Rate pegging, cost-shifting and increasingly stringent standards are all posing financial constraints on Central Coast Council, according to Council submissions to two inquiries.
One is the Federal Government’s Inquiry into Local Government Sustainability and the second is a State Government Inquiry into the Ability of Local Governments to fund infrastructure and services.
Council has lodged the same submission for both inquiries.
It says rate pegging poses a notable constraint on local government finances, limiting the extent to which councils can adjust rates to provide suitable services and meet community expectations.
The hoops councils need to jump through to get a special rates variation (SRV), an increase in rates beyond the rate peg stipulated by the Independent Pricing and Regulatory Tribunal (IPART), was also criticised.
Not only is the SRV process quite lengthy and costly to Council, there is often negative sentiment from the community when this option is pursued, the submission says.
“The ongoing need for councils to continue to apply for SRVs in order to fund the services which the community expects, is generally perceived as being poor for Council’s reputation, the community’s perception of Council, and typically results in negative feedback from the community.”
Council also acknowledges that an SRV often seeks a steep, one-off jump in the total rates that a resident pays.
“This sudden jump in expenditure is often difficult for many households, who are often managing their budget on a week-to-week basis, to manage,” the submission says.
Cost shifting exacerbates the financial strain on local government by transferring responsibilities from higher levels of government without corresponding funding allocations, with state roads, lighting, an SES levy and a proposed new dam safety levy.
“This inquiry represents an opportunity to address long standing concerns about the funding of the local government sector, including funding shortfalls, insecurity of funding streams, and governance arrangements,” Council says.
Balancing grant funding and political desires for new assets when funding is needed for ongoing maintenance and depreciation of new assets is a challenge, says Council, without concurrent allocations of ongoing continuing expenses to cover “ongoing operational costs” which are funded by Council.
“These costs include asset depreciation costs, costs to operate the asset (ie, electricity, staff costs) and ongoing maintenance and cleaning costs,’’ the submission says.
Council uses developer contributions to fund new works but these developer contributions do not fund ongoing depreciation, maintenance and operational costs associated with the new infrastructure.
“Unless a development creates a commensurate increase in rates income, the additional costs from these new or upgraded assets must be met from a council’s existing revenue placing greater pressure on the council’s resources,” Council said.
The submission also talks about the continual rise in standards, legislation, specifications and best practice alongside higher levels of service expected by the community.
“With evolving technological advancements and growing population needs, Council is tasked with meeting increasingly stringent standards while balancing limited financial resources,” it says.
For example, low cost timber bridges must now be replaced with more expensive concrete bridges.
Council had to carry the cost of upgrading all bus stops to meet new disability access standards.
“Whilst Council supports the provision of assets to provide access to all in the community, funding was not provided by higher levels of government to the Central Coast to assist with construction costs,” the submission says.
“Council was subsequently required to fund all associated bus stop upgrade works, many of which are complex with significant construction costs.”
It left an unenviable choice between absorbing funding shortfalls from other levels of government or leaving key services inadequately funded, the submission says.
It suggested a multifaceted approach was necessary to address these issues effectively.
“To mitigate these challenges and ensure sustainable funding for infrastructure and options include exploring alternative revenue streams, fostering partnerships with the private sector and community organisations, and advocating for reforms to address cost shifting and rate pegging limitations,” the submission says.
“Furthermore, enhancing transparency and engaging the community in decision-making processes are essential to build trust and garner support for funding initiatives.”
A comparative analysis of NSW councils provided to the inquiry shows that only four councils had operating expenses exceeding revenue in 2021/22 – and the Coast was not one of them.
The submission was presented to the May 28 meeting of Council.
Merilyn Vale