An independent inquiry by the former Treasury Head Professor Percy Allan has found half of NSW’s 152 municipal councils are now struggling financially and 25 per cent are in fact technically unsustainable.
Is this a new or unique problem, how has this situation come about, and if it’s been around for such a long time why are we only hearing about it now?
Commentators usually claim that in the past two decades there has been a gradual change in the perceived role of local government which has seen the traditional and narrow approach of Services to Property significantly broadened to what they term a more ‘enlightened’ Services to People approach.
Most also admit it has been both incremental and ad hoc and has not been the direct result of any considered decision at any level. In fact there has never been any debate on the subject by any of the parties involved … it has just happened.
This inexorable change of focus has seen council staff sizes balloon into an ever increasingly diverse range of social areas and an associated reduction in percentage and absolute terms of the amounts of revenue allocated to Services to Property and infrastructure.
Now that the problem has finally surfaced, officially, most long time councillors and senior council officers are reluctantly admitting (usually off the record) they were aware of this situation and had fallen into a pattern of regularly seeking additional rate rises from State Government, which they also conceded were both extremely unpopular with ratepayers and in many instances were flatly refused, for a variety of (usually political) reasons.
Incidentally NSW is the only state in Australia which has capped council rates effectively cutting off the only real opportunity the third tier of government has to adequately fund its future infrastructure needs.
The practice of higher governments to only partially fund initiatives or more commonly launching fully funded essential programs with much positive publicity (MPs cutting ribbons etc), and then quietly removing future financial support leaving the local council to assume the full burden of keeping the whole project afloat unaided is called cost shifting .
The combined effect of rate pegging and cost shifting is delivering a double whammy to councils which may if unaddressed prove fatal in the years to come.
Given this background there would appear to be only a limited number of alternatives to consider – what’s more, nearly all involve varying amounts of electoral pain which unfortunately does not auger well for a speedy resolution.
It has been suggested elsewhere that NSW councils have basically only three options to go forward:
1) The Minimalist Model – cut back staff numbers and reduce overheads and concentrate all revenue raised on getting value for maintenance and infrastructure. Based on the New Zealand experience which usually involves outsourcing most civil works to private contractors.
Council should adopt the Minimalist Model. Vote Here->
2) The Maximised Model – improve level of existing services. Obtain more of the State and Commonwealth tax pie, e.g. a fixed percentage of all GST or petrol tax should be allocated to local councils which would automatically rise with inflation.
Council should adopt the Maximised Model. Vote Here->
3) The Optimised Model – retain existing levels of services. Abolish rate pegging and leave it to local councils to raise and service their own capital requirements
Council should adopt the Optimised Model. Vote Here->
Do you agree that NSW Councils must change how they finance their operations, with one of the three options above, to survive?
If not we want your feedback: Your Opinion Counts. Click here->
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