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EDITORIAL: Council’splan for a rate hike

WITH an annual turnover of more than $200million, a workforce of about 1000 and a portfolio of assets worth at least $1.6billion, Newcastle City Council is one of this region’s biggest businesses.
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For various reasons, it also carries an unwanted reputation for controversy, regularly ending each year in deficit and relying, in turn, on a series of plans and strategies to dig itself out of the hole that various senior managers and financial consultants have warned about.

Now, it is the turn of Ken Gouldthorp to put his stamp on the council’s finances, with a draft delivery program and operational plan to be formally unveiled at Tuesday night’s council meeting, then put on public display before an application to the Independent Pricing and Regulatory Tribunal for an average rate rise of about 6.6per cent a year for five years from July 1, 2015.

If the tribunal grants the council’s desired rate increase – and it has fully or partly granted all but a handful of similar applications in recent years – then residential rates will rise by a modest $24 for a property with an average Newcastle land value of $234,000, and by $67 a year on land worth $1million.

Over five years, however, the compounding impact of each increase takes the overall rise to almost 38per cent, or more than twice the 17per cent increase that would follow if the council stayed within the tribunal’s expected rate-capping limit of 3.2per cent a year.

Given the well-publicised problems of recent Newcastle council administrations, the present council under Lord Mayor Jeff McCloy needs to explain its policies both to residential and business ratepayers. To this end, MrGouldthorp has produced a spreadsheet comparing Newcastle’s rate burden – as it affects an ‘‘average’’ residential ratepayer – with similar councils from the Tweed to Shoalhaven.

In this document, Newcastle’s average residential rates remain noticeably lower than those in Lake Macquarie and Maitland until at least 2021, because the pricing tribunal has already granted these councils larger rate variations than the one sought by Newcastle.

In dollar terms, the biggest Newcastle increases will be paid by the business sector, which is predicted to contribute more than $41million in rates in 2014-15 from just 4700 properties, almost half of the $85million raised from more than 60,000 residential properties.

Local government finances will always be a hot topic of debate – that is part of the freewheeling beauty of democracy – but no organisation can survive, long-term, spending more than it earns, which has been Newcastle council’s burden for too long. Mr Gouldthorp’s plan might not be the only way to revive the council’s ailing finances, but he was hired to put the house in order, and his prescriptions should be given weight by the public and the elected councillors alike.

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