FAQs

A Special Rate Variation (SRV) refers to an increase in total general rates that is greater than the published rate peg. Each year, the Independent Pricing and Regulatory Tribunal (IPART) sets a rate peg for every council in NSW, which is based on the expected cost increases that councils will incur. When councils need to increase total rates by more than the rate peg, they must apply to IPART for an SRV. 

For an SRV to be approved, councils must demonstrate that they have met the criteria set out by the Office of Local Government (OLG), including demonstrating that there is a need for the SRV, ensuring that the community is aware of the proposed SRV, understanding the community’s capacity to pay for the increase and making sure that the council’s planning and reporting documents (particularly its Long Term Financial Plan) reflect the need and scope for the proposed SRV.  

For North Sydney Council, the proposed SRV is critical to: 

Several factors have contributed to Council’s current financial challenges: 

North Sydney Olympic Pool redevelopment: This major project has significantly impacted the Council’s financial position. External debt has increased, and internal reserves have been drained, further reducing Council’s asset renewal capacity.  In addition, ongoing costs associated with interest repayments and future renewal costs will add to operating deficits already experienced.  

Declining revenue from other sources: Historically, the Council adopted a diversified approach to revenue generation to reduce its reliance on rates. Traditionally, around 45% of total operating revenue has been generated through user charges, fees, and other non-rate income. This includes on-street parking fees, fines, advertising revenue, and commercial rental income. While this strategy has lessened the financial burden on residents and businesses, it has also exposed the Council to financial shock and fluctuations in income.  Since the 2020 COVID-19 pandemic, adjusting for inflation, income from user charges, fees, and other revenue streams, it is estimated that revenue for the current fiscal year is down by $9.9 million.  The cumulative effect of declining revenue has also impacted reserve levels and capacity for infrastructure renewal. 

Asset maintenance and renewal: Current estimates of infrastructure backlog indicate a history of underinvestment in asset renewal, which has compounded over time and further exacerbated funding challenges. In particular, 62% of Council building assets have been assessed at a rating of less than ‘good’, which limits their ability to best service the community.  Addressing this backlog will require targeted, sustained investment to bring infrastructure management up to a level that meets both current and future community expectations.    

Cost increases: Costs have increased faster than revenue in recent years. While IPART has addressed some of these issues through rating reforms implemented in July 2024, historical gaps remain, exacerbating the financial strain. Like many Councils, we have had to cut back on asset expenditure, leading to a growing backlog of capital works. 

Outdated information systems and technology: Over the past two years, Council has actively reviewed its operations to identify opportunities for improvement.  While progress has been made, Council’s ability to generate efficiencies is constrained by its outdated suite of information systems and technology. These systems are not integrated, require excessive manual intervention, and lack the sophistication needed to support timely decision-making. The inefficiencies caused by these systems are a major source of frustration for the workforce and, indirectly, for residents and customers, negatively impacting the overall customer experience.    

Historically low rates income: Historically, residential rates have remained low, providing under 44% of Councils operating revenue, due to reliance on other sources of income. This is no longer sustainable. The following chart shows a comparison of current and forecast residential rates with other Councils in the region and across Sydney.   This does not factor in SRV’s currently being proposed in these Council areas.   

Council has initiated a comprehensive program of review and improvement to ensure the effective use of public funds. In 2023, a major realignment of the organisational structure was implemented, establishing a clear leadership and service unit framework. As a result of this realignment, over $6.4 million in employee benefits and oncosts were reallocated to streamline leadership structures and address critical resource needs in areas such as risk management, commercial property management, parks and gardens maintenance, organisational improvement, technology, and strategic planning. 

Ongoing and future review and improvement programs include the introduction of:  

Despite these significant commitments to improve organisational efficiency, Council’s ability to generate efficiencies is constrained by its information systems and technology. 

For comparison purposes, it is important to note that in addition to the minimum rate, residential rate payers pay an average of $129.34 in infrastructure, environmental and main street levies – calculated as a base amount plus an ad valorem component based on their land value.  

These special levies will not be charged in addition to the minimum rate under the new SRV proposal. Instead it is proposed that this special levy income which is currently levied as a separate charge be rolled into the ordinary rate revenue.   

If your property is subject to a minimum, this means that these levies will not be an additional charge in future. 

