PORT Macquarie-Hastings Council’s financial sustainability is weak, and the council might not be viable in the long-term.
That’s the gloomy view of the council’s finances, as assessed by the NSW Treasury.
The assessment of council’s financial sustainability rating and outlook will be considered by the Independent Local Government Review Panel, which is investigating options for governance models, structural arrangements and boundary changes for local government in New South Wales.
The assessment, released last week and prepared by the NSW Treasury Corporation, is part of a review of all 152 councils in NSW.
It identifies the financial sustainability of council as weak, advising that while there is an acceptable capacity to meet financial obligations in the short to medium term there was a limited long-term capacity.
The assessment also classified the financial outlook of Port Macquarie-Hastings Council as negative, indicating that a rating change may be the result of the limited long term financial capacity.
Mayor Peter Besseling said the TCorp assessment echoed the concerns expressed in various recent reports to council about the long-term funding model for local government.
“To put things into perspective, council currently has an infrastructure backlog of approximately $187 million,” Mayor Besseling explained.
“This is the cost to bring many of our assets, such as roads, bridges, public buildings, water, sewer and stormwater infrastructure, up to a satisfactory standard.
“If we were to bring our assets up to an ‘as new’ or improved standard, the backlog figure rises to approximately $500 million.
“In the absence of extensive reform of the overall funding model for local government, council needs to ensure it is best placed to make the most of the funds it currently collects and receives.
“This effectively means operating within our means and ensuring that the allocation of scarce resources is made in a prudent and systematic way, in line with community priorities.
“The Treasury Report gives a clear assessment of the challenges facing our newly-elected council and confirms that our fiscally responsible approach to dealing with local infrastructure and services is both necessary and appropriate.”
The long term financial position has recently been reviewed with the 10-year Long Term Financial Plan, currently on public exhibition as part of the Integrated Planning suite of documents.
“In addition to the infrastructure backlog issues, council has been constrained for many years by issues of rate pegging and cost shifting from the State Government, which is valued at over $4 million annually,” said Mayor Besseling.
“Recent special rate variations have allowed council to direct additional funding into road construction and maintenance as well as parks maintenance.
“Council is also undertaking on-going service reviews to ensure that we are operating as efficiently and effectively as possible.
“Whilst we would have liked TCorp to report on a more favourable financial assessment of the council, the fact is the problem has been building up slowly over decades and is at the forefront of each financial decision this council makes.”
Council’s “weak” sustainability assessment is defined as:
- A local government with an acceptable capacity to meet its financial commitments in the short to medium term and a limited capacity in the long term.
- It has a record of reporting moderate to significant operating deficits with a recent operating deficit being significant. It is unlikely to address its operating deficits, manage unforeseen financial shocks and any adverse changes in its business, without the need for significant revenue and/or expense adjustments.
- The expense adjustments would result in significant changes to the range of and/or quality of services offered.
- It may experience difficulty in managing core business risks.
Definition of council’s ‘negative’ outlook assessment means:
- As a result of a foreseeable event or circumstance occurring, there is the potential for deterioration in the local government’s capacity to meet its financial commitments (short and/or long term) and resulting change in its rating. However, it does not necessarily indicate that a rating change may be forthcoming.
