21 November 2023

Cost shifting has ballooned to a total of $1.36 billion

As many of you would have seen, last week LGNSW released its latest cost shifting report for the local government sector.

It identified that cost shifting has ballooned to a total of $1.36 billion annually.

This is the equivalent of more than $460 per ratepayer per year.

It is, quite simply, unsustainable and cannot continue.

After decades of advocacy by the local government sector, I welcomed the Minns’ Government’s pre-election acknowledgement that the current funding system is broken – in large part due to cost shifting.

• The largest direct cost shift to councils is from emergency service contributions and other emergency service obligations, totalling $165.4 million.
• However, the cost of rate exemptions is higher still, representing a total of $273.1 million of potential rates that are exempted and redistributed to other ratepayers to pay.
• An additional $288.2 million in waste levies are passed onto the ratepayers through the waste collection fees in their rates bill. 
• A further $156.7 million in costs for libraries is also being covered by councils to make up the difference between the committed funding for councils’ libraries and the subsidies received.

Read the full cost shifting report and highlights > 

Infrastructure Cuts
Like so many of you, I was enormously disappointed at the huge infrastructure cuts announced by the federal government late last week as part of its infrastructure spending review. 

While most of the cut projects are state-led, they are of high importance to our communities right across NSW. 

This is a short-sighted decision when so many of these projects are exactly what is required to accommodate population growth, deliver productivity gains across NSW and provide the enabling infrastructure for increased housing supply. 

I have written to the Premier Chris Minns asking that he lead a delegation of NSW mayors to Canberra to call on the Australian Government to reconsider this decision. 

New Road Funding

In some better news, on Sunday the Australian Government announced Roads to Recovery funding will double from $500 million to $1 billion annually and that Black Spot Program funding will increase by $40m per year. 

In addition, a new Safer Local Roads and Infrastructure Program will incorporate the existing Heavy Vehicle Safety and Productivity and Bridges Renewal Programs, with funding gradually increasing from $150 million to $200 million per year.

These funding programs are critical to the maintenance, improvement and safety of our local road infrastructure and is a terrific outcome for councils and their communities. 

Financial sustainability of local government 

There are some positive developments on the horizon to address the financial sustainability challenges facing our sector, including: 

• IPART’s final report for its review of the rate peg methodology which contains a number of decisions (including an individual adjustment to each council’s rates to wholly cover the cost of any increase in the Emergency Services Levy (ESL), as well as a more forward-looking rate peg that better reflects council costs). These decisions will result in an improved rating framework for councils.
  
  
• RFS mobile assets – ‘Red Fleet’ – LGNSW has maintained its pressure on the NSW Government to resolve the matter of where Red Fleet asset depreciation costs should be recorded. The NSW Opposition has now introduced to Parliament a Bill to amend the Rural Fires Act 1997 to resolve this issue and make clear once and for all that RFS mobile assets are assets of the NSW Government for financial reporting and depreciation purposes. LGNSW has been calling for support for this Bill right across Parliament.
  
  
• Parliamentary inquiry into sustainability of local government contributions to emergency service provision – The Minister for Local Government has also now asked the Parliament’s Public Accounts Committee to inquire into the accounting treatment of the Red Fleet, alongside a more wide-ranging inquiry that will also examine the sustainability of local government contributions to emergency service provision.
  
  
• Review of financial model for local government – A pre-election commitment of the current government was to conduct a review of the financial model for local government. In committing to this review, the then Shadow Minister for Local Government noted councils had been impacted by "a decade-long practice of cost shifting" that had undermined the financial sustainability of the local government sector and placed significant strain on councils and household budgets. Our cost shifting survey of councils revealed a record amount of cost shifting impacting NSW councils, and this report will form an important part of our sector’s advocacy to the review of the local government financial model.

ESL announcement re insurance
Last week the Premier announced a review of the Emergency Services Levy (ESL), with a particular focus on removing the ESL from insurance premiums. 

While this is important and in line with past LGNSW conference resolutions, it is critically important that this review also results in the removal of the ESL from the council rating system. 

Collection of the ESL via the rating system imposes a cost on councils, and rate exemptions mean that some landholders, including those with vast holdings that generate income for the State Government through state-owned corporations like the NSW Forestry Corporation, do not contribute through their rates. This increases costs for existing ratepayers and must not continue. 

Sincerely,

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