Four local councils unite to oppose half a billion dollar reduction in Government Financial Assistance Grants

Lake Macquarie City Council, City of Newcastle, Central Coast Council and MidCoast Council are calling on the NSW Government to pause proposed changes to 2027 Financial Assistance Grants, warning the cumulative reduction over the next decade is almost half a billion dollars.

The four councils, who represent the four largest councils by population in the region, warn the proposal would divert more than $33 million away from their communities next year alone. The funding is required to fund increasing infrastructure and service demands.

The Local Government Grants Commission is proposing that the stripped funding be reallocated to other councils whose residents can less afford a rate increase.

Lake Macquarie, Newcastle, Central Coast and MidCoast councils say the proposed methodology shifts funding pressure between councils, when what is needed most is an overall increase in Local Government funding.

Lake Macquarie City Council is facing a projected reduction of at least $7.2 million a year under the proposed methodology, equating to an estimated $85 million lost funding over the next decade. Financial Assistance Grants, which are made by the NSW Government using Federal Government money, currently provide almost $21 million annually to Lake Macquarie City Council to support the delivery of essential infrastructure, community facilities, environmental programs and services.

Lake Macquarie CEO David Hughes said the proposed changes would have significant consequences for communities that rely on councils to deliver essential services and infrastructure.

“As one of the fastest-growing regional cities in New South Wales, Lake Macquarie is facing increasing demand for roads, community facilities, sporting infrastructure, environmental management and other essential services,” Mr Hughes said.

“With our population expected to grow by more than 50,000 people to reach 277,000 by 2066, councils like ours need funding models that recognise and support the challenges of growth.

“A recurring reduction of this scale would place significant pressure on Council’s ability to continue delivering the infrastructure and services our community expects and deserves.”

City of Newcastle currently receives around $15.5 million annually in Financial Assistance Grants. Under the proposed changes its grant allocation would be more than halved, creating a shortfall of at least $9.5m each year and more than $108 million over the next decade.

City of Newcastle CEO Jeremy Bath said the changes would threaten the delivery of key community services and the renewal and maintenance of infrastructure used not only by Novocastrians but residents from across the region.

“City of Newcastle delivers cultural and recreational facilities, major transport assets and coastal infrastructure that support communities well beyond our council boundary,” Mr Bath said.

“We fund regional assets such as the Civic Theatre, the Newcastle Art Gallery, the Newcastle Ocean Baths, the Newcastle Museum and even our swimming pools, which are majority used by people who don’t pay rates in Newcastle. The Grants Commission can’t simply say that Newcastle residents will just have to pay more in rates to offset a $9.5 million reduction in our annual grants income.

“This proposal to redistribute funding away from councils predominantly on the coast to regional and rural councils is just robbing Peter to pay Paul. We need the State Government to hit the pause button on this and urgently rethink how it should be helping struggling regional councils.”

The Central Coast is one of the fastest-growing regions in New South Wales, and funding models must recognise the significant infrastructure, service and disaster recovery demands that come with supporting a growing community.

In addition to investing in roads, community facilities and essential services, councils must also be prepared to respond to and recover from natural disasters that can have lasting impacts on local communities.

A reduction of up to $20 million per year in Financial Assistance Grants would place substantial pressure on Council’s ability to deliver the infrastructure, resilience and community outcomes our residents rely on.

Central Coast Council interim CEO, Jamie Loader, said any reduction in the Financial Assistance Grants would have a significant negative impact on Council.

“Central Coast Council is the third largest LGA in NSW, an area which also includes more than 2200 km of roads, servicing a rapidly growing population of around 370,000 people. The support of government grants and funding is vital for us to be able to maintain the infrastructure needed for this growth. Quality roads, sporting facilities, water and sewer infrastructure and crucial safety features such as lighting and pathways for a vibrant nighttime economy as well as cycling and walking infrastructure for schools, leisure and the general community are essential,” Mr Loader said.

“While Central Coast Council is an $800 million organisation – the grants we receive enable us to meet those community demands and expectations. To have a year-on-year reduction of up to $20 million would have extraordinary consequences.

“Council undertakes a huge range of services and functions, many on behalf of other levels of government at the expense of ratepayers.

“With $13 billion in assets to maintain the growing community, there will be no option other than reducing services or passing on costs to the ratepayer should the funds be reduced. The timeframes provided do not allow for appropriate community engagement to inform future budget allocations or reductions.”

For MidCoast Council, one of the largest regional councils in the state, serving a community spread across 10,000 square kilometres and a road network spanning 3,600km, the impact is similarly significant. MidCoast currently receives $23.9 million in Federal Assistance Grants, which will be reduced to $18.9 million under the proposed changes.

Facing a projected reduction of $5 million per year, MidCoast’s General Manager Adrian Panuccio said the loss will have a big impact on the region. Over a 10-year period it will equate to a $55 million hole for a community, which is still reeling from a one in 500-year flood event in May last year.

“This is not the type of loss that can be absorbed, we will have to look at reducing services and options for increasing costs. This is the last thing our community need to be facing,” Mr Panuccio said.

“We had almost 4000 properties across our region requiring rebuilding, restoration or repair and numerous public spaces damaged that we still haven’t had any assistance with repairing for our community. We have an estimated $320 million of damage sustained to our road and bridge network that we are working through.”

Mr Panuccio said the reality of the proposed funding reduction would mean Council will have to consider how key services are delivered and will reduce the level of maintenance and repairs on key community infrastructure.

“We are still battling on behalf of our community to attract funding for key projects as a result of the flood, we cannot expect our community to pick up the tab for this as well,” Mr Panuccio said.

The four councils support efforts to ensure fair funding outcomes for rural and regional communities but say this should not come at the expense of other communities facing significant growth pressures. Instead, they are advocating for an increase in the overall funding available to local government consistent with motions passed for many years at the NSW and National Local Government Annual Conferences.

In July this year the Australian Federal Government and the Australian Local Government Association (ALGA) secured increased untied federal funding to address local council resource pressures. Until it’s known how much additional funding will be provided to the NSW Government for distribution in assistance grants, no redistribution should take place that strips tens of millions of dollars annually from local coastal councils.

The proposed methodology by the NSW Grants Commission assumes that residents in Lake Macquarie, Newcastle, the Central Coast and MidCoast can afford to pay more in rates than other councils in the Hunter.

The calculations include income the councils have received including emergency grants used to rebuild after natural disasters along with levies councils collect on behalf of the NSW Government. In the case of Newcastle, the new methodology even includes the income of Newcastle Airport despite the Airport being a separate legal entity whose income is entirely invested into airport operations.

The four councils are calling on the NSW Government to pause the proposed changes until the Federal Government’s commitment to increase Financial Assistance Grant funding has been implemented. No council in NSW should be worse off simply to prop up another council who is struggling financially.

Financial Assistance Grants