The Government has asked the Independent Pricing and Regulatory Tribunal (IPART) to examine the financial model for councils and key factors impacting councils’ financial sustainability.

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The review will assess the resources currently available to councils, their capacity to cover ongoing expenses and ability to fund core council services and infrastructure for their communities.

It will also identify ways to improve budgetary performance and accountability within the sector so democratically elected councillors are empowered to make decisions for the effective running of their councils.

“The financial sustainability of councils is one of the most significant issues facing local government in this state,” Minister for Local Government Ron Hoenig said.

“With the cost of delivering core services to communities rising, it’s critically important councils are financially sustainable, but that needs to be balanced with the impact on tightening household budgets.

“That’s why we’ve asked IPART to make recommendations about whether the current financial model of councils enables long-term financial sustainability and whether councils have the financial capacity and mechanisms needed to deliver budget improvements.”

Minister Hoenig said there needs to be a closer examination so that the solution to financial challenges is not increasing revenue through raising council rates or seeking financial support from the State Government.

Natalia Cowley, General Manager of City of Coffs Harbour, expressed concerns over the review’s potential effectiveness.

“My view is that the current improvement areas, as identified by Minister Hoenig, based on the Terms of Reference, will barely move the financial sustainability dial, as they are focused in the wrong direction.

“The reason for my view is that the improvement areas squarely focus on the ‘outputs’, i.e. visibility, processes, budgeting, capacity and systems.

“The actual problem is the ‘inputs’, i.e. getting one-off capital grants from the Government, while we are grateful for them, without the ongoing respective operational grants to support the maintenance of those capital items, which are then burdened on the community to carry.

“Of course, cost shifting, emergency levies, red fleet and any other hiccups further suffocate the problem.

“Also, what’s the point of requiring councillors to have financial literacy requirements, when members of NSW Parliament don’t have the same requirements?

“That causes more damage to communities because financially illiterate comments can be made by those individuals, thus misinforming the community.

“So, if the Terms are not updated to equally focus on both sides of the equation, inputs and outputs, the outcome is going to be another well-intentioned book on a shelf.”

The Country Mayors Association of NSW (CMA) has welcomed the review announcement, albeit with some reservations.

“It’s brilliant that IPART has been mandated to conduct this review, we have been calling for this, but we are concerned with the draft recommendations handed down by the Government,” said CMA Chair Jamie Chaffey, who also serves as the Mayor of Gunnedah.

Mr Chaffey said the process will be too drawn out.

“Submissions close on 15 March, a report is then due to the Government twelve months after the Terms of Reference have been finalised, and then the work begins.

“It’s simply too long.

“We’d like to see them wholly focussed on the financial issues.”

All points are relevant, he said, but can be put on hold until after this initial review is complete.

His organisation’s member Mayors want to see real action take place to fix problems with the local government financial model first.

“Because the financial model is not fit for purpose, councils are in the cycle of needing to go back to their ratepayers and residents in their communities every five to ten years to put up their rates.

“Communities cannot sustain that,” he said.

“Better and more consistent funding of rural and regional councils, particularly in relation to roads, is critical to financial sustainability.

“Simplistically questioning and therefore tarnishing the professional capacities of elected members and staff is far from helpful and demonstrates the need for well-informed common-sense submissions to IPART regarding the draft Terms of Reference.”

The draft Terms of Reference are now open for feedback and can be viewed at www.ipart.nsw.gov.au/Home/Industries/Local-Government/Review-of-council-financial-model-in-NSW

You can make submissions on the draft Terms of Reference until 15 March 2024.

By Andrea FERRARI