The Independent Pricing and Regulatory Tribunal (IPART) has been tasked by the NSW Government with assessing council resources and how well they are able to cover operating expenses as well as fund community services and infrastructure.
“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.”
The NSW Labor Government sees this as a significant step in delivering on their election campaign commitment.
IPART will consider and recommend improvements on matters including the visibility of councillors and the community over the financial and operational performance of their councils, whether the current budget and financial processes of councils are delivering value for money for ratepayers and residents, and whether the current funding model will sustainably support the needs of communities.
The review will also consider whether councillors and council staff have the financial capacity and capability to meet current and future needs of communities, and how better planning and reporting systems can improve long-term budget performance, transparency and accountability to the community.
“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,” Minister Hoenig said.
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 March 15, 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 focused 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 terms of reference for this review can be read online at https://www.ipart.nsw.gov.au/Home/Industries/Local-Government/Review-of-council-financial-model-in-NSW.
Submissions will be accepted until March 15, with a report due to the government 12 months later.
The announcement follows changes to the IPART rate peg methodology announced last year, so it now takes into account factors like employee cost increases, forecast inflation, council-specific changes in Emergency Services Levy contributions and population growth, and have been endorsed by LGNSW.