Within Local Government, financial performance is measured by way of the ‘Net operating result for the year before grants and contributions provided for capital purposes.’  For 2023/24, Council recorded a deficit of $3.6 million. The Office of Local Government measures Council’s performance by excluding these capital revenues. 

The reason capital grants and contributions are excluded from this measure is because these grants fund infrastructure and/or infrastructure reserves for new infrastructure. These funds cannot be used to fund operational costs. 

Operating performance is the measure of income coming in and expenses going out. Having an operating performance ratio of 0% assumes that no capital funding is required for outgoings such as loan repayments, new and upgraded infrastructure or to mitigate the inflationary nature of asset renewal costs.   

Through the SRV proposal, Council has set its operating surplus at a level that will: 

Council receives an annual financial assistance grant from the Australian Government of approximately $2.4 million, or approximately 1.78% of total operational income. This grant is used towards Councils operational costs. 

In addition to the financial assistance grant, Council receives a range of smaller specific purpose grants for services such as family day care, recycling initiatives, etc.  In total, $3.3 million was received in 2023/24 from these grants, or 2.49% of total operational income. 

Council also seeks grant funding for capital projects (such as cycleways) when opportunities arise.  

The main source of funding for the provision of local services and infrastructure is rate revenue, user charges and fees, and other income such as parking fines and rental income. 

One of Council’s primary responsibilities is the provision and management of infrastructure. This infrastructure must be maintained to provide service to the community. 

The total value of infrastructure in North Sydney Local Government Area is $2.18 billion. 

Depreciation is an expense recorded in Council’s financial statements and allocates the cost of a long-term asset (such as a building, road and other infrastructure) over its useful life. This process ensures that the cost of the asset is spread out over multiple periods, reflecting its decreasing value. 

Depreciation is incredibly important in ensuring intergenerational equity. If depreciation is funded, it ensures that each year, the community that enjoys the use of the infrastructure provided, pays towards its cost. 

Where depreciation is ignored or not funded, infrastructure renewals are not able to be undertaken as they fall due, leading to failing infrastructure. 

Council is restricted in its use of cash and investments generated through developer contributions, domestic garbage charges and specific purpose grants.   

By legislation, developer contributions can only be used for the infrastructure included within Council’s Development Contributions Plan. This plan identifies $402 million in infrastructure projects to support a growing population, with developer contributions estimated to generate approximately $195 million towards these projects. 

Council collects developer contributions each year and the funding reserve increases until projects can be delivered. This occurs when: 

It is therefore important that Council builds ‘unrestricted cash and investment’ levels to meet this requirement. 

Council projects its ‘unrestricted cash and investments’ to be critically low as at 30 June 2025 and unable to maintain current services without increased revenue, reduced expenditure or further borrowings. This means that it is also unable to provide required funding to realise projects within the Development Contribution Plan. 

Council currently has $51 million in debt associated with the North Sydney Olympic Pool project.  Further borrowings may be required within the 2024/25 financial year due to current liquidity levels. 

If Council was to consider additional loan borrowings, the rate increased would be delayed, not avoided.  A cumulative increase in rates to generate the required income level plus loan repayments would still be required and over time, this would result in higher average rates. 

Delaying an increase in minimum rates would also reduce the additional income generated by new housing development within the next three years. 

Council continues to face financial risks associated with income from user charges and fees. It is important that revenue levels are strengthened. 

Consideration has been given to both comparative Council rates and capacity to pay analysis in proposing the options within the SRV proposal. 

Council has considered selling assets, and as recently as October resolved to enter discussions regarding a possible land sale in Cremorne. Council’s improvement plan also includes consideration of land sales, and the Draft Governance Strategy includes a review of Council’s property and building assets. 

In considering the sale of community property, the following considerations should be given: 

Further, property sales provide a one-off revenue stream, and will not provide ongoing revenue to fund Council services and infrastructure renewals. 

Council continually seeks opportunities to apply for grants. Operational grants provide only 5%, or $6.5M, of our total operational income.   

Conversely, Council is responsible for paying a number of levies to the NSW State Government, including parking space levies, planning levies and emergency services levies. In 2022/23, these levies cost Council $2.7M. 

Operational grants are not all indexed in line with the rate peg or inflation and, for some, there is no increase year on year. 

