Councils In Crisis To Double Rates

2008

December [29]
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August [23]
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April [26]
March [27]
February [23]
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2007

December [1]
November [2]

Councils In Crisis To Double Rates

Sydney Morning Herald

Tuesday July 29, 2008

Harvey Grennan

THIRTY-FIVE councils are so short of cash they will need to increase rates and charges by 80 to 200 per cent in the next 10 years to survive, a new report warns.

Another 19 "vulnerable" councils in NSW will need to increase rates and charges by at least 60 to 80 per cent.

Without the extra income the councils will have to let rundown facilities deteriorate further, or appeal to federal and state governments to bail them out.

These are the main findings of a second survey by analyst Fiscal Star of the financial health of the biggest 100 councils, which cover 95 per cent of NSW's population.

The report does not account for the loss of hundreds of millions of dollars by councils on failed subprime investments. Nor does it factor in the recent recommendations of the Independent Pricing and Regulatory Tribunal to remove payroll tax exemption from councils and make them pay the full cost of fire services. These recommendations would increase rates by up to 40 per cent depending on local land values.

A report to be published soon by the French bank Dexia will show Australia has among the lowest spending by local government in the developed world - just 2.3 per cent of gross domestic product compared with 15.1 per cent in Japan, 12.9 per cent in Britain, 12.7 per cent in the European Union and 8.5 per cent in the US.

The Fiscal Star report says more than half the state's councils must substantially adjust their taxes or spending within five to 10 years to become sustainable. "Today's problems are being left largely for future ratepayers to fix," it says.

Fourteen Sydney councils are found to be financially unsustainable, as are 61 per cent of coastal urban councils outside Sydney, including Newcastle and Wollongong.

"We are not talking about a future crisis, we are talking about a crisis now," Professor Percy Allan of Review Today, the company that commissioned the report, said.

"The most alarming aspect is that neither the state nor federal government accepts the gravity of the crisis sinking local government."

"The State Government seems to think that as long as a few councils each year are allowed a significant rate hike the problem will go away. The Federal Government won't help until NSW council rates, held down by 30 years of rate pegging, rise to the level of the other states.

"Ratepayers will have to bear some of the pain or put up with infrastructure heading towards Third World standards. The heart of the problem is that most councils are facing a large and growing backlog of infrastructure such as roads, playgrounds and drainage that has passed its use-by date and needs replacing, not just patching. While New Zealand has a much lower per capita income than NSW, the standard of its local facilities puts us to shame."

The report warns many councils have a heavy reliance on tenuous grants from other governments, little or no spare cash to meet emergencies, expenses growing well in excess of underlying costs and insufficient capital works spending to renew ageing infrastructure.

"The State Government's decision to reduce the scope of councils to levy developer charges, to continue with rate pegging when no other state does and to tolerate cost shifting like the latest proposal to make councils pay more for fire services will constrain the ability of local government to rescue itself," Professor Allan said.

"Ironically, the straitjacket applied to NSW councils may ultimately backfire on the state if voters unleash their fury on MPs for not addressing local problems that councils could have fixed had they been allowed to do so.

"Already there are many councils whose infrastructure backlog is too big for ratepayers to fund. As more join their ranks, the pressure on the state's Treasury to come to their rescue will intensify."

BALANCING THE BOOKS

BEST

City of Sydney

Fairfield

Kogarah

Lane Cove

Warringah

North Sydney

Leichhardt

Parramatta

WORST

Ashfield