At the July meeting, Councillors unanimously supported my Mayoral Minute to join industry calls for urgent reform to address the growing negative impact of cost shifting onto local government.
Cost shifting occurs when higher levels of government force councils to take responsibility for infrastructure, services, and regulatory functions without providing additional funding support.
A new report commissioned by Local Government NSW (LGNSW) reveals that councils spend on average almost $500 per ratepayer annually to cover costs shifted from state and federal governments. That's a significant drain on rates revenue that could otherwise fund essential services and infrastructure like road repairs or community facilities.
The report, produced for the 2023/2024 financial year by independent consultants Morrison Low, revealed $1.5 billion in expenses has been imposed on councils – an increase of approximately $140 million (10 per cent) since the last report in 2021/22.
The LGNSW report identifies the top five areas of cost shifting as:
- Forced rate exemptions – including non-government social housing, private schools and NSW Forestry Corporation.
- Waste levy – a state government tax on waste facilities.
- Development assessment and regulatory functions –state government set fees that don't cover the actual service cost.
- Emergency services contributions – an 11% levy for the cost of NSW emergency services.
- Library funding – NSW Government now only fund 6% of the total library costs despite originally committing to 50%.
The relentless growth of cost shifting, combined with rate pegging and insufficient state and federal funding, continues to erode the financial sustainability of local government.
Like many councils, we were forced to apply for a special rate variation to generate the money required to continue delivering the services our community expects. Ultimately, the difficult decision to raise rates sits with the Councillors – the people closest to the challenges our community faces - while hidden taxes are effectively paid to other levels of government through cost shifting.
We will continue to advocate for a fairer system for our community. The LGNSW report and summary are available on Local Government NSW website.
