Newcastle City Council finances – Leadership needed

Much has been made in the media recently about the current state of Newcastle City Council’s financial position. On taking office, Lord Mayor Jeff McCloy refused to sign off on the Council’s financial statement and forwarded 24 questions that he wanted answered before he would authorise council’s projected expenditure. Councillor McCloy took the opportunity of his first financial sign-off to attack many current council practices as “bizarre”, to threaten significant staff cuts and the opening up of several council services to tender.

In the turmoil that has ensued since then, General Manager Phil Pearce has tendered his resignation. We can only presume that Mr Pearce found his position to be untenable. That is, the management practices favoured by Mr Pearce were incompatible with those of our new Lord Mayor.

But just how serious is the current financial situation of Newcastle City Council? The current operating deficit of  $23.3 million revealed in the financial statement excludes capital grants of $11 million received by the Council, so after taking these into account the actual deficit is significantly less at $12.3 million – the financial statements refer to this as “the change in net assets from operations.”

We also see that a major contributor to the deficit was a significant increase of $12.7 million to depreciation expenses (when compared to the 2010/11 year), which is largely as a result of a mandate from the State Government’s Division of Local Government to revalue Council assets such as roads, footpaths, bridges and drainage assets.

A close reading of the Council’s financial statements for the 2011/12 financial year offers little justification for alarm. Compared to the 2010/11 year, Council’s income decreased by $5.4 million (3%) and expenditure increased by $6.6 million (3%). This level of deficit operating result is surmountable. The Council needs to do some considered reworking of our budgetary measures for the current financial year, in consultation with the community, to overcome this legacy

So where does this place the financial position of Newcastle City Council? The year-to-year budgeting of councils such as Newcastle involves making predictions about income and expenditure that are inexact by their nature. A recent review by the Independent Pricing and Regulatory Tribunal (IPART) suggests that an appropriate range for financial sustainability for a council is somewhere between +5% and -10%. Newcastle Council’s budget falls well within this range. To sum up, an atmosphere of financial crisis has been fomented where there is none.

Newcastle Council’s current deficit is similar to that of many other councils of its size. While it is vital for Council to keep its financial affairs in order, it is equally important that any review of council services and employment practices is conducted in a calm and considered manner, free from presumptions that Council’s financial position is in crisis. It is not helpful for the healthy functioning of our council and staff morale if there are overt threats of wholesale privatisation of council services made through the local media. We owe it to our wider community and to the council’s staff to conduct our deliberations calmly, taking into account all the implications of our planned actions.

Newcastle City Council, like all councils in NSW, has a charter of obligations under various acts of the NSW Government that it must fulfil: rubbish collection, local road construction and maintenance, the provision of sporting fields and recreational parks, swimming pools, libraries and civic amenities such as galleries and meeting halls. Because councils represent the sphere of government closest to the people, they are best positioned to oversee the most equitable provision of services to children, young people and the elderly.

The Lord mayor has responded to Mr Pearce’s resignation not with regret at the loss of his expertise but with an express desire to have the next general manager come from a “business background”. Yet, what of the importance of managing the multifarious needs of the residents of Newcastle?

Local government delivers services and facilities on a human scale. It is responsive to local need, provides local leadership and advocacy, fosters civic pride and reflects local priorities in a way that neither state and federal governments or private enterprise can. Council needs to consider how it can continue to answer these vital social needs, while also providing our fundamental services efficiently and effectively.

Should Newcastle City rush to contract out Council services to the private sector? The experiences of other councils indicate that privatisation is not the panacea the Lord Mayor might have us believe. Newcastle City Council is not a business and should not operate as a business. It is a sphere of government with the fundamental responsibility of providing services to its residents. Historically, our council has acquired a large inventory of assets in its plant, equipment, buildings, roads and bridges. Even more importantly, it has built up expertise and corporate knowledge among its staff. Notwithstanding the clear need to develop new efficiencies, that can and should happen, while retaining our invaluable assets, both physical and human.

Council services exist to serve the residents of Newcastle, not to make a profit for private interests. Wherever services are let out to private contractors, the fundamental aim of those contractors is to make a profit. Private contractors may at times offer services cheaper than Council can, because they use more up-to-date equipment, pay lower wages or employ work practices that reduce staff numbers. We need to ask ourselves whether these practices amount to real and sustainable efficiencies for Council

If updated equipment is what we need we could well be better off making wise investments now. If we need to make efficiencies in work practices, that can and should be negotiated with our workforce. Cuts in staff numbers should be carried out only with careful consideration and consultation with relevant unions or employee representatives.


What our council needs right now is leadership that has the best interests of the city and all its people at heart, not some chimerical quick-fix solution that benefits only the big end of town.

Therese Doyle

Greens Councillor, Ward 2


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