In order to regain financial sustainability, 35 of the 100 largest councils within NSW will need to increase their rates, fees and charges by at least 80 per cent over the next ten years, according to a report by Fiscal Star.
The report, commissioned by research firm Review Today, was released at the Benchmarking Best Practice in Local Government conference, held today in Sydney.
According to the report, The Financial Sustainability of Existing Financial and Infrastructure Policies, regional coastal urban councils are the hardest hit when it comes to unsustainable revenue and spending policies.
Review Today chairman, Professor Percy Allan, told conference delegates: “11 of the 18 regional coastal urban councils were unsustainable and only three per cent were sustainable."
Outer-metropolitan councils followed closely behind, with 10 out of 22 listed as unsustainable and another four identified as vulnerable.
“By contrast, a majority of inner metropolitan councils and regional rural councils were sustainable,” Professor Allan said.
According to the report, a $4.3 billion total infrastructure backlog for the 97 councils is largely to blame.
“The heart of the problem is that most councils have a huge backlog of infrastructure that has passed its use-by dates and needs renewal, not just patching to be safe, sound and sightly,” Professor Allan said.|
“46 councils have a backlog of between 50 per cent and 200 per cent and another 10 councils have a backlog exceeding 200 per cent.”
According to Professor Allan, vulnerable and unsustainable councils are well below the sustainability mark when it comes to infrastructure backlog and outstanding debt. And those councils that are listed as sustainable are only teetering on the edges.
“To be sustainable, a council’s combined debt and backlog should not exceed around 60 per cent [of their total annual operating revenue].
“Fiscal Star found that the ‘broad liabilities’ of all councils that are unsustainable averages 187 per cent of their total annual operating revenue. For ‘vulnerable’ councils the broad liabilities ratio average is 95 per cent.
“Even ‘sustainable’ councils need to be vigilant because their average is 55 per cent suggesting that many are living on the edge of sustainability.”
Vulnerable and unsustainable councils, however, are not facing insolvency.
“Sustainability should not be confused with solvency. Nor un-sustainability with insolvency,” Professor Allan said.
“A council may have unsustainable policies, but still be solvent because like all governments, it can always tax and levy itself out of bankruptcy, notwithstanding rate pegging.”
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