Councils unite to oppose proposed cut in Financial Assistance Grants

Four Northern Rivers councils, together with MidCoast Council, are calling on the NSW Government to pause proposed changes to the 2027/2028 Financial Assistance Grants methodology, raising concerns the proposed model does not adequately account for the unique challenges and circumstances facing regional communities.

Across the five LGAs of Tweed Shire, Lismore City, Kyogle Shire, Byron Shire and MidCoast, the proposed new methodology would result in a combined reduction of approximately $18.9 million in annual funding equating to an estimated $222 million over 10 years factoring in indexation, representing an average reduction of around 32 per cent.

The impact is particularly significant for the Tweed Shire, Lismore City and Byron Shire councils each facing reductions of around 50 per cent under the proposed model.

Lismore City Mayor Steve Krieg said if the flawed proposed changes proceed, councils will be forced to reduce services, lower service levels or seek additional revenue measures such as a special rate variation.

“The proposed methodology would see a $4.25 million hit to our budget a large portion of which includes contributions for local roads.

“The new model adds in all operating grants including disaster recovery funding which should be excluded. It doesn’t account for population variations, tourism impacts, regional infrastructure differences, the varying costs of delivering services across regional NSW and the recent impact of disasters in the area,” Mayor Krieg said.

The proposed methodology could result in significant reductions in funding at a time when communities are still recovering from major disasters including flood and fire, are rebuilding essential infrastructure and reactivating the community particularly business.

“Disaster Recovery Funding Arrangements are specifically tied to repairing and restoring assets damaged by disasters. They are not unrestricted revenue available to fund ordinary council operations and should not be treated as evidence that a council has greater capacity to fund its ongoing services,” Mayor Krieg said.

Lismore is still undertaking one of Australia’s largest local government recovery programs following the 2022 floods.

“If you receive a grant, you expend it. The methodology needs to include actual income and actual expenditure not average expenditure or it distorts the financial picture.”

“Communities experiencing natural disasters should not be penalised. They should also not be disadvantaging councils for being successful in securing external grant funding. All operating grants should be excluded.”

Recent impacts on populations due to disasters are also not being adequately accounted for.

“A population-based methodology risks further negatively impacting Lismore following the post-flood buyback scheme, with more than 600 properties acquired by 2026. This may reduce the assessed need even though infrastructure responsibility remains largely unchanged.”

Byron Shire Mayor Sarah Ndiaye said population is only one measure of demand for council services and infrastructure.

“Tourism is a major economic driver across the region, with visitor numbers placing significant additional load on local roads, public spaces, waste services and community facilities, often well beyond what our ratepaying community contributes to,” Mayor Ndiaye said.

“Most of our visitors arrive by road, creating additional demands on local and regional road networks that are not reflected in resident population figures.

“This is particularly true for Byron as we are the fourth most visited destination in NSW and the 11th most visited in Australia for international visitors.

“At the same time, we are still recovering from the devastating 2022 floods, while managing the combined pressures of rebuilding infrastructure and servicing a visitor population far greater than our resident population,” said Mayor Ndiaye said.

MidCoast Council’s Mayor Alan Tickle said the current local roads component of the methodology is not equitable or fair because it does not directly account for road type, asset condition or actual road usage when determining funding allocations.

“The methodology does not adequately account for the differences between sealed and unsealed roads, regional and local roads, traffic volumes, tourism-related traffic or the impact of heavy vehicle use,” Mayor Tickle said.

“In the Mid Coast, our community spans more than 10,000 square kilometres and is serviced by a 3,600-kilometre road network, including around 1,700 kilometres of unsealed roads. This scale and diversity presents unique challenges that need to be recognised in road funding allocations.”

Kyogle Council believes the methodology using per capita particularly affected the Kyogle LGA.

Using this method disadvantages the Kyogle LGA because it has a disproportionately high number of square kilometres of roads relative to our population.

The councils are also concerned about the treatment of funding that councils receive to administer or deliver services on behalf of other levels of government.

This includes funding for programs such as the NDIS and childcare, where Council may receive funding to provide or facilitate services, but the funds are then passed directly on to deliver those services.

These services are not typically the responsibility of councils to provide, falling to other levels of government to fund.

Mayor of Tweed Shire Council Reece Byrnes said the aim of the Financial Assistance Grants is to provide councils with greater certainty of funding, but the inclusion of Disaster Recovery Funding Arrangements (DRFA) operating grants will create significant year-to-year fluctuations for councils.

“For the Tweed this is a loss of $6.5 million a year, close to half our grant. That is money that goes into roads, parks and the everyday services people rely on, and it cannot simply be absorbed,” Mayor Byrnes said.

“We are still rebuilding from the 2022 floods and Cyclone Alfred. Taking that much out of our budget while that work is underway makes no sense for a community that has already been through so much.”

Lismore City Mayor Steve Krieg said the councils consider the proposed methodology flawed but to date have been denied access to the detailed calculations needed to properly assess its impact and develop an informed, comprehensive submission.

“We are calling on the Government to be transparent with councils about how these calculations are being made,” Mayor Krieg said.

The five councils support a fair distribution of funding across NSW but believe redistribution between councils cannot be the sole answer when the underlying problem is inadequate funding for local government as a whole.

Based on the councils’ current modelling, the proposed changes would result in a significant reduction in funding as outlined below. These numbers are based on letters of advice received from NSW Local Government Grants Commission.