Council had proposed the variant to repay long-term loans that would be used to fund three future developments – the Muswellbrook Regional Aquatic Centre upgrade, the implementation of the Denman Town Centre Master Plan and the development of Muswellbrook Regional Convention and Performance Centre.

But, on Tuesday, IPART knocked back Muswellbrook Shire Council’s application to increase its general income by a cumulative 20.39 per cent over the next four years.

Rate increases from July 1, 2017, will now be limited to the 1.5 per cent rate peg as a result of IPART’s assessment that the community was not made sufficiently aware of the size or extent of the increase being sought.

Muswellbrook Shire mayor Martin Rush said he was upset by the ruling.

“Cleary there will be many in the community disappointed with the decision,” he told the Chronicle.

“A number of projects prioritised by the community cannot progress as hoped.

“It is noted IPART affirmed that: [the proposed projects were] consistent with community priorities [and] … the impact of the increases is modest and reasonable.”

Cr Rush said IPART refused the application on two technical grounds. 

“The first, because council’s Long Term Financial Plan was submitted a few days late – there are lessons for council on that point,” he admitted.

“The second was council’s use of real terms rather than face value terms to express the ‘increase’.

“Council used real terms against the existing rate structure because it is orthodox, honest and the more settled view to express pricing from year to year. 

“That is because it allows consumers to compare the purchasing power of dollars between years.

“The use of ‘face value’ terms was not preferred because, as a result of a new mining assessment yielding $600,000 – and council being rate pegged overall, everyone else’s rates (including all the existing mining ratepayers) would actually have experienced a reduction. 

“This is because council cannot levy the new rating in addition to the existing rating (because of the effect of the rate peg).

“That information was available to IPART as part of its assessment but it is clear that IPART never really understood the issue.

“IPART’s slavish adherence to its guideline left them with little flexibility to deal with local government areas where there are rapid and dramatic changes to the rating substructure.

“Council will now proceed with its Plan B, which will be to re-line the 50m outdoor pool at the Muswellbrook Aquatic Centre and construct the first stage of the Denman Town Centre Master Plan over the next four years.

“One silver lining is the shire will now have the lowest residential rates in the Hunter from July 1, 2018.”

IPART chair Dr Peter Boxall said the application was assessed against the NSW Government’s published criteria, which require the council to make the community aware of the proposed increase and to consider the community’s capacity and willingness to pay the requested increase.

“Special variations are designed to give councils the flexibility to generate additional income above the rate peg to meet their specific needs, with an independent process to assess the increase,” he said.

“In the case of Muswellbrook Shire Council, we are not satisfied the community was aware of the extent of the proposed increase based on the information provided by the council.”

The council’s consultation used rate increase figures that did not include the rate peg. 

This meant the rate increases the community were consulted on were significantly below the actual increase that would occur under the special variation.

“By subtracting the rate peg from figures quoted to the community, the council has consulted the community on a 10 per cent increase that is half of the actual 20 per cent increase it applied for to IPART,” Dr Boxall said.

“As such the community cannot be said to be aware of the size and extent of the special variation increase and the council has not satisfied this criterion.”

Dr Boxall said the loan repayments would not begin until 2019-20, providing council with sufficient time to reapply to IPART for a special variation in future years if required.