Newsletter 69 – Finance

Ladies and Gentlemen,

North Sydney Council, at its meeting on 27 October voted on The Draft Long-term Financial Plan.

The Plan proposed:

• an increase in our rates of up to 54.18% (phased in over a three-year period)
• as well as an increase in the minimum rate for residential and business.

We don’t know what individual councillors are thinking because the vote to put the Plan on public exhibition was not the subject of a single question or debate – it was just accepted by all councillors.

Council Rates – does Council really need to increase rates, let alone by 54%?

Council is again crying poor.

• Last year Council applied for and failed to get approval from IPART (State Government’s Independent Pricing and Regulatory Tribunal), for a Special Rate Variation of 87% – an increase in the rates it levies rate payers.
• This year Council is:

• • consulting on the Plan to increase rates by up to 54.18%, and
  • has ruled out repurposing/recycling any of its property assets (car parks, shops and residential properties).

Council’s “financial crisis”

Council’s finances appear to be in reasonable shape but the messaging from Council seen against the backdrop of the financial report leaves one wondering.

Prior to the Local Council elections in 2024 there was no report from Council Staff warning of a “financial crisis”.

Following the election Council reported that it was facing a “financial crisis” and then applied to IPART approval for a Special Rate Variation of 87%. The application was rejected.

After the failed IPART decision Council started suggesting it had a “liquidity problem”.

If you ask me, it had neither a financial crisis nor a liquidity problem.

Getting back to basics, in a perfect world, we’d see

• a budget with income (from rates and charges) covering expenses, and
• assets (notably, the property portfolio) can be sold with the proceeds used to repay unwanted debt and improve or add to amenities.

Perfect World – Income from rates and charges would cover expenses

Council’s finances are improving

That $15m in 2024-25 is a surplus and it was an increase of $2m over the previous year. What it shows is that the Council’s finances are getting better.

Perfect World – Assets can be sold to repay unwanted debt and improve amenities.

Council has a substantial property portfolio.

Some properties could be sold with the sale proceeds used to pay off debt and improve new and existing amenities.

Unlike the last IPART application, Council is not considering the sale of any assets. However, Council does recognise in their Long-Term Financial Plan that property sales and reinvestment in public infrastructure can meet community needs.’

Let’s look at just one property – the Ward Street car park, and do so, in the context of Council’s debt.

Council’s total debt was just shy of as of June 30, 2025, comprising:

• $56m in current liabilities and 

• $33m in non-current liabilities.

Back in 2016 Council had the Ward Street car park valued in terms of development potential. The value was then put at $80 million.

A lot has happened in North Sydney since 2016, that’s 9 years ago –

• property values have shot up, and
• the Metro arrived.

I hunted around Council’s web site looking for how the Ward Street car park might fit into a grand vision. As I could not find anything on point, I asked Google “what are the plans for the Ward Street car park”. It “replied”:

The North Sydney Council has not yet outlined a clear plan for the site, and it has been in a state of “strategic limbo” since the council took back full control in 2020.

Seems to me, Council should review its property portfolio with a view to maximising the benefit to ratepayers – pay off debt and improve amenities (e.g. kids’ play grounds and parks).

Back to 2024, why did IPART reject Council’s application for a rate increase of 87%?

IPART’s benchmark for rate increases for the 2025-26 financial year ranged from 3.6% to 5.1%.

IPART found that Council did not:

• consider alternatives to a rate rise (e.g. selling properties);
• explain the need to grow its reserves and achieve a high Operating Performance Ratio of over 17%;
• show the proposed increases were reasonable; and
• achieve productivity improvements and cost savings.

The rate Special Rate Variation, if approved, would have raised an extra $544m over ten years with, to use IPART’s figures (see below), an average $40m surplus each year.

Why on earth would Council want such a surplus? That seems to have been a matter that exercised IPART’s mind. It noted:

… Some stakeholders … raised concerns that allowing the council to accumulate excess reserves would reduce the transparency and accountability of the council to the community on how these funds will be used and increase the potential for the misuse of the funds.

And in a footnote:

For example, a submission …. states excessive reserves can diminish transparency and accountability by functioning as a safety net for project cost blowouts or poor financial decisions. Excessive reserves can also enable discretionary spending on politically motivated projects, or electoral cycle-driven expenditure that may not truly benefit the community.

Finally, IPART said:

The council did not clearly communicate the key purpose of the Special Rate Variation was to accumulate substantial reserves and the council has not provided evidence that the community has a willingness to pay for building up financial reserves significantly above the Operating Performance Ration Benchmark. We also consider generating significant surpluses for the purpose of financial reserves is not appropriate in the context of cost-of-living pressures and affordability concerns for residents and ratepayers of the LGA.

And 

Taking into account the council’s Operating Performance Ratio, net cash position and unrestricted current ratio, we found that the council does not demonstrate a financial need for the proposed 2-year permanent Special Rate Variation. The Office of Local Government’s benchmark for Operating Performance Ratio is greater than zero, but the proposed Special Rate Variation is forecast to produce an Operating Performance Ratio of 17.6% by year 2, resulting in an average $40m surplus each year.

As far as IPART was concerned, Council had failed to make the case for any increase in rate above the “peg” – so much for the headline grabbing “financial crisis”.

Another IPART application is planned.

Now is:

• Not the time to push for a 54.18% rate increase (with yet another IPART application).
• The time for Council to show sensitivity for the plight of its ratepayers who struggle to make ends meet and turn its attention to strategies that keep rates and charges within the IPART peg.

Now is the time to let councillors know your thoughts and prepare to tell IPART what you think through the public submission process.