“The pressure on councils to continue to provide services of appropriate standard to our communities is now extraordinary,” he told councillors at their monthly meeting on Tuesday.
“The unrelenting growth of cost shifting to councils, coupled with rate pegging, is increasingly eroding any possibility of financially sustainable local government and risking the capacity of councils to deliver tailored, grassroots services to their communities and properly deliver and maintain vital local infrastructure.”
Local Government NSW’s latest cost-shifting report, released in November 2023, highlighted a total cost shift to councils of $1.36 billion in 2021-22 - an increase of $540 million since the last report from the 2017/2018 financial year and represents lost services, lost opportunity and lost amenity for all residents and businesses.
Mayor Bourke said it means our communities get less or go without. “They go without better roads, they go without better parks, they go without important community services that only councils provide, and they and their ratepayers are effectively paying hidden taxes to other levels of government,” he told councillors.
“Our communities deserve better, and this must stop. Prior to the most recent state election, the then Minns opposition wrote to LGNSW acknowledging that cost shifting had undermined the financial sustainability of the local government sector.
“Now in 2024, it is important to councils and communities that the NSW Government urgently seek to address cost shifting through a combination of regulatory reform, budgetary provision and appropriate funding.”
Boot’s on the other foot
Deputy mayor Shaun Whitechurch strongly backed the mayor. “The boot is on the other foot now,” Cr Whitechurch said.
“As the Minns Government is now in power, it has the opportunity to back up its stance when in opposition and reduce this cost shifting onto councils.”
Councillors voted unanimously for council to write to the Premier, the NSW Treasurer and the NSW Minister for Local Government seeking that they urgently seek to address cost shifting through a combination of regulatory reform, budgetary provision and appropriate funding.
Also an IPART submission
In a separate correspondence, the Federation Council will respond to the Independent Pricing and Regulatory Tribunal (IPART) invitation to comment on its upcoming review of the financial model for NSW local councils.
IPART has received a draft Terms of Reference from the NSW Government to investigate and report on the financial model.
The NSW Government is asking IPART to review councillor and community visibility over the financial and operational performance of councils, including whether the current budget and financial processes deliver value for money and whether the current funding model will sustainably support the needs of communities.
It also includes reviewing the capacity and capability of councils and how better planning and reporting systems can improve long-term budget performance, transparency and accountability to the community.
IPART seeks feedback from the community, ratepayers, councils, former and current councillors and council staff. Responses will be received until March 15 by making a submission via the website.
Federation Council’s General Manager Adrian Butler said NSW councils’ financial sustainability is an ongoing issue, and “especially if you talk to anyone in Local Government that has been in it for 20 plus years, they will recall many such reviews”.
“Usually, most fail due to a lack of effective implementation of recommendations, or in some cases, the state governments of the day do not accept or adopt recommendations,” he said.
“Cost shifting is another prime example of the challenges impacting councils’ financial sustainability, highlighting the quantum, even for the 21/22 financial year, of the continued shifting of costs onto councils by the State and, in some cases, the Federal Governments.
“Councils continue to receive rate peg increases that are far less than actual cost increases, and most councils until recently, did not attempt to pursue special rate variations to address ongoing operational deficits (including non-cash operating losses caused by depreciation). The gap in the operating result caused by depreciation, is in simple terms, the amount underfunded asset maintenance.
“As we know, the worse condition assets get to, the costlier it is to repair. Minor or routine maintenance then becomes major or in many cases, total renewal. There are many other areas that are impacted from a lack of financial sustainability, in addition to just roads of course, including buildings and facilities, plant, waste facilities, and service delivery constraints and staff risks, due to a lack of resources to adequately staff areas, to name a few.”
Mr Butler said the recent Independent Peer reviewed Business Case on Federation Council, by the University of Newcastle, led by Professor Joseph Drew, provided robust data and analysis, and many recommendations aimed at improving Federation Council’s financial sustainability.
“The draft terms of reference (by the NSW Government) seem to look entirely inwardly at the councils’ performance and ways to improve, which is in part very much required, however seems to lack any outward look at the real constraints facing rural and regional councils,” the General Manager said.
“Councils do not receive their fair share of revenue back from the taxes and many other levies paid and product produced in these areas, and the characteristics of having large required asset bases, and dispersed populations requiring asset duplications, and a low rate base to meet the costs of maintaining assets such as roads.
“These critical issues appear to be not addressed in the current draft terms of reference.”
