Why fuel and project costs aren’t the only things killing councils

THE Bass Coast Shire Council is proposing to plug a gaping hole in its 2026-27 budget by transferring $8 million from reserves and cutting $7.5 million from the capital works program it had hoped to deliver, as outlined in its Long-term Financial Plan 2025-35.

Even with those adjustments, however, and taking into account a net reduction in borrowings of $3.4 million, the shire is still projecting to spend $4.3 million more than it receives.

The parlous state of the shire’s affairs, going into a new financial year, is all detailed in a draft budget of $124.6 million to be tabled at this Wednesday’s council meeting, a program which council acknowledges is under constant review due to escalating fuel and capital works delivery expenses.

But it’s not just the uncertainty of the global environment that’s producing headwinds for council.

Bass Coast was already battling sector-wide underfunding, which it claimed recently impacted 19 low-rating councils, including itself, more than most, those caught out by the introduction of the ‘Fair Go Rating System’ in 2015.

Council expects to be able to meet most of its outgoings by increasing rates and charges by $3.4 million to $84.7 million, with grants and subsidies of $16.2 million, fees and charges of $10 million, interest revenue of $1.7 million, transfers from reserves of $8 million and other revenue of $3.9 million.

The budget features a reduced capital works program of $30.3 million which includes the following:
• Cowes Streetscape Master Plan $3.6 million
• Thompson Reserve Lighting Upgrade $1.34 million
• Waste management infrastructure $7.7 million
• Climate change action plan capital projects $275,000
• Tracks and trails $2.8 million
• Rural Roads renewals $1.6 million
• Urban Roads renewals $2.6 million
• Storm Water Drainage $1 million

Borrowings are set to fluctuate from $24.117 million on June 30, 2026 to $20.7 million in 2027, $16.8 million in 2028, $22.2 million in 2029 and $29.9 million in 2030.

The shire plans to pay off $4.776 million of its borrowings in 2026-27 but will borrow an extra $1.34 million to pay for the lighting upgrade at Inverloch’s Thompson Reserve.

The document offers an explanation for the problems:

“Beyond the immediate volatility of fuel prices, council continues to operate within an increasingly challenging structural environment for local government across Victoria,” the officers’ budget report to council states.

“This budget acknowledges the growing pressure on the long-term financial sustainability of the sector, particularly for regional councils.

The compounding effects of rate capping, persistent inflation, and the ongoing challenge of cost shifting from other levels of government place immense strain on the sectors financial capacity.”

Council explains that while rates are being increased by the State Government’s ‘Fair Go Rates’ cap of 2.75 per cent, it is lower than the current inflation rate of 3.6 per cent per annum.

“Additionally, in the four years leading up to 2025-26, the rate cap has been lower than the inflation rate in 2022/23 (rate cap 1.75 per cent, CPI of 6.1 per cent), 2023/24 (rate cap 3.5 per cent, CPI of 6.0 per cent), 2024/25 (rate cap of 2.75 per cent, CPI 3.8 per cent), 2025/26 (rate cap 3.0 per cent, CPI of 2.1 per cent).

“This highlights the need for Council to maintain an ongoing focus on the identification of opportunities for productivity improvements and financial efficiencies.

“Even without the current global instability, these sector-wide headwinds would require a disciplined approach to financial management.

Council is committed to proactively addressing these challenges by seeking operational efficiencies and exploring new opportunities to ensure our long-term viability.”

Despite spruiking “operational efficiencies”, however, employee costs are set to blowout from $39.3 million in 2025-26 to $45.6 million in just four years’ time.

The state of the economy is not helping.

“Council is impacted by a significant slowdown in the property market, reduced growth in the rates base and development related fees and charges.

In response, Council’s draft budget focuses on efficiency, resourcefulness, and community needs while prioritising essential services and long-term sustainability.”

Council noted that the full impact of the broader global economic uncertainty on project delivery costs locally and operational expenditure was not known at the time of drafting the budget.

“Bass Coast Shire Council,” it said, “will continue its advocacy to State and Federal Governments for sustainable funding arrangements that recognise the expanding role of local government.

This includes advocating for improved assistance to strengthen the sustainability of regional councils, which forms part of council’s adopted advocacy priorities for 2026-2028.”

But, local government watchdog, Council Watch Victoria, believes that while residents “battle rising rates, failing services and bloated bureaucracies”, councils are busy asking themselves the wrong questions.

A recent report, it said, highlighted the top questions local government was asking in 2026, focusing heavily on grants, compliance processes and internal systems rather than outcomes for residents.

“Here’s what a competent, modern council would be asking:

(1.) What measurable outcomes did ratepayers get for every $1 spent?
Not inputs.
Not process.
Outcomes.

(2.) Which services are failing and why haven’t we fixed them yet?
Roads, waste, planning delays - name them publicly.

(3.) How many staff do we actually need and what can be automated?
If Amazon can run logistics in real time, why can’t councils fix a pothole faster?

(4.) What are we doing that the private sector could do cheaper?
Quite a lot.

Council Watch asks councillors to focus attention on speeding up delivery, where money is being wasted, benchmarking high performance and cutting costs.

“What are residents actually unhappy about and what have we fixed this month = not surveys - real-time feedback and action.”

After voting to receive the draft budget, council will make a call for written submissions on the proposals contained in the 2026-27 Budget to be received up to 5pm Wednesday May 8, with a hearing to follow on May 13.