IT’S no secret that Port Stephens Council is facing financial problems.

In the recent Council meeting on 28 June 2022, it was resolved that the Council commence an engagement process to discuss the financial sustainability of the Council over the next ten years with the community, including the prospect of a Special Rate Variation for the 2023-2024 financial year.

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Tim Hazell, Port Stephens Council Financial Services Section Manager, said there have been many contributing factors to the Council’s financial sustainability – particularly over the past two years.

“Already faced with some difficult economic decisions to be made from the 2022 financial year onwards, the organisation was then shocked by the impacts of mandates resulting from the COVID-19 pandemic and a number of natural disasters affecting the Port Stephens local government area.

“For two consecutive years, the ramifications of imposed lockdowns saw an $8 million deterioration to the operating bottom line.

“While this placed an economic strain on the organisation, Council was mindful of its civic leadership role, joining other levels of Government to ensure that the economy could be stimulated to lessen the overall impact to residents and ratepayers.

“On one hand, the Council had to display prudent fiscal management, yet on the other it had a civic duty to assist with the stimulus of the economy.”

Mr Hazell said the Port Stephens Council has operated on a very tight fiscal basis for a number of years.

“Previous policy decisions of Council have meant that ratepayers have historically enjoyed the lowest rate level of any of our contemporaries in the Hunter region, or other comparable councils as shown by the Office of Local Government categorisation.

“The rate level for Port Stephens in the residential category is typically up to 35 percent less than our neighbouring councils.”

To ensure this rate level was maintained, a strategy was deployed to develop a reliance on maximising commercial or ‘own source’ revenue in which Council has gained numerous streams of income, including managing five holiday parks, some on behalf of the Crown, but some in an outright capacity.

Co-owning Newcastle Airport has provided substantial benefits over the past number of years.

“These two business activities have been able to successfully supplement revenue streams to Council and thus reduce the overall quantum of financial reliance on rate revenue.

“However, with the state-mandated lockdowns introduced during the COVID-19 pandemic, both these activities were severely impacted and the holiday parks and airport were unable to produce income,” Mr Hazell said.

The dividend received from the airport activities, previously $2 million per year, has yet to be reinstated and it is not certain to what level it will return.

While the 2020-2021 financial year was forecast to have an operating deficit of over $4.4 million, a number of measures were taken to mitigate this and ultimately these measures proved effective and the financial result for the year was a surplus of $583,000.

The Council knows that this is not sustainable, and will begin community consolation in July 2022, combining a mix of face to face and digital conversations and consultations.

“While the engagement process is about clearly communicating the current financial position and implications of current projections, a conversation about possible rate increases needs to take place,” Mr Hazell said.

Mr Hazell says that the engagement data will then be used by Council to make an informed decision as to the path forward.

By Tara CAMPBELL