If Johnny’s uncle gave him a new skateboard, few parents would expect their son to put aside pocket money for a future replacement. Bicycles or even cars might be of greater interest before the skateboard wears out.
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What's the relevance for councils?
In NSW, councils can’t raise all the funds they need from rates and charges, thanks to rate-capping and other restrictions. State and Federal governments are keen to publicise their efforts to alleviate the problem e.g. $12.4 million to Armidale Regional Council (ARC) for the Guyra pipeline, $1.09 million for a hydrotherapy pool, $8 million (State) and $3.5 million (Federal) for Armidale airport. To cover the cost of replacing assets, councils’ budgets include entries for depreciation.
Thanks in part to necessary funds from other tiers of government, ARC’s assets increased by $17.6 million.
However depreciation – money supposed to be set aside to replace assets – at $16.38 million is now the third highest item in the budget, second only to employee benefits and on-costs ($23.86 million) and materials and contracts ($20.87 million). Adding in depreciation turns a surplus of $13.8 million into a deficit of deficit of $2.6 million.
It would be silly to refuse grants that provide substantial community benefits, just because councils can’t afford to set aside funds to replace them at the end of their useful life.
Serving community needs, which have increased because of cost shifting, competes for scarce council resources with setting aside funds to replace infrastructure. As new technologies and social practices emerge councils have to adapt to community priorities. Lack of infrastructure investment in regional NSW by state governments is a matter of adverse comment by the Productivity Commission.
Forcibly merged councils like ARC required Federal and State government help for long overdue infrastructure upgrades, like Guyra's water supply and the Airport, to meet national productivity agendas.
It's ridiculous to then force such councils to show a budget deficit caused by the state government's requirement to add depreciation of all assets to the budget. This is a state matter for State MP, Hon. Adam Marshall to address.
This is our opinion, not an official view of Armidale Regional Council.
