The average residential waste charge is $302.90 (page 1247 of same minutes). If the waste charge remains unchanged, I calculate the percentage increase in property rates plus waste charges to be 3.73% for 2014/15 for the average residential property.
The CEO then said.
“... underlying the 4.5% is a 33% committment to capital … if one takes a third off the 3.8% off, we are left with somewhere around 2.5% to run our operation with increasing services and demand from community ...”
What was happened?
Overall the property rates and waste charges increase by only 3.8%. So far so good.
A third of the rates are spend on capital works. Once again true.
But it is not correct to take one third away from the 3.8% to arrive at 2.5% to be spent on staff, services, etc.
Please let me explain.
On page 1246 of the minutes (page 4 of the 2014/15 budget document) it says:
“One third of rates income or $24.76 million is directed to improving the capital infrastructure of the City as part of the $34.27 million capital program, and two thirds will go toward maintaining the provision of services for the community.”
If the total rates income increases by 3.8% and if one third is used on on capital works and two thirds used on services and staff, then the one third used on capital works and the two thirds used on services and staff must also each increase by 3.8%.
Let me say it in a slightly different way. If the total rates increase by 3.8%, then the one third and the two thirds must also each increase by 3.8%.
Do some examples with a calculator if you disagree with my assertion. Consider this example. Say rates are $100m. The next year they are $103.8m which is an increase of 3.8%. Now 1/3 of this $103.8m is spent in infrastructure in both years. So in the first year $33.3m was spent on infrastructure. And in the next year 1/3 of $103.8m is $34.6m. So how much did infrastructure spending increase? Thats right 3.8%. What the Chief Executive Officer is said is rubbish.
It is nonsense to reduce the 3.8% by one third and arrive at 2.5% and then say the staff and services cost go up by only 2.5%.
The CEO is talking nonsense. He is trying to justify another massive rate increase by using a misleading and false argument and rubbish mathematics.
What the CEO said could be true – in one particular instance.
The percentage of rate money spent on staff and services could decease if a larger proportion of the rate money was spent on capital works.
If this were the case then the CEO could accurately say that a smaller percent of the money is being spent on staff.
But this is not the case. In fact the exact opposite is happening.
Just for the record, on page iii of the prior years budget document (2013/14) it says:
“... A total of $24.17 million in rate funds is applied to capital works, which is 33.9% of every rate dollar, exceeding Council’s target of 33.0% by $0.50 million ...”
If you do the maths, you will see that Manningham spent 33.9% of rates on capital works in 2013/14 and plans to spend a the slightly smaller proportion of 33.0% on capital works in 2014/15.
So Manningham is spending more of our rate money this year on staff and services than they did last year. The percentage spent on staff and services does not go down but increases slightly for 2014/15.
Again we see the CEO is again talking nonsense and is misleading us.
So why wasn't the CEO's answer recorded in the minutes?
I think there is a good reason why the CEO's answer was not included in the official minutes.
The reason Manningham council gives is “the CEO gave a very lengthy and detailed answer” (page 1355 of the minutes) suggesting the response was too lengthy and detailed to include in the minutes.
I will transcribe the CEO's response here from the audio tapes for our council:
“... Council is unanimous and solid in it's resolve to constrain the burden of cost on our community. Any increases passed on to community will be at the lower end of local governmment and as in recent public reports, Manningham is in last 10% quartile of rate increases.
Underlying the 4.5% is a 33% commitment to capital. When you take the headline rate of 4.5% and you collapse it together with the waste charges the effective average household will experience a rate increase of 3.8%. A third of that rise will go without question to our capital. The level of assets in our city is somewhere around 16% higher than any other central eastern metropolitan suburb. We have a considerable capital challenge. If one takes a third off the 3.8% off, we are left with somewhere around 2.5% to run our operation with increasing services and demand from community.
One of those underlying restrictions placed on me is to limit the labor cost of the council to no more than effectively around 2.5%. Further I have been tasked with my executive to find savings in the order over the next three years accumulating to $1.2m in our operations. This strategy will allow council to entertain a further reduction in it's rate rises in the next two years. Next year we are heading towards the financial sustainability of being able to pass on a lower and probably the lowest rise in - I think if you go back to at least the last decade a headline rate of 4% would probably the lowest in that decade.
Strategies to achieve this will be about upliftiong contemporary work practices in our organisation. Finding our own way of reviewing and doing our own internal efficiency reviews - it is part and parcel of what modern organiations are about. Without sacrificing quality or sacrificing service. So having said that the CPI rate in effect internally to the operations of the organisation is just about where we are perhaps point 1 or point 2 above that in real terms of what we have to work with and front line services are sacrosanct, capital is sacrosant. The pressure will be on findings overhead savings in administrative overheads in the main.”
That wasn't too hard, was it.
Just four paragraphs to transcribe the CEO's reply to the first question and even less for his answer to the second question.
Is Manningham council saying that in 507 pages of minutes for this meeting, they could not find space for these few paragraphs?
Sometimes council minutes for one meeting can get close to and even exceed 1000 pages (see full minutes for June 2014 and also 28 May 2013). Is Manningham council saying that they can find the time and effort to key all those 1000 pages of detail, but cannot find the time, effort or space to transcribe these few paragraphs?
I think the real reason why they did not include the CEO's reply is, if they did, it would become part of the official council records. It would be on record at the state government. And it would be audited by state government auditors and would be readily available for everyone to see the CEO's deception and nonsense.
So it was simpler and much safer for the council, and the CEO, to simply leave the reply out from the official minutes. By leaving out his reply, fewer people would take the time to listen to the recordings. And it would also be easier for the council to explain away the CEO's deceptive and incorrect statements as being just one person's point of view or one person's error in judgement.
If Manningham council did include his reply in the official minutes, the auditors might pick up on his deceptive statements and errors and may even require him to correct them at a later meeting. The CEO would then need to make an embarrassing correction at a public meeting and that would encourage even more ratepayers to question the council's exorbitant and self indulgent rate increases. Manningham council simply could not allow that to happen.
I think Manningham council officers knew full well that the CEO was talking rubbish and they chose to sweep his nonsense under the carpet as best they could.
And by the way, I have scanned all the minutes of meetings up to Sept 30, 2014 and the CEO has not, as far as I can find, corrected his deception. The important issue appears to be that the CEO won the argument on the day and silenced criticism from the public.
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