OPINION: The bottom line: the books aren’t that bad

Newcastle City Council isn’t in the trouble some, including the lord mayor, would have you believe, writes Therese Doyle
杭州桑拿

Therese Doyle is the Greens councillor for Ward 2.

MUCH has been made in the media recently about the state of Newcastle City Council’s finances.

On taking office, lord mayor Jeff McCloy refused to sign off on the council’s financial statement and forwarded 24 questions he wanted answered before he would authorise council’s projected expenditure. Councillor McCloy took the opportunity of his first financial signoff to attack many council practices as “bizarre”, to threaten staff cuts and the opening up of several council services to tender.

In the turmoil since , 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 lord mayor.

But just how serious is the financial situation of Newcastle City Council?

The operating deficit of $23.3million revealed in the financial statement excludes capital grants of $11million received by the council, so after taking these into account the actual deficit is significantly less at $12.3million – 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 $12.7million to depreciation expenses (when compared to the 2010-11 year), 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 $5.4million (3per cent) and expenditure increased by $6.6million (3per cent).

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 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 an appropriate range for financial sustainability for a council is somewhere between plus 5per cent and minus 10per cent.

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 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.

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, and 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 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 Council rush to contract out services to the private sector? The experiences of other councils indicate 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.

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 offer services more cheaply 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.

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.

GONE: Departing Newcastle City Council general manager Phil Pearce.


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