Budgeting during a pandemic

Last month the Fremantle Council adopted its annual budget for 2020-21 and in the past few days Fremantle residents have been receiving their annual rates notice. It’s fair to say that formulating a budget in the middle of a global pandemic has been a challenging experience.

The COVID-19 pandemic has had a more significant financial impact on the City of Fremantle than most other local governments. This is because, unlike more suburban-oriented councils, approximately 35 per cent of our operating revenue is derived from non-rate sources like car parking, rent from commercial properties and fees and charges.

As a consequence of COVID-19 and the restrictions imposed to stop the spread of the virus, the City lost more than $6 million of revenue between when the restrictions were introduced in March to the end of the 2019-20 financial year.

Furthermore, we estimate we will lose about $4 million in revenue in 2020-21 from things like parking and commercial rents.

During the height of the COVID-19 restrictions myself, elected members and senior staff at the City agreed to a voluntary 20 per cent reduction in pay, while the majority of other staff working in areas not considered essential to the immediate COVID-19 crisis response effort agreed to reduce their working hours by 20 per cent.

There were also about 60 staff for whom there was not the required level of necessary work because of government directives mandating the closure of facilities such as the library, leisure centre and arts centre. Those staff members were directed to take annual leave, and in some cases leave without pay.

Regrettably, local government was specifically excluded from the Jobkeeper program so this was not an option.

Now that facilities like the leisure centre and library are open again staffing at the City has returned to more normal levels.

In formulating the 2020-21 annual budget the council has chosen to focus on the provision of core services and the delivery of our capital works program.

A number of services have been cut back, for example funding for the CAT bus has been reduced, residential verge mowing has been cut and there will only be one green waste collection this year instead of two. Although City-run festivals and events will still be held this year, they will be on a smaller scale with significantly reduced budgets.

In relation to rates, Fremantle Council has adopted a 2020-21 annual budget that features no increase in rate revenue and a freeze on the majority of fees and charges.

Some commentators have argued that because on average Gross Rental Values as determined by the state government’s Valuer General have gone down rates should go down by the same amount, but that is a misunderstanding of how rates are calculated.

Every year councils work out how much revenue is required to provide the services and facilities the community needs – remembering that rates usually account for only around 60 per cent of the City of Fremantle’s revenue - and then calculate the rate-in-the-dollar based on that.

In previous years when Perth’s property market was booming and GRV’s increased significantly the rate-in-the-dollar was lowered accordingly.

This year because on average GRV’s in Fremantle have gone down by about 10 per cent the rate-in-the-dollar has gone up by about 10 per cent, but the amount of revenue collected will stay the same as last year.

While the City’s rate revenue will stay the same as last year, the costs of providing services and facilities to the community are continuing to rise.

The council will continue to monitor our budget position during the year to ensure any improvement is delivered back into community services or recovery projects to support our community.

Brad Pettitt

Fremantle Mayor