Yes, some Councils could collapse as a result of COVID-19.
Our lives changed in a heartbeat in March 2020. Lockdowns, travel bans and entire industries (airlines, tourism and events, to name but a few) collapsing. JobKeeper, JobSeeker, JobMaker, JobsPlus and a raft of other COVID-19 Assistance Programs propped up people and the private sector. Now the spotlight is on the public sector.
One third of all Councils in Queensland (Australia) are considered at ‘high risk’ of becoming financially unsustainable. That’s 25 out of 77 Councils – four more than the previous year. These statistics weren’t unexpected.
- Travel restrictions, border closures and lockdowns meant that most councils earned a much lower revenue. For example, waived car parking fees and an abrupt end to venue hire dramatically reduced income streams.
- Employee and contractor costs have dramatically increased. The increased cost of cleaning public facilities, responding at short notice to the provision of quarantine facilities, assisting in the coordination of border closures and bringing forward capital infrastructure projects.
An Auditor-Generals report tabled in the Queensland State Parliament said 70% of Queensland councils spent more than they earned in the 2020 financial year. Council expenses rose 3% to $11.2 billion in 2020, while debt jumped a staggering 16% to $10 billion.
COVID-19 has been fiscally tough on councils, particularly those already struggling amid challenging socio-economic conditions. The financial reality facing regional, rural, remote and Indigenous councils is even more bleak, especially given their small, or in some cases non-existent base of rate payers. That said, for almost half of Queensland councils the amount they collect in rates is less than 15% of their annual budget.
Councils are on the front-line. Connecting citizens in our communities and a first port of call in local communications. They provide a range of essential services such as roads, water, waste, libraries and parks. As well as ‘stepping up’ and filling the hole of market or political failures such as natural disaster recovery and affordable childcare.
Most Governments around the world continue to have major concerns about public sector financial sustainability. Let’s be blunt here – Governments can’t just print money! The Queensland Auditor-Generals report also cited weak strategic planning, governance, asset management and IT practices as key issues. This is likely a global, not a local issue.
So, with COVID-19 presenting new and unprecedented challenges for Councils to deliver their services under immense financial pressures and in times of unpredictability such as Australia’s borders likely being tightly closed until 2024, what do they do?
Increasing Council rates isn’t a viable option. We’re all vulnerable too. Only 25% of Australian’s own their own home outright. 36% have a mortgage and 30% rent (9% are somehow un-accounted for). Add in employment casualisation, short-term contracts, job insecurity, redundancies and rising unemployment and it’s clear that very few would be willing or able to pay more money for rates.
So, what can Councils do?
Councils, Mayors and Councillors need to address budgetary pressures, make better use of their existing assets and save money through efficiencies. That starts with leadership, political bravery and a clear vision.
Councils need to get better at doing things differently (Why is Resource Optimisation such a taboo subject?) and using robust data to make informed decisions (Why is Demand Management still so loathed?) about a range of Council’s statutory requirements and organisational needs, including infrastructure planning, asset management, environmental protection, financial administration and “Business As Usual’ activities such as waste collection, car parking, disaster management, road safety and pest control. Resource Optimisation and Demand Management are just two ways that Councils have:
- the right truck infrastructure and community facilities in the right places strategic and infrastructure planning.
- the right levels of demand, not saturated or under-utilised assets, as a result of better resource and asset optimisation.
- the right environmental protection programs in the right places as a result of better project prioritisation and targeted interventions.
The truth is, tackling a Councils financially unsustainability isn’t just a Mayoral or Auditor Generals problem. It’s a local and a national opportunity. Just like good lobbyists ask their government for some money and great lobbyists find the money, so great leaders ignite the fuse for change and great citizens help solve real problems facing real people in real places.
We can’t silence public debate on this. We can’t watch, whinge and complain about how taxpayer, rate payer and public money is spent. We all need to step up and get involved in our councils, our communities and our cities because our future is our responsibility.
What’s your priority? Helping ignite the fuse for change where you live or watching on as your local Council collapses from COVID?