Councils lose half billion dollars a year under poorly designed rubbish levy scheme as union demands end to rate capping


The United Services Union (USU) has revealed the NSW Government has been withholding over half a billion dollars annually as collected from local councils through a poorly designed waste levy without reinvesting it to assist councils with their waste collection services and assets as intended, adding to their financial distress.

The revelation will be presented today to the NSW Standing Committee on State Development’s inquiry into local government financial sustainability, along with a firm recommendation to end rate pegging, which has crippled the finances of the overwhelming majority of NSW councils.

Both rate capping and the poorly designed waste levy are hangovers from the previous coalition government.

“The NSW Government is withholding money collected from local councils and their communities to the tune of $500 million a year through the waste levy,” said USU General Secretary Graeme Kelly.

“This money should be used to help councils manage waste more sustainably, but instead it’s being sent to the NSW Government’s consolidated revenue.”

The union will reveal that while the NSW Government collects approximately $750 million annually in waste levies from councils, only $250 million is reinvested in local government waste management initiatives. The remaining $500 million is retained by the state.

The waste levy collected would be significantly more if the waste levy funds collected by the state government were reinvested into new local and regional landfill sites, particularly in northern NSW where most councils are transporting their land fill waste over the border to Queensland due to a lack of current sites being available in their region. Waste being transported to Queensland is at a cost to ratepayers and results in no waste levy being collected in some regions.

“This is a great example of cost shifting by the NSW Government,” Mr Kelly said.

“Councils are struggling to fund essential services and infrastructure, but the state is happy to use them to raise revenue.”

The USU argues that the waste levy issue compounds the financial pressures on councils already battling the impact of rate pegging, declining grants, and increased service demands.

“The waste levy is supposed to be an environmental measure, but it’s become a perverse incentive for some councils to dodge the levy by dumping waste in Queensland,” Mr Kelly said.

“Most of the councils on the north coast from Coffs Harbour to the Tweed Border use contractors who are technically robbing NSW councils and taxpayers by not paying the levy.”

However, the waste levy is just one symptom of a broader financial crisis facing local government in NSW, according to a report by Professor Brian Dollery submitted as part of the union’s inquiry submission (attached).

“Professor Dollery’s research shows that rate pegging has left councils unable to raise sufficient revenue to cover their growing costs. Councils are increasingly expected to provide the community services that hold a society together including everything from childcare, libraries, and pools through to community gardens and renewable energy grants,” Mr Kelly said.

“But their finances are bone dry.”

The report finds that over the past 20 years, rate pegging in NSW has resulted in higher council debt levels, larger infrastructure backlogs, and lower municipal efficiency compared to other states without rate caps.

“The evidence is clear – rate pegging is crippling local government in NSW,” said Mr Kelly.

“Every council is different, rural councils supply water and deal with wastewater, city councils don’t, that’s an incredible difference, so we can see councils need to be able to go to their ratepayers with projects, services and rates tailored to their constituents.

“Many councils have had to go through forced amalgamations, which was incredibly disruptive, it just seems that successive NSW governments wants to make life difficult for councils instead of letting them flourish.

“It’s worth noting only two states in Australia have capped council rates.

“To be fair the current NSW government didn’t create this mess but it’s up to them to fix it.

“Unless councils can set rates that reflect their true costs, we’ll see more and more councils fall into financial distress, putting jobs and services at risk.”

“Over 50,000 people work for councils, combined they are one of the state’s biggest employers, just as they are in many regional communities, we need to get this right.

The USU is calling on the NSW Government to abolish rate pegging as part of a broader reform package to secure the long-term financial sustainability of the local government sector.

“Scrapping rate pegging won’t solve all the problems facing councils overnight, but it’s an essential first step,” Mr Kelly said.

“We need a new funding model for local government that recognizes its vital role in our communities and provides a secure, sustainable revenue base for the future.”

/Public Release.