|Fees and Charges Policy
||22 August 2017
|Responsible Officer: Manager – Financial Services
||Chief Executive Officer
Council provides a wide range of services to its community. In undertaking this role Council assesses community needs through its planning process and determines which services Council will support. Of those identified services, Council can advocate for the service, facilitate the service or actively participate and deliver the service.
Some of these services are required due to statutory or legislative obligations, whilst for other services Council has discretion whether or not to provide the service and at what level and quality.
In planning for a service Council must decide on the level of rate contribution it will allocate to support the service. Once the rate contribution to the service has been determined the balance of the cost of service which is unfunded will need to be recovered from the users as a Fee or Charge or other revenue stream, such as grant income.
The setting of Fees and Charges requires a standard methodology which is applied consistently across the organisation in order to enhance accountability and provide transparency to the community in the decision making process.
The Policy applies to all fees and charges listed in the annual budget as well as any new fee or charge which Council is eligible to charge under the Local Government Act which has not previously been included in the schedule of fees and charges.
Council must consider the application of this policy when:
Fees and Charges – Cost Recovery by Local Government. Victorian Auditor-General’s Report April 2010.
Play Strategy 2017 CPL285.9.
Local Government Best Practice Guide Revenue and Rating Strategy Department of Transport, Planning and Local Infrastructure 2014.
National Competition Policy (NCP).
The Local Government Act 1989.
Cost recovery is the level of costs to be recovered from users of the service. To achieve this the full cost of delivering a service will be calculated using direct costs and indirect costs and an overhead allocation for those services which are deemed significant business activity. The target rate contribution and any other revenue, such as grants, will be subtracted from this amount. The residual amount will be recovered from fees and charges.
Direct costs are those costs, captured at an activity level, which can be readily attributed to the service because they are incurred exclusively for the particular service.
Indirect costs are departmental costs which support the service (e.g. Manager and department administration costs).
National Competition Policy means application to the significant business activities of publically owned entities, and not to the non-business, non-profit activities of those entities.
Overhead costs are those costs which support the service at an organisational level such as payroll, risk management, information technology, payables, receivables and insurance.
Rate contribution means the dollar amount identified in the annual budget to be contributed to the cost of service delivery from properties (Council rates).
Service means a collection of tangible and intangible benefits that can be offered and consumed. Service provision requires work to be done by one or more people for the benefit of others.
Significant business activity means service which is defined as commercial and competes against other providers of the same service.
5. Council Policy
Fees and charges are a component of Councils’ revenue raising strategy and represent 19% of Councils’ budgeted recurrent revenue.
Fees and charges are raised for a number of reasons:
To increase revenue available to Council to support the cost of service delivery;
To support Council’s medium to long term service delivery objectives; and
To help users of Council service understand the value and benefits they obtain when accessing those services.
In setting Fees and Charges Council is committed to:
ensuring resources are used efficiently and effectively to finance the service delivery objectives outlined in Our Future and City Plan
identifying the level of rate contribution provided to individual services to ensure transparency in decision making.
ensuring Council’s long term financial sustainability by considering user pays principles as part of determining the most appropriate way to fund services.
5.1. Fees and Charges Framework
|Council’s Fees and Charges Policy is underpinned by the User Fee Decision Matrix which provides a standardised approach in determining the target rate contribution to be provided to a service.
||Council will provide improved transparency to the community in the decision making process by demonstrating the level of rate contribution, cost recovery and fee setting criteria as shown in the table below:
|Target Rate Contribution
(% Rate Contribution)
||Fees and Charge Setting Criteria
|100% Rate contribution
||No Cost recovery
||No Fee or Charge Levied
|Partial Rate Contribution
||Partial Cost recovery
||Fee set by Council (Discretionary)
||Impediments may prevent targeted cost recovery (e.g. set by statute)
|0% Rate contribution
||Full Cost Recovery
- Fee Set by Statute
- Fee Set by Local Law
- Fee set by Funding Agreement
- Fee set by Council (Discretionary)
|Impediments may prevent full cost recovery (e.g. set by statute)
|0% Rate contribution
||Market Driven (must be Full Cost Recovery plus Margin)
||Fee set by Council (Discretionary)
||This service is a significant business activity and subject to National Competition Policy
||All Council services will be subject to the User Fee Decision matrix.
Council will review and endorse the User Fee Decision Matrix annually as part of the budget process.
5.2. User Fee Decision Matrix
Council’s User Fee Decision Matrix is based on the following:
||Identification of services which Council provides.
||Classification of the services between external services (those that have a direct interface with external customers and internal services (activities which support the provision of the external services). Fees and charges will only apply to external services.
||Determining if the service has general or specific users. Generally services which are provided for the broader community, such as public open space, will not attract fees and charges.
||Understand the Fee setting criteria. The type of fees and/or charges for the service may be subject to statute, local law, schedule of fees or the discretion of Council. The type of and/or charges will determine any restrictions on setting the price.
||Determining if the service is a significant business. Under National Competition Policy competitive neutrality adjustments, to ensure full cost reflective pricing, are required if the service is a significant business.. To comply with National Competition Policy, councils need to identify their significant business activities and adjust their prices, where relevant, to neutralise any competitive advantage when competing with the private sector. Cost reflective pricing includes recognition of private sector equivalent costs such as rate of return, regulatory costs not incurred by Council and taxes
||Classification of the cost recovery for the service will determine the total revenue from fees and charges. Individual fees and charges will then be set based on fee and charge setting criteria.
||Target rate contribution will be determined by Council based on community needs and policy objectives. Services that are likely to attract a rate contribution are those which provide a broader community benefit as well as benefits to the individual users. The target that is set will be endorsed by Council and used by Service Managers to calculate required total fee and charge revenue. Service Managers will then set individual fees and charges based on expected usage. Each service will initially be assessed under the categories:
- 100% rate contribution (no cost recovery);
- Partial rate contribution; or
- 0% rate contribution (full cost recovery).
||Uniform pricing services which are provided at a similar level or standard will have the same fees across the municipality.
5.3. Costs excluded in setting fees and charges
Costs which are incurred for the benefit of Council, the Chief Executive, Directors and Legal Services and Governance Department will be excluded.
These costs are not considered indirect costs but a cost of being a Council.
These costs will be assessed in the calculation for the municipal charge (a fee on all rateable assessments to cover the fixed and unavoidable costs of governance).
5.4. Ancillary Services
In some instances a service which has been defined as having ‘general’ users and would not normally set a fee may charge users to access facilities/grounds e.g. weddings.
Cost recovery of these services will be market driven and reflect full cost recovery plus margin.
5.5. Uniform Pricing
In order for users of a service to be confident that the fee charged will provide them with a similar level of service regardless of their social equity or location, Council will endeavour to adopt uniform pricing for like services.
5.6. Transition period
The base level of rate contribution for each service will be recognised as the levels approved within the 2016-17 Budget.
Where there is a material difference between the required level of rate contribution and the base level of rate contribution Council will consider phasing increases in over a period of time.
The phase-in period will be determined following consideration of the user’s capacity to pay, commercial implications and the funding pressures on Council.
5.7. Policy Review
The Fees and Charges Policy will be reviewed annually during budget development, with consideration given to service levels and productivity.
The community will be able to access information about fees and charges from Council’s website in the annual budget document.
6. Quality Records
Quality Records shall be retained for at least the period shown below.
||Manager – Financial Services