MidCoast Council would have substantially more money to spend on services if the state and federal governments did not require Council to provide either unfunded or partially funded services. This is called ‘cost shifting’.
What is cost shifting? Cost shifting occurs when state and federal governments force councils to assume responsibility for infrastructure, services and regulatory functions without providing sufficient supporting funding.
Quoting from the study by Morrison Low, “Cost shifting remains one of the most significant challenges to the financial sustainability of the New South Wales (NSW) local government sector.”
How does this affect Council finances? “The 2023-24 Cost Shifting Survey has revealed that cost shifting totalled $1.50 billion in 2023-24 which is a 10 per cent increase from the last survey result of $1.36 billion in 2021–22.” The practice has imposed an estimated cumulative burden of more than $11.31 billion over the last decade. Importantly, as cost of living pressures for households only seem to be rising every month, cost shifting now amounts to an average annual cost of $497.40 paid by each NSW ratepayer.
- Forced rate exemptions
Councils are required to exempt profit-driven state-owned corporations and other organisations from paying rates, even though they use and benefit from local government services and infrastructure.
- The waste levy
The waste levy is an invisible NSW Government tax on ratepayers. The waste levy is a levy paid by waste facilities in metro and some regional areas to the NSW Government. The cost of this levy is recovered through the waste collection fees levied by councils, in effect shifting the burden of this State Government tax onto ratepayers.
- Development assessment and regulatory functions
Councils incur costs of increased regulatory responsibilities that are not fully funded by fees and charges. The most significant regulatory function cost shift is for assessing development applications. Development assessment fees are set by the NSW Government and are generally set well below the actual cost for this function.
- Emergency services contributions and obligations
Councils are required to fund 11.7 per cent of the cost of the NSW Government’s emergency services in addition to other financial obligations.
- Library funding
The original commitment from NSW Government was to fund up to 50 per cent of libraries’ cost for many councils. The NSW Government now funds just 6 per cent of the total costs, leaving councils to fund an additional $181.8 million to make up the shortfall.
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