Federation Council has formally lodged a submission strongly opposing proposed methodology changes to the distribution of the Federal Financial Assistance Grants (FAGs) to NSW Councils, warning the NSW Local Government Grants Commission that the draft model would strip over $2.1 million per year and compounding, in critical operating funds from local regional communities starting in 2027/28.
Under the proposed distribution model, Council's General Purpose Grant component would be slashed by nearly half (-49.4%), resulting in an overall net annual funding loss of $2,168,517 - despite a modest increase in the local roads component.
Federation Council Mayor Cr Cheryl Cook stated that a funding shock of this magnitude severely threatens financial sustainability and everyday public services across the region.
"A sudden $2.17 million annual loss in general operating funds is a catastrophic blow to Federation Council and the services Council delivers across 13 towns and villages and everywhere in between, across an area of almost 6,000 square kilometres," Mayor Cook said. "Our community has already absorbed a 69% cumulative rate increase over the past four years to work towards greater financial stability. Expecting our residents to absorb service cuts and or further increase rates, by around 16%, during a severe cost-of-living crisis to cover this shortfall is ethically and practically impossible."
Summary of Proposed Funding Impact
| Grant Component | FY 2025/26 Allocation | Proposed FY 2027/28 | Net Variance ($) | Variance (%) |
| Local Roads Component | $3,125,289 | $4,203,187 | +$1,077,898 | +34.5% |
| General Purpose Component | $6,417,919 | $3,246,415 | -$3,171,504 | -49.4% |
| Total Allocation | $9,543,208 | $7,449,601 | -$2,168,517 | -22.7% |
Key Flaws Identified in Proposed Methodology
In its submission, Council detailed major structural flaws in the Commission's draft modelling:
Distorted Revenue Indicators: The model incorrectly assumes high agricultural land values equate to a higher capacity to pay rates, ignoring actual farm cash flow, seasonal and market volatility, and statutory state rate pegs. Councils like Federation, Lockhart and Greater Hume are all facing severe cuts, presumably based on flawed methodology such as assuming that growth in agricultural land values means these Councils should receive less in grants. These are not feel good grants that the Government gives out of generosity; these grants come from a continuously eroded pool, now less than 0.5% of the entire taxation revenue paid in Australia each year. These regions contribute significantly to the national economy. To think that Councils with higher land values, should receive less, when we all have similar costs to maintain and reconstruct roads for example, and deliver services, is not acceptable.
Inclusion of Emergency Disaster Grants:Counting temporary disaster recovery funding - such as over $10 million received to rebuild infrastructure following the 2022 floods, grossly distorts Council's operational revenue baseline. This funding does not help the Council deliver services, it simply restores roads mainly back to pre-flood condition, and in some cases, it doesn't even achieve that.
Inaccurate Remoteness Classifications: ABS data misclassifies Federation Council as 23% inner regional when 77% of its landmass is outer regional, failing to recognise the high overhead costs of serving scattered rural communities.
City vs. Regional Disparity: Federal rules guarantee high-density metropolitan councils a minimum 30% per capita flood grant regardless of their massive rate bases, redistributing funding burdens onto regional communities.
"To suggest that receiving temporary disaster funds to rebuild flood-destroyed roads means Council has more money to run libraries, swimming pools, parks, and community services is fundamentally flawed," Mayor Cook added. "Guaranteeing funding floors for wealthy city councils while penalising rural communities that have thousands of kilometres of roads and assets and services spread across many towns and villages, is completely inequitable."
Federation Council has also formally lodged a request under the Government Information (Public Access) Act 2009 (GIPPA) to access the underlying technical reports and datasets withheld during the brief 28-day consultation window. The lack of meaningful information to support why the proposed cuts to Council are being imposed is simply not acceptable.
"We are calling on the NSW Grants Commission to immediately suspend this process and convert it into a 12-month collaborative review," Mayor Cook said. "Councils cannot provide fully informed technical feedback when the data behind these calculations is kept hidden. The Commission must disclose the modelling, fix these underlying flaws, and join the sector in advocating for the federal funding pool to be restored to 1% of national tax revenue. Council is grateful for the close working relationship with two of its neighbours who also face severe cuts, Lockhart and Greater Hume Councils, and has also been working in a wider group of around 16 other potentially negatively impacted Councils, to ensure we can put our best foot forward. Council calls on community members to become engaged with this and speak to your local Member to voice your concerns also."
Read the full submission below or download from the top of this page.
