Sydney councils are being asked to pay for more with less. Waverley is going to find out how much

It’s the key reason given by Sydney’s councils for applying for enormous rate rises: cost shifting. Over the years, cash-strapped councils have been tasked with paying for services once funded by state and federal governments.

The cost of emergency services, libraries, extra public transport, and policing during events are some examples of the expenses foisted upon local governments, which objected but were made to pay, or forgo public safety and amenity.

Waverley councillor Michelle Stephenson says coast councils are being saddled with unfair costs.Credit: Janie Barrett

Already, Northern Beaches and North Sydney councils have applied for outsized rate rises this year. Last year, the state government proposed it stop funding Beachwatch, a water quality testing service that warns swimmers of where and when it is safe to take a dip, meaning the cost would need to be borne by local government or the program abandoned.

For the eastern suburbs’ Waverley, which already takes on costs related to the maintenance of seawalls, and the cleanup and management of unofficial events such as the annual backpacker bonanza at Bronte Beach each Christmas, enough was enough.

“It’s out of control and I don’t think people understand how much councils are made to do with less,” said Michelle Stephenson, a Liberal councillor for Waverley’s Bondi Ward. “I think the state government needs to take ownership for the services they provide and stop pushing back on councils to pick up the tab.”

Earlier this month, Waverley passed a motion for staff to investigate “to the dollar” what ratepayers were being asked to fork out for former state and federal services. The report is to be handed down in May.

Last month, Northern Beaches council sought a special rate rise of 39 per cent from IPART, closely followed by North Sydney, which applied for an 87 per cent rise – both cited cost shifting as a factor affecting their financial capacity.

Stephenson said when she started at Waverley Council she was shocked at the costs borne by ratepayers. When revellers flock from across the city to Waverley’s beaches during summer, it is ratepayers, not taxpayers, who dish out the $75,000 a year for additional “user pays” policing on busy days. Keeping revellers safe on Christmas Day at Bronte costs the council $11,000 alone.

When state funding for water quality testing ends in July, the council expects to spend $22,190 on the program, even if it is a state-owned sewerage system that makes beaches toxic after a downpour.

“The council aren’t the ones making a massive amount of money from people coming in, it’s a boost to the local economy, but the only way we’re making money to recoup those losses is to [charge] for parking,” said Stephenson. “On busy beach days, we have to pay for a whole bunch of extra services – police, more rangers, security on some days, our cleanup crew. This cost to the council far exceeds, in my mind, what we would earn.”

The experience in Waverley is not unique. A 2023 report by Local Government NSW found that cost shifting placed a $1.36 billion financial burden on ratepayers each year – roughly $460 per person – in 2021-22. The primary drivers of this cost were the waste services levy, rate exemptions for certain government buildings, and the emergency services levy.

Newly elected teal independent for Pittwater, Jacqui Scruby, said councils needed to demonstrate financial competence, but were under pressure from the state and federal governments. Credit: Natalie Boog

Councils are obliged to fund 11.7 per cent of emergency assistance services like the RFS and SES, which LGNSW called “the largest direct cost shift to local councils”. The Northern Beaches council had the highest reported emergency services contribution of any council in the state at $7.1 million.

State MP for Pittwater Jacqui Scruby, whose seat falls within the Northern Beaches council area, said the relationship between the community and politicians was faltering after financial difficulties. She has called for an inquiry into the council to find efficiencies and rebuild trust.

Scruby said residents, some of whom picketed a January council meeting, were “outraged” and baying for “austerity, cost-cutting and efficiency”. She said the frustration was well-founded, but more nuance was needed to assess local government expenses.

“The financial sustainability of councils has been undermined for over 40 years,” Scruby said. “Even after all the cuts are made, the likely reality is that the current council model is unsustainable if the cost-shifting trend continues.”

Willoughby councillor Nic Wright said public outrage over rate rises was as useful as “a fire alarm that only goes off after the building has burnt down”.

“If the debate were honest, we’d be talking about why councils are left scrambling to fund state-mandated services without state funding,” Wright said. “Instead, we get performative outrage, carefully worded press releases, and the same cycle of political amnesia until the next rate hike rolls around.”

Last March, the state government launched an inquiry into the ability of local governments to fund infrastructure and services.

The final report, handed down in November, offered 17 recommendations, including one that called for the government to “identify opportunities to reduce cost shifting to local government” and better consult with councils on decisions that may result in cost shifting. The government’s response to these recommendations is now due.

Local Government Minister Ron Hoenig told budget estimates on Friday that he wasn’t “copping this general whinge about costing”.

“The sector has always complained about cost shifting. The NSW government complains about cost shifting with the Commonwealth, and we say our arguments have substance, especially with GST share. But this is part of the normal tensions of a democracy where you have three tiers of government.”

A similar inquiry at the federal level released an interim report this month which suggests “developing a new tripartite agreement between all three levels of government, that ends the cost shifting onto local governments”. The federal government has yet to respond.