Report warns of council debt load

NEWCASTLE City Council will leave its next generation of residents in financial ruin if it continues to operate under the existing framework, according to an independent report.

The Callaghan Institute released its report yesterday after it was commissioned to review the council’s financial performance by business group Newcastle Alliance and the Hunter chapter of the Property Council of Australia.

Under the current structure the council would be $120 million in debt by 2022 and without the propensity to borrow funding for crucial projects, the report found.

But general manager Phil Pearce said the council was in the process of a comprehensive review of its non-statutory services and had been for the past five months.

He said it had also been benchmarking its staff with other councils of similar size like Lake Macquarie and Wollongong.

Mr Pearce also questioned the accuracy of the report and said he was disappointed the authors had not contacted the council.

The review was commissioned in light of the council applying for a special rate variation of 5 per cent which would increase rates to 8.6 per cent.

The council said the rate rise was required so it could deliver ‘‘nine key civic projects’’ that would cost about $180 million.

The projects formed the basis of the council’s submission to IPART and include the Hunter Street revitalisation (at the top of the list), upgrading the art gallery and swimming centres.

Increased rates would deliver an additional $50 million over 10 years and the sale of redundant or unused council assets would also rake in about $50 million.

Callaghan Institute managing director Jeff Eather said: ‘‘The thing people have to realise is once they sell off the assets and the operating budget is required to service the additional debt, that’s it.’’

Paul Murphy, from Newcastle Alliance, said: ‘‘We don’t believe [the council] are operating their business in an efficient and effective manner.’’

Mr Pearce said that council officers had already indicated they would review the internal restricted cash assets to see if any funds could be utilised to support the 10-year plan.

‘‘This would help in addressing the shortfall in funding,’’ he said.

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