Super sucker: Councils locked into dud scheme

RATEPAYERS are underwriting a superannuation fund that was closed 20 years ago — the cost to the North East alone this year is about $12 million.

Wodonga Council’s liability of $3.3 million will be partly funded by land sales but a $700,000 shortfall will be considered in its budget planning with rate rises an option.

Wangaratta Council owes $3.2 million and is expected to make a decision this month on how it funds the make-up payment.

The defined benefits scheme, closed in 1993, requires employers to top up the fund if it fails to reach an annual 7.5 per cent return.

The employers’ share is based on a wages formula for people still employed under the original scheme, retired employees on the fund’s pension benefit and if they die, their spouses.

This week Alpine Council decided to fund its liability from cash reserves.

In December Indigo Council shelved several planned capital works projects to pay its share, while Moira used savings from projects that came in under budget to pay its liability.

Cash-strapped Towong Council also had to dig into its cash reserves to pay its $1 million share.

Wodonga Council’s business services director Trevor Ierino said that it had initially budgeted $1.5 million for the payment.

“But that left a $1.7 million shortfall, more than $1.1 million covered by the sale of the Scout Hall land in central Wodonga and future saleyard land at Barnawartha,” he said.

“It could be that the remainder, too, will be paid for by surplus land sales but it will form part of considerations for next year’s budget.”

Moira chief executive Gary Arnold said that an allocation of $600,000 over two years was provided to fund the expenditure.

“In addition to this and as part of the council’s continuing cost control strategy, savings were made on both operational expenditure and building projects where capital expenditure incurred was less than that budgeted,” he said.

The Municipal Association of Victoria has put together a raft of proposals to state and federal governments as well as Vision Super, that now administers the fund, to reduce the impact of future contributions.

“Councils are under increasing pressure from costs and cost-shifting but there is no way of walking away from this obligation,” the association’s chief executive Rob Spence said.

“But while there have been three-year reviews since the fund closed and previous payments, this has been by far the largest.

“Councils across Victoria have been asked to put in $396 million.”