A NSW Government body has recommended a more flexible rates system for councils.

A Productivity Commission Review of Infrastructure Contributions in NSW issues paper, released this week, has found that enforced pegging of local government rates hinders growth and the delivery of infrastructure and services in NSW communities.

Local Government NSW (LGNSW) President Linda Scott says it is good to see recognition of what councils have been saying for decades.

“Each year, council rates only ever vary by 2.6 per cent or less in NSW. This restriction means councils don’t have the flexibility they need to fund the vast range of infrastructure and services they are expected to provide for the public good over a changing economic climate,” Cr Scott said.

“The NSW Government’s long-standing policy of rate pegging has resulted in a shortage of parks and green spaces, footpaths, sporting centres, roads, cycle paths, bridges, drainage and a range of other vital community assets and undermined the financial sustainability of councils.

“Infrastructure contributions paid to councils play a crucial role in addressing that shortfall, by ensuring funding for infrastructure to support new developments without unfairly transferring those costs to existing residents.

“The Productivity Commission rightly identifies that NSW’s existing infrastructure contribution system is incredibly complex in NSW and could potentially hinder local developments and the economic benefits they bring.

“The review suggests cutting unnecessary red tape, increasing transparency and fixing uncertainty around infrastructure contributions.

“It identifies that NSW’s antiquated rate pegging system, birthed out of the economic upheaval of the 1970’s oil crisis, needs greater flexibility going forward, something LGNSW has been calling for, for decades.”

Cr Scott said while she welcomed the review, any changes to infrastructure contributions must deliver better outcomes for councils and communities.

“Increased rate flexibility should not be seen solely as a mechanism for replacing infrastructure contributions,” she said.

“Infrastructure contributions are a reasonable expectation to support new infrastructure. It is fair that developers pay their fair share for new community infrastructure as housing or commercial space increases, and that these costs are not shifted on to existing communities.

“Councils continue to urge the NSW Government to remove rate pegging and ensure the continuation of a strong system of developer contributions for community infrastructure. This will lead to the strongest possible locally led recovery for NSW.

“We will continue to advocate for the complete removal of rate pegging, not a partial relaxation with increases outside the peg restricted to expenditure that would replace contributions.”