Lake Macquarie councillors vow to fight against state's $85m cut to grants

Lake Macquarie City Council is forecasting eight budget deficits over the next decade if the NSW government's proposed changes to the 2027 Financial Assistance Grants scheme are implemented.

The NSW Local Government Grants Commission's review of its funding allocation methodology was a hot topic among Lake Macquarie councillors at Monday night's council meeting.

If the proposal is adopted, Lake Macquarie City Council would lose $7.2 million next year from its $21 million annual funding pool. Over the next decade, the cumulative reduction in funding is expected to be about $85 million.

That would paint a bleak fiscal picture for the council, which last month posted a $19.1 million operating surplus before capital revenue for the past financial year and paid down $33.4 million in debt.

The council's modelling predicts if the changes to the financial assistance grants are implemented, it would post a $100,000 surplus in 2031-32 and a surplus of less than $5 million in 2033-34.

However, the eight other financial years for the next decade would be deficits, including about $7 million in the red for 2032-33.

Under questioning from councillors, deputy chief executive Tony Farrell said the proposed cut could not be easily managed.

"It's simply not plausible for us to find $7.2 million between now and when you consider the draft budget early next year," Mr Farrell said.

"If the structural changes to the allocation are made and there is no significant increase in the funding pool from the Commonwealth, we will be having to cope with a significant reduction, and I can't see a reasonable way to make those adjustments to services before June 30, 2027.

"On that basis it's very likely we will be presenting deficits at least for the first year of impact, and after that, quite clearly, there will be 12 months of very hard work by staff and councillors to find $7.2 million out of our budget, and it will be operating funds that we will have to find, and they're always the most difficult."

Council chief executive David Hughes said any rate variation could not occur for at least 18 months.

The Local Government Grants Commission (LGGC) is consulting councils on proposed changes to the methodology. The commission argues the change is needed to reallocate the funding to councils whose residents can less afford higher rates.

The City of Newcastle ($9.4 million a year), Central Coast Council ($20 million a year) and Mid Coast Council ($5 million a year) are also facing funding cuts.

Councillors unanimously endorsed a seven-part motion submitted by Labor North Ward councillor Brian Adamthwaite that called for "methodology review to be paused until after the financial assistance grants return to 1 per cent, or historical high levels" and for the council to write to the Local Government Minister Ron Hoenig, as well as Hunter state and federal members Dan Repacholi, Pat Conroy, Sharon Claydon, Jodie Harrison, Sonia Hornery, Yasmin Catley, Greg Piper and Clayton Barr seeking their support.

An amendment from Liberal East Ward councillor Matt Schultz had Opposition Leader Kellie Sloane and local government spokesman Tim James added to the motion.

The motion also noted that the proposal was "flawed where it counts disaster funding as revenue" and that the council has been unable to get "accurate details of the methodology proposed".

"We have a long-term difficulty in terms of our future financial asset, and one of the earliest, quickest and best things we can do is to contact all of those people who have a vested interest in our city, a committed interest in our city or, in some way, an association with our city, to be our advocates," Cr Adamthwaite said.

Cr Schultz said the council had governed with sound fiscal efficiency and was being punished unfairly.

"The state government we know already cost shifts $1.5 million to local councils, which equates to around $500 per ratepayer, and so by coming with this new proposed methodology, the grant commission in a really clandestine way is punishing our residents here in Lake Macquarie by pushing a proposed $7.2 million potentially back onto our ratepayers because we're going to have to go to them to try and find this."

North Ward independent councillor Colin Grigg was incredulous that the state government was proposing the change.

"I think it's reprehensible that the government would want to hobble us as a council and other councils and, in turn, hobble the city of Lake Macquarie.

"We know where the buck stops. It stops with us who are at the coalface."

Lake Macquarie's Labor mayor Adam Shultz said the motion was about giving the council a voice in the process.

"Council is not arguing against a review of the financial assistance methodology," Cr Shultz said.

"We recognise the importance of ensuring the model remains comtemporary, equitable and fit for purpose.

"A fair and sustainable model must appropriately recognise population growth however, including infrastructure responsibilities, service demands and the capacity of communities to contribute.

"A reduction of $85 million over 10 years would place Lake Macquarie City Council under significant strain and could possibly have a significant impact on our service levels that our community demands and expects."

West Ward Lake Mac Independents councillor Kate Warner was elected unopposed as the new deputy mayor.

Cr Warner replaced Cr Grigg after his customary one-year stint expired.

In the 2024 council election, Cr Warner stood for mayor and finished second on preferences with 39.84 per cent of the vote, behind Cr Shultz (60.16 per cent).