How councils can support rapid population growth while remaining financially sustainable

Managing rapid population growth while ensuring the financial sustainability of local government in New South Wales is a significant challenge.

In an ideal world, this would be achievable through comprehensive strategic planning, substantial infrastructure investment, diversification of revenue sources, efficient asset management and innovative cost-efficiency measures. 

However, the reality for councils overseeing urban release areas is far from simple. They grapple with the daunting task of meeting their communities' infrastructure expectations while providing essential services and maintaining financial stability.

The complexity of this challenge is compounded by the historical actions of successive NSW governments. These actions have eroded the capacity of local governments to levy costs on developers, diminished grant-funding levels and shifted the burden of essential-service costs onto local authorities. 

Even a council's ability to levy rates on its residents is subject to constraints imposed by the Independent Pricing and Regulatory Tribunal (IPART), which oversees rate-pegging methodologies that many consider to be flawed.

A crucial tool for local councils is developer contributions (Section 7.11 contributions, also known as infrastructure levies), which allow councils to impose charges on property developments to fund local infrastructure necessitated by new developments.

These levies have existed since the introduction of the NSW Environmental Planning and Assessment Act in 1979. Initially, this mechanism functioned effectively, enabling councils grappling with rapid population growth to provide much-needed facilities for their expanding communities.

However, a significant turning point occurred in 2010 when the NSW Government introduced contribution caps and the essential-works list. While land allocated for community facilities remains on the list, funding for associated buildings and structures is not included. These restrictions even limit the enhancement of open spaces to a basic level, often falling short of meeting a community's desires or needs. Despite persistent advocacy by local government authorities over the years, successive NSW governments have been reluctant to embrace substantial reform.

The NSW Government's expectation that local governments finance either all or at least part of the cost of these essential facilities primarily from their general revenue (rates) adds another layer of complexity.

IPART further curtails a council's ability to raise rates unless it embarks on a lengthy and often unpopular special-rate variation (SRV) process. The surge in SRV applications in recent years demonstrates that it is not solely growth-focused councils that grapple with the challenge of delivering services and infrastructure while remaining financially sustainable.

Blacktown City, home to 12 of the 16 growth precincts in the North West Growth Area, exemplifies the formidable challenge of balancing rapid population growth and financial sustainability. It is currently the fastest-growing population centre in NSW, with an expected 50 per cent increase in its population to more than 600,000 residents in the next 20 years. 

The amount we receive from the rate peg is not enough to cover the increased costs of maintaining service levels, the increased need for new assets and the provision of adequate facilities as our population grows, even with the additional rates income we receive from the new properties.     

Given these challenges, councils like Blacktown City face limited options to support rapid population growth, including:

• Seeking alternative revenue sources, such as raising service charges and fees. However, many of these sources are subject to regulation by other levels of government, limiting the council's autonomy;
• Imposing charges and fees on services that are currently provided for free. However, such actions are never well-received by residents;
• Selling assets such as land or buildings could generate funds to cover the cost of renewing ageing infrastructure. However, this approach cannot be sustainable in the long run;
• Scaling back services to residents and deferring maintenance, renewal and upkeep of equipment, parks, reserves and playing fields is an option, but it will negatively impact residents' quality of life; and
• Reducing the workforce, although this is a last-resort measure, as it can have severe social repercussions on the council’s ability to deliver services.

Alternatively, a more effective solution lies in the hands of the NSW Government and IPART. 

Urgent and comprehensive reforms are needed to alleviate the burden on local governments. These reforms should address the limits on developer contributions and rate-pegging methodologies.

By working collaboratively, the government and local authorities can strike a balance between managing rapid population growth and ensuring the financial sustainability of local communities.

This will help to ensure that communities like Blacktown City can continue to receive essential services as well as much-needed infrastructure while flourishing in the face of population growth.

It is time for comprehensive action to secure a sustainable future for all residents of NSW.