Tuesday, March 5, 2024

NSW Govt announces review of funding model for councils

The NSW Government has announced it will implement a review of the financial model for local government to address rising cost pressures facing councils across the state.

“The financial sustainability of councils is one of the most significant issues facing local government in this state,” said NSW Minister for Local Government, Ron Hoenig.

“With the cost of delivering core services to communities rising, it’s critically important councils are financially sustainable, but that needs to be balanced with the impact on tightening household budgets.

“That’s why we’ve asked IPART to make recommendations about whether the current financial model of councils enables long-term financial sustainability and whether councils have the financial capacity and mechanisms needed to deliver budget improvements.”

The Government has asked the Independent Pricing and Regulatory Tribunal (IPART) to examine the financial model for councils and key factors impacting councils’ financial sustainability.

The review will assess the resources currently available to councils, their capacity to cover ongoing expenses and ability to fund core council services and infrastructure for their communities.

It will also identify ways to improve budgetary performance and accountability within the sector so democratically elected councillors are empowered to make decisions for the effective running of their councils.

“There needs to be a closer examination so that the solution to financial challenges is not increasing revenue through raising council rates or seeking financial support from the State Government,” said Mr Hoenig.

“This review is a key election commitment and will help ensure this vital tier of government can continue to deliver essential services to NSW communities.”

The announcement follows changes made to the IPART rate peg methodology last year, which give councils greater certainty about the income they can generate through the payment of council rates, while protecting residents from significant rate increases.

The Minister said the financial modelling review will provide a holistic view of the challenges impeding the financial sustainability of the sector and ensure councils are delivering value to their communities through responsible fiscal decisions.

IPART will consider and recommend improvements on matters including:

  • The visibility of councillors and the community over the financial and operational performance of their councils;
  • Whether the current budget and financial processes of councils are delivering value for money for ratepayers and residents;
  • Whether the current funding model will sustainably support the needs of communities;
  • Whether councillors and council staff have the financial capacity and capability to meet current and future needs of communities; and
  • How better planning and reporting systems can improve long-term budget performance, transparency and accountability to the community.

The draft Terms of Reference are now open for feedback and can be viewed here.

Submissions on the draft Terms of Reference will be accepted until 15 March 2024.

IPART will consult with councils and the public to develop a report due to the Government 12 months’ after the Terms of Reference have been finalised.

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