Emergency Service Levy Increase will be Catastrophic for Councils

Local Government NSW (LGNSW) has criticised the NSW State Government’s decision to apply sky-high increases in the Emergency Services Levy (ESL) describing it as catastrophic for many councils.

LGNSW said that for some councils the unexpected cost hit would all but wipe out any IPART-approved rate rise, shredding budgets already under massive pressure from the combined impact of the pandemic, extreme weather events, high inflation and wage increases.

What is the Emergency Services Levy?

The ESL is a cost imposed on councils and the insurance industry to fund the emergency services budget in NSW. The majority is paid as part of insurance premiums, with a further 11.7 per cent picked up by councils and 14.6% by the State Government itself.

How Much Does Lane Cove Council Pay?

In 2019 the Liberal State Government sent Lane Cove Council an invoice from Revenue NSW for $759,252 for its 2019/2020 emergency services levy contribution. That was $79,500 more than the 2018/19 levy; an increase of  11.70%

After NSW Councils objected to the sharp increase, the government backed down and funded the 2019 increase and subsequent increases.  The NSW Labor government has advised it will be seeking to apply the full ESL.

A Lane Cove Council spokesperson told ITC:

“Lane Cove Council has just received advice that the Emergency Services Levy (ESL) payable for 2023/24 will be $1,186,681 which is a $224,207 (23%) increase on the 2022/23 figure of $962,474.

In addition, it appears Councils will no longer receive a subsidy from the State Government, as has been the case in the past 3-4 years.

Historically, the subsidy has been (on average) around $100,000 for Council.

Hopefully, with the united efforts of all NSW Councils and LGNSW, we can convince the State Government to either reassess the increase in the ESL or, at the very least, continue the subsidy that has been provided to councils in recent years to soften the financial impact of this significant cost increase.”

Cost Shift

“The ESL is an absolutely blatant cost shift by the State Government,” LGNSW President Cr Darriea Turley AM said.

“To make things worse, the ESL has seen stratospheric increases year-on-year to make up for the Government’s unfunded workers’ compensation liability for emergency services workers struck down by a range of cancers.

“Now it appears councils are being asked to fund massive rises in emergency services budgets, including a 73% increase in the budget allocation to the State Emergency Services (SES).

“The levy increase for the State’s 128 councils in 2023/24 alone sits just under $77 million.

“To put that in perspective, Hay Shire Council will immediately lose 88.6 per cent of its approved rate rise to the ESL, while Bourke Shire Council will lose 94%, Yass Valley Council will lose 96%, and Tenterfield will lose 119%.

“Hornsby council will lose about 75% of its approved rate rise.

“The effect will leave some councils with insufficient funds to cover cost increases in other areas. These costs will need to be met by cuts to staff and services.”

Cr Turley said the local government sector’s fight was not with emergency services workers, but with a duplicitous and financially unsustainable funding system.

“I’m seeking urgent talks with Treasurer Daniel Mookhey where I will ask him to work with councils to develop a fairer funding system,” she said.

“This shock increase comes at a time when council budgets are still struggling with flood and bushfire disaster recovery.

“When you factor in the inflation and soaring costs we are all facing across the full gamut of our operations, the immediate future looks particularly bleak.

Councils Have Not Budgeted for the Increased Levy

“This is an alarming development coming late in the council budgeting cycle and well after the IPART’s rates determination for 2023-24″ LGNSW President Cr Darriea Turley AM said.

Lane Cove Council has recently released its draft budget – it is essentially a balanced budget but the removal of the approx $100 000 subsidy would impact the bottom line and some programmes may need to be scrapped.

To find out more about Lane Cove’s Budget and to have your say on how Lane Cove Council is spending your rates income – click here.

NSW Government Response

A New South Wales government spokesperson told ITC:

“Our emergency services agencies have long been funded through this cost sharing arrangement – local government contributions to the cost of emergency services date back to the 1800s.

Funding was discontinued by the previous government. This is one of several instances and we are working through them as part of the Expenditure Review Committee process.

The contributions made by local councils to emergency services are determined through legislative requirements. These legislative requirements have not changed.

This increase was approved by the former government and the Government did not have the time to engage with the process without jeopardising the funding arrangements for emergency services.

The NSW Government is committed to ensuring that emergency services are delivered efficiently and within budget now in order to minimise impact on councils and households in the years ahead.

As the payments to cap ESL contributions at 2019/20 levels was ad-hoc and not budgeted for, ideally, local governments will have been budgeting for the full emergency services levy, including any increases, since 2019-20 (as the top-up was never guaranteed).

The NSW Government recognises that councils are facing increased cost pressures and is focussed on ensuring the sustainability of the local government sector.

The NSW Labor Government has committed to implementing a review of financial modelling for councils, with a lens on the increasing cost burdens on residents, and we remain committed to that promise.

Councils have other concerns about the way the emergency services levy interacts with rates, and want to be able to list ESL as a specific line item on rates bills (like insurance companies already do, but almost all councils cannot). The Government is committed to listening to councils’ concerns around these matters.”

Next Steps

LGA NSW is urgently calling on the Government to:

• restore the subsidy for 2023
• unshackle this payment from council rates
• develop a fairer, more transparent and financially sustainable method of funding the critically important emergency services that benefit us all.

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