Over the past two years, Council has also received approximately $8.4M per year in NSW State Government grants for infrastructure projects. It’s important to note that grants are often restricted to funding new assets, after which Council is responsible for ongoing maintenance and renewal costs. 

To be most successful with grant applications, Council must invest in planning and design of new infrastructure to ensure shovel-ready projects for when grant programs are announced. Grants often require co-contributions from Council. Projects are rarely 100% funded by other levels of government. 

The local government industry has actively lobbied for change to the nature and level of grant funding for some years. 

We acknowledge that the delays encountered in the North Sydney Olympic Pool redevelopment have been frustrating for everyone involved and understand the community is eager for the pool to reopen after a long closure. 

We continue to work very hard to get the project completed as soon as possible, and remain committed to delivering this new community facility. 

In April 2023, Council considered a report outlining a summary of the independent review that was commissioned to better understand the root cause of the challenges experienced during the project. This report is available here: 

https://www.northsydney.nsw.gov.au/ecm/download/document-10421217  

Over the past two years, Council has embarked on a considerable review and organisational improvement path with a view to increasing overall efficiency and reducing costs.   

Council is working through a program of process and service reviews aimed at identifying opportunities to change the way services are delivered. In some instances, this may include reductions in service levels, however this will involve further consultation with the community. 

History has demonstrated that, when Council makes a quick and reactive decision to cut back services to reduce cost, these decisions have been reversed once the impact is felt by the community. Overall, while well intended and with cost reduction in mind, changes that do not take a considered approach often result in additional time and cost. All decisions must be balanced. 

To improve operational efficiency, Council is also considering the opportunity to implement better systems and technology. 

A strong local government is one that plans for the future and adapts to changing community needs. 

As individuals, when visiting a financial planner, we first consider what we would like our future to look like – what challenges and opportunities will we face and what are our priorities and goals?  From there, we work through the resources required to achieve these goals and then develop the financial strategy to help us realise these aspirations. That is what we have been working towards in consultation with the community for the past year. 

In May and June this year, Council undertook the ‘Have Your Say on Our Next Ten Years’ engagement to identify the priorities and projects the community wanted Council to focus on over the next ten years. Based on the community’s feedback, we have developed and costed the priorities. These are outlined in the draft Informing Strategies, which are currently on exhibition as well. In making an informed contribution to the consultation process, it is important that you read the draft Informing trategies to understand the reason for the various initiatives, projects, plans and infrastructure included.  

When we realise the cost of our aspirations, we find ourselves at a decision point. Can we generate sufficient funds to realise these aspirations, or do we have to make some adjustments to our expectations? 

Through the SRV process, we are consulting the community as to whether the priorities developed through our engagement are important when considering the cost.Special Rate Variation options 2 and 3 include funding required to deliver the expanded services, initiatives, plans, and new and upgraded infrastructure identified through the Next Ten Years engagement. 

It should be emphasised that many of these initiatives and projects are in response to current challenges faced by the community such as lack of open space and recreation. 

Unlike private sector businesses, services and infrastructure provided through local government must cater for a large and diverse range of community needs and desired outcomes. The infrastructure and services we provide must support quality of life and a sense of belonging among a whole community, not any one individual alone. This public value consideration requires everyone in a community to consider those around them, and future generations. 

To express your objection to the proposed rate rise or advocate for no increase, you can include this feedback in the extended response section of the survey questions regarding the Long-Term Financial Plan and Special Rate Variation options. All responses, including objections, will be carefully noted and outlined in the report presented to Council.  

The survey asks for feedback on your preferred option, and this question has been altered to ensure it is not mandatory if you would prefer not to choose any option. 

In expressing your objection to a rate rise, you are encouraged to provide feedback as to what specific services or infrastructure you feel could be reduced, and any other suggestions you feel would benefit the community. 

The Long-Term Financial Plan outlines the ten-year financial forecast for Council excluding a rate rise.  This demonstrates that Council services would be unsustainable, and infrastructure would not be renewed. 

Land sales and borrowings are short-term financial cashflow measures that may be considered within financial strategy, however neither consideration will correct the ongoing revenue needs. Loan funding requires repayment, and selling land without considering the future needs of the community may result in higher infrastructure costs in the future, in addition to reduced rental income.