Hunter councils divided over grants shake-up

Hunter councils are split over support for a federal grant funding overhaul.

The shake-up could lead to more money for the region's smaller and rural councils, but larger councils say it will cost them millions.

Cessnock councillors will be asked on Wednesday night to back a proposed overhaul of how federal grants are shared among NSW councils, putting the fast-growing Hunter Valley council at odds with the region's larger coastal councils in Newcastle and Lake Macquarie.

An extraordinary meeting at 5.30pm will consider a staff recommendation that Cessnock support the NSW Local Government Grants Commission's proposed new method for distributing Financial Assistance Grants, and send a submission to that effect before consultation closes on Friday.

Cessnock's report argues the revised method better recognises the pressures on high-growth councils.

It says the council's population is forecast to rise from about 64,600 in 2021 to 107,375 in 2041, an increase of 66 per cent, driven by development at Huntlee, Bellbird North, Kurri Kurri and the planned Anambah to Branxton growth area.

The council's draft submission says the new method would lift Cessnock's total allocation if the overall funding pool stays the same.

The papers do not say by how much.

The report acknowledges concerns from councils which stand to receive less, including larger urban councils, but argues that reverting to the old arrangements would reduce recognition of the growth pressures the new method is designed to address.

Keeping the current method, it says, "is not neutral" because it preserves historical funding patterns.

The council's report names Cessnock as the "third fastest growing regional council in NSW", and says "growth should not be assumed to equate to immediate financial capacity" and that the council has faced "significant financial sustainability challenges over many years"

The report says extra grant money "would accelerate council's path to financial sustainability".

Dungog Shire's mayor said in a council update that the draft model would deliver about $2.2 million extra to the council.

That was welcome, the mayor said, though Dungog "could do with $10 million".

The mayor emphasised that the model was still a draft.

Dungog has long argued that the existing formula disadvantaged small regional councils.

The Hunter Joint Organisation's June 2025 letter to the Grants Commission noted that more than 60 per cent of Dungog's revenue came from external sources.

It called for a 12-month review of the method and for a fairer redistribution towards councils with greater need.

The commission says the current formula has become too complex to trust, relies on unverified council-reported data, and uses outdated measures such as rainfall and topography.

Its proposed model allocates 30 per cent of the general purpose pool per head of population to every council, and the remaining 70 per cent according to relative financial need, calculated as expenditure need minus revenue-raising capacity.

Feedback is due by October 9.

The same changes have united City of Newcastle, Lake Macquarie, Central Coast and MidCoast councils in opposition.

Together they estimate they would lose $41.6 million a year, almost half a billion dollars over the next decade, as money is redirected to councils whose residents are judged less able to afford higher rates.

Newcastle would be hit hardest.

Its grant would more than halve from about $15.5 million a year, a shortfall of at least $9.4 million annually and more than $108 million over a decade.

Lake Macquarie faces a cut of at least $7.2 million a year, about $85 million over the decade.

Central Coast says it could lose up to $20 million a year and MidCoast $5 million.

Newcastle councillors unanimously endorsed a submission opposing the model on September 22. Lord mayor Gavin Morris said rural and remote councils did need help, but "our ratepayers are not a bottomless pit".

Labor councillor Declan Clausen said the answer could not be to set rural, coastal and regional councils against each other over the same limited pool of Commonwealth money.

Lake Macquarie councillors last week unanimously backed a seven-part motion from Labor councillor Brian Adamthwaite calling for the review to be paused until grants return to 1 per cent of Commonwealth tax revenue or historical highs.

The four councils say they support greater help for rural and regional communities, but argue any redistribution should wait until it is known how much extra untied funding will flow from the federal government.

They say no council should be worse off to prop up another.