Superannuation bills put country councils in a fix
COUNTRY councils have started deferring projects and cutting budgets for roads, bridges and other assets to meet a shock superannuation bill of more than $500 million facing councils, water authorities and other agencies.
COUNTRY councils have started deferring projects and cutting budgets for roads, bridges and other assets to meet a shock superannuation bill of more than $500 million facing councils, water authorities and other agencies.The impact of the bills will be particularly sharp on financially squeezed country councils, which have smaller populations and budgets, but vast networks of roads, buildings and other assets.Small country councils that have recently battled costly drought and floods in northern Victoria are contemplating cuts to roads and other capital spending as well as taking out big loans to meet their shortfall but are reluctant to increase their rates. They have told The Age they are frustrated and disappointed to be hit with the large superannuation bills, which must be paid by next July.Some of the first cuts emerged this week when the City of Greater Bendigo said it would cut its capital spending and operating budgets by a combined $5.9 million to pay a shortfall of $10.3 million. Bendigo avoided a rates rise but deferred some projects and cut spending.In a statement, the council said inaction from the state and federal governments had forced its hand, and it had to make the cuts to pay for "unfair superannuation costs".Bendigo mayor Alec Sandner said: "This issue is not going to go away. There will be another call to fully fund this scheme in two years' time, then there will be another one after that, and another and another. This has the potential to burden ratepayers for the next 30 years and beyond."Councils have been hit with the bills to meet a shortfall in a "defined benefit" scheme for council staff that was closed to new members in 1993.Under federal law, the scheme must be fully funded, which means it must be able to meet the retirement benefits of all members, assuming that those still working immediately quit their jobs.Many small country councils are facing bills equal to 20-25 per cent of their annual rates revenue.Buloke Shire, which includes such towns as Charlton and Birchip, has a bill of almost $2 million, about 22 per cent of its annual rates revenue.Gannawarra Shire, which includes Kerang, has a $1.82 million bill."Our council is not pleased at all," said Gannawarra mayor Max Fehring."It makes it near impossible for a council to plan ahead in a financial sense over a number of years. Because in the last 10 years since I've been a councillor, we've had a call now of $4 million, all up."Cr Fehring, who completes his term as mayor next month, said the incoming council would have to consider tough options to pay the bill, including major borrowing, service cuts, rate increases and the deferral of capital projects.Buloke mayor David Pollard said the superannuation bill would lead to cutbacks, starting this financial year. "It's got to cut some capital works, because we've got to pay it," he said."We're actually in the process of revising the budget now. We're looking at borrowing the money, but we've got to work on paying it back fairly quickly."We've got to start cutting back, we've got to try and get on top of this loan quickly. Because it's pointless putting this loan over 15 years if we get another call of $2 million in two years' time."