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The financial challenge is still front and centre!

December 2021

The announcement of the 2022/23 rate peg sees further financial pressure on councils, with some 88 councils across NSW receiving a rate peg increase of less than 1% - over two-thirds of councils.

This has an immediate impact on councils’ long term financial resource planning, as many councils were estimating increases around 2%. Councils will need to reconsider the budgeting and financial forecast implications for the 2022/23 year and beyond.

The impacts of natural disasters, COVID-19, cost shifting, supply chain delays and income raising constraints on councils are well documented. Long term financial resource planning is now more critical than ever:

  • Do councils understand impacts and options of a lower rate peg?
  • Have councils developed contingency planning and ‘what-if’ scenarios?
  • Are councils assessing the balance between competing objectives - new assets, service levels, community expectations of affordability?
  • With this multifaceted challenge, councils have many levers at their control - are they applying them?

The timing of the rate peg calculation methodology changes and peg announcement is significant as next year will be a massive year for councils. Not only are new councillors being inducted and quickly brought up to speed, but the development of new delivery programs, resourcing strategies and service review programs add to the complexity of the first four months of 2022.

The newly elected councils will need to immediately tackle financial sustainability, should the rate peg be insufficient for councils to fund the delivery program (and we suspect for many it won’t be sufficient). Service reviews, planning and improvement initiatives will be even more critical to the long-term financial sustainability. Councils will need to revise their plans and notify any intent to consider a special rate variation in their published Integrated Planning and Reporting plans.

If the need is immediate, this only leaves a relatively short period for councils to engage with their communities.

The team at Morrison Low is here to assist if needed and, in the meantime, we would like to wish all our clients and councils an enjoyable and safe Christmas and New Year. We hope you find some time to relax and spend with your family and friends, as you onboard the new councillors.