By Paul Hemsley

Local Government New South Wales (LGNSW) joint president Ray Donald has said that calls for an end to rate pegging have been backed by the state government in the latest report about the financial sustainability of councils from the NSW Treasury Corporation (TCorp).

Mr Donald said TCorp’s findings in the Financial Sustainability of the NSW Local Government Sector confirmed the that the existing revenue restrictions on councils including rate pegging “severely hamper” a council’s ability to fund present and future levels of service.

He warned that the NSW Government needs to be mindful of how these restrictions impact councils when “pointing the finger” at the local government sector – “a sector regulated by the state”.

Rate pegging has been a significant financial woe for councils in NSW since the passage of the Local Government Act 1993, which limits the total amount that a council can charge to its ratepayers in exchange for council services.

“Couple these restrictions with years of cost-shifting by the NSW Government and inadequate financial grants to address ageing infrastructure such as timber bridges in regional and rural communities, is it any wonder that some councils are struggling to maintain financial sustainability?” Mr Donald said.

The local government peak body’s call for the state government to overhaul financial sustainability for councils has come amid a mutual reinforcement of the relationship between the two tiers of government.

This collaboration solidified when Minister for Local Government Don Page inked the Intergovernmental Agreement to Guide NSW State-Local Government Relations on Strategic Partnerships with the joint-presidents of LGNSW to address cost shifting.

A week prior to the Agreement, LGNSW backed a proposal by Mr Page to re-write state legislation that governs councils in simpler language and purging regulations that were meant for “one off” issues.

A potential crack in the “special relationship” continues to loom because of the state government’s rumoured flip-flop on its 2011 election campaign promise not to force amalgamations on NSW. This is despite Mr Donald’s previous assertion to Government News that it is the policy of LGNSW and the state government that this will never take place.

Mr Donald even warned the state government in a statement today that it should not use the release of this TCorp Report ahead of the Independent Local Government Review Panel’s third and final discussion paper to backflip on its ‘no forced amalgamation policy’.

Although the NSW government is presently the only state government in Australia that caps council rates, the issue was raised at the eleventh hour of the Western Australian state election in March 2013 when the Labor Opposition pledged to cap council rates and align them with the consumer price index (CPI).

However the Western Australian Local Government Association condemned the Opposition’s rate pegging plan as “ill conceived” and “lacking appropriate economic fundamentals” because CPI has little bearing on providing services and facilities.

Liberal Premier Colin Barnett won the election in a landslide regardless, but the issue did not disappear because of the City of Perth's push to amalgamate with the City of Vincent and swallow up surrounding areas.