NSW councils buckling under cost-shifting topping $670 million

NSW councils argue that the state government is passing the ball, to the tune of more than $670 million.


NSW councils are buckling under the extra burden of more than $670 million a year in costs shifted from the two other tiers of government, a new report has revealed.

The Local Government NSW (LGNSW) Cost Shifting Survey, which is conducted every two years, identified $670 million in costs passed on to councils – primarily by the NSW Government – in the 2013 to 2014 financial year.

This figure is significant because it represents almost 7 per cent of councils’ total income before capital expenditure and the survey is a comprehensive one, with 72 of the state’s 152 councils involved in the final survey.

What’s more, the impost appears to be getting worse. The bill copped by local government has swollen by an extra $88 million since the last survey two years ago.

Cost-shifting is defined as being where one sphere of governments shifts responsibility for providing services, maintaining assets or enforcing regulation to another sphere of government but without the funding or the opportunity to raise enough revenue to cover it.

One such scenario is where local government agrees to provide a service on behalf of the state or commonwealth government but the funding is later reduced or stopped and a council cannot withdraw the service because of community demand.

Another example of cost-shifting is where one level of government stops providing a service or function it is responsible for and the local council steps in because of community of demand for it.

The areas of expenditure pinpointed as having the biggest negative impact on local government due to cost-shifting are: public libraries, mandatory pensioner rebates and contributions to emergency services.

Also mentioned is the increased burden on local councils of upholding regulations. For example, assessing development applications, controlling noxious weeds, regulating pets, maintaining flood and managing contaminated land.

By far the biggest offender was state government, which the survey said accounted for around 96 per cent of the extra tab picked up by councils.

Metropolitan and urban regional councils reported that they suffered more from cost-shifting than rural councils, which could be partly explained by the lopsided impact of the waste levy, public libraries, DAs and, to a lesser extent, pensioner rate rebates on them.

LGNSW President Keith Rhoades said that NSW councils were fighting an “ever-increasing financial squeeze” with the imposition of a new, lower 1.8 per cent rate cap in 2016/17 and the continued freeze on the indexation of Funding Assistance Grants.

Mr Rhoades argued that the funding system for NSW local government needed to be fixed first and that council amalgamations were just a sideshow.

“It’s not the councils that are broken, it’s the funding system they’re forced to work under,” he said.

“LGNSW has argued throughout the entire reform process that we need to fix the funding first – well before we start worrying about developer-driven structural reform via council amalgamations.

“This new data on cost-shifting is powerful reason for the State and Federal Governments to stop asking councils to keep doing more and more with less.”

He said that if the government was serious about strengthening local government it would start by “resolving the systemic funding issues that bedevil councils, not by spending taxpayers’ money forcing amalgamations.”

Cr Rhoades said that amalgamations between two financially squeezed councils would only result in one large council under even greater financial stress.

He said it was ironic that the NSW government was currently arguing against federal-state cost-shifting at the Council of Australian Governments (COAG).

“It certainly seems that what is good for the goose is not good for the gander in this case,” he said.

Comment below to have your say on this story.

If you have a news story or tip-off, get in touch at editorial@governmentnews.com.au.  

Sign up to the Government News newsletter

Leave a comment:

Your email address will not be published. All fields are required