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Cost shifting undermines financial stability of local govt

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Cost-shifting onto councils means ratepayers are being forced to pick up the tab for local infrastructure and services to the tune of $820 million each year – about the same amount the NSW Government plans to splash out to rebuild a single sports stadium in Sydney.

“Cost shifting is one of the most significant problems faced by council in NSW and our research shows it is increasing at an accelerated rate,” LGNSW President Linda Scott said.

“This trend is being driven largely by State Government policies, and it is eating into council revenue by up to 17 per cent each year.”

Inner West Mayor Darcy Byrne said that the State Government’s cost shifting had forced an unwanted amalgamation on Inner West communities.

“This survey shows that in the same year Ashfield, Leichhardt and Marrickville Councils were being abolished, allegedly to create savings, the NSW Government shifted more than $18 million in costs on to our combined balance sheet.

“Now we know that the former Ashfield Council was being ripped off by the Government more than any Council in the state, with a whopping 17 per cent of its last budget being eaten up by cost shifting,” said Mayor Byrne.

“We didn’t need our Councils to be sacked, we just needed Gladys Berejiklian to get her hand out of our pockets.”

Cost shifting occurs when state and federal governments force councils to assume responsibility for infrastructure, services and regulatory functions without providing sufficient supporting funding.

The practice has imposed a cumulative total burden of $6.2 billion over a 10-year period.

Clr Scott said the five hardest-hit councils in NSW included:

  • Inner West Council (17% of income)
  • Cessnock City Council (16% of income)
  • Maitland City Council (16% of income)
  • Hunters Hill Council (15% of income)
  • Canterbury-Bankstown Council (14% of income).

“One of the most appalling examples of cost shifting is the NSW Government’s waste levy, which increased councils’ costs by 44% over a two-year period,” she said.

“In 2017, the NSW Government collected $659 million in waste levies but only 18% of this council contribution was returned to local government to actually manage waste.

“Where has the rest gone? Is it being funnelled into the controversial plan to spend $729 rebuilding Allianz Stadium or $810 million on the ANZ Stadium at Homebush?

“Treasurer Dominic Perrottet boasts of a budget surplus, but he’s a little less forthcoming about the fact that some of that surplus is only possible because the State Government shoves an ever-increasing amount of costs downstream to local government.

“It’s quite common for the Government to make a big media splash about providing one-off funding for local infrastructure – but then the council has to absorb the cost of maintaining that infrastructure in years to come.”

Clr Scott said the latest research identified other big-ticket cost-shifts as including the shortfall in public library funding; pensioner rate rebates; and the cost of managing other regulatory burdens such as the operation of Independent Hearing Assessment Panels, enforcement of companion animal regulations, and the management of contaminated land, noxious weed and flood controls.

“Cost shifting is increasingly undermining the financial stability of local government and its ability to deliver the services and infrastructure communities need.

“Quality government regulation can, and should, lift up local communities and support economies; not deplete them – and this is why we are calling on the NSW and Australian Government to put an end to cost shifting”.

Source: LGNSW

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