North Sydney Council is seeking community feedback on a proposed Special Rate Variation (SRV) as part of its strategy to secure long-term financial sustainability.
Council is facing significant financial challenges due to a number of factors. These include increased costs associated with the North Sydney Olympic Pool redevelopment, declining revenue from non-rate sources and rising asset renewal backlogs. These challenges are compounded by increased service delivery costs, ageing infrastructure, and the needs of a growing population.
Despite implementing cost-saving measures, including a major organisational restructure in 2023, these challenges persist. Without intervention, the funding gap will continue to widen, impacting Council's ability to maintain services and invest in the essential infrastructure the North Sydney community depends on.
To address this critical issue, Council has developed a draft Long-Term Financial Plan (LTFP), which includes a proposed SRV to strengthen Council's financial position, reduce deficits, and provide the necessary resources to deliver services and infrastructure for the community.
Council has also considered the feedback provided by the community during the 'Have your say on North Sydney's next ten years' consultation in May and June 2024 which, combined with key research, has shaped the Draft Informing Strategies. These strategies will guide the new Community Strategic Plan, focusing on enhancing quality of life, strengthening community, and delivering responsive services and infrastructure that meet the evolving needs of our population. Central to the realisation of these strategies is Council's long-term financial sustainability.
Why does North Sydney need to consider a Special Rate Variation?
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.
Declining revenue from other sources: 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 due to reliance on other sources of income. This is no longer sustainable. Please see the chart in the attached factsheet that shows a comparison of current and forecast residential rates with other councils in the region and across Sydney. This does not factor in SRVs currently being proposed in these council areas.
Outside of an SRV, what is Council doing to improve its performance?
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 designed to enhance role clarity, accountability and communication, while reducing duplication and improving collaboration across the organisation. Additionally, 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:
A process mapping initiative, initially targeting 250 high-priority processes, with plans to expand to 1,000 over time. This effort aims to identify opportunities for greater operational efficiency.
A new service level review framework to ensure that Council's services are aligned with the evolving needs and expectations of the community.
Service unit planning to identify workforce development priorities, opportunities for process improvement, and areas for financial review.
A development and performance framework to support the creation of a high-performing workforce.
A new workforce strategy aimed at positioning Council as a competitive employer in a challenging environment marked by skills shortages.
Despite these significant commitments to improve organisational efficiency, Council's ability to generate efficiencies is constrained by its information systems and technology.
What is the community being asked to consider?
Council is consulting on four SRV options, which present different levels of financial strength and sustainability for North Sydney. Options one, two and three are different in size and reflect a different level of benefit. Options 2a and 2b provide the same benefits but have different implementation paths.
Option 1: Financial repair – focuses on financial repair, improvement to governance and administration, the delivery of critical infrastructure backlog projects and managing debt repayments.
Option 2a and 2b: Strength and sustainability – includes everything in option 1 as well as delivery of community infrastructure and service priorities developed in response to widespread consultation in May and June 2024.
Option 3: Future growth – delivers everything in Options 2a and 2b, as well as additional funding to bring building infrastructure to a 'good' condition, over a ten-year period commencing in year 4.
What are the proposed changes to minimum rates?
North Sydney has one of the lowest minimum rates in metropolitan Sydney. Over 77% of residents currently pay the minimum rate and this does not support the level and variety of Council services currently offered to each household. To improve equity and ensure revenue keeps pace with growing unit developments, Council proposes increasing minimum rates in 2024-25 to $1,300 for residential properties and $1,400 for businesses. After 2024-25, minimum rates will increase by the approved rate path, which may either be one of the proposed Special Rate Variations options or the rate peg.
These new proposed rate figures also include the infrastructure, environmental, and main street levies, which are currently paid separately to rates by residents and businesses. Residents are currently paying approximately 90% of all the levies. The new rate structure proposes including the levies in future rate and a more equitable rate balance of 60% from residents and 40% from businesses.
For full details about the proposed Special Rate Variation please see the attached fact sheet.
