Bega Valley loses $3.8m, Shoalhaven $2.2m, Eurobodalla gains

Bega Valley Shire Council's Financial Assistance Grant would fall from $10,030,678 to $6,187,548 a year, a cut of $3,843,130 or 38.3 per cent, under the indicative modelling the NSW Local Government Grants Commission sent the council on 4 September (Commission letter, supplementary agenda pp 12 to 13). Shoalhaven City Council says its allocation would have fallen from $16.2 million to $14 million, including a $1.6 million cut to the roads component (council release, 9 September). Eurobodalla Shire Council's draft submission says the Commission's estimate suggests an increase in ESC's allocation under the proposed methodology, without putting a figure on it (agenda, 29 September, p 13).

Three neighbouring councils, one formula, three different readings. Bega Valley's report to its 23 September meeting calls the proposal the highest level of risk to the organisation (item 11.4, p 10). Shoalhaven's Acting Mayor called it a slap in the face to the Shoalhaven community (release, 9 September). Eurobodalla's councillors voted 8 to 0 to endorse a submission that supports the method, subject to several minor modifications (minutes, resolution 26/135; agenda p 13). The difference is not temperament. Each council is reading the letter the Commission sent it, and no council's letter has been published except Bega Valley's.

What the Commission is changing

Financial Assistance Grants are untied Commonwealth money paid through the states. The Commission recommends how the NSW share is split between councils, in two parts: a general purpose component and a local roads component (Bega item 11.4, p 5). The review does not add a dollar. The Commission's letter says this draft proposal cannot change the total Commonwealth funding pool available to NSW councils, so every increase for one council is a decrease for another (letter, p 12).

For the general purpose component, the Commission would replace its direct assessment of advantage and disadvantage with a balanced budget model: estimate what each council needs to spend, estimate what it could reasonably raise, and call the gap financial need. Thirty per cent of the pool still goes to every council per head of population, as the national principles require; the other 70 per cent goes to councils whose need is above the weighted state average, in proportion to that need. Councils at or below the average get the per capita minimum and nothing more (Commission presentation, slides 20 to 22 and 26; letter, pp 14 to 16).

Expenditure need is modelled from population, Aboriginal and Torres Strait Islander population and remoteness. Revenue capacity is modelled from household income and the number of households (for residential rates), land values (for business and farmland rates), statistically estimated user fees and charges, and a four year average of operating grants. Water and sewer are excluded. The letter describes revenue capacity as what a council should reasonably be able to raise on average, rather than the revenue it chooses to collect in a particular year (letter, p 15). The roads component would be shared on reported road and bridge length, scaled by a regional construction cost index from Rawlinsons; road type, condition and traffic are left out because the Commission says consistent audited data does not exist (letter, p 16).

The Commission's preferred option adds one safeguard: the 14 most remote councils, those with an ARIA+ remoteness score above 6, would receive no less than their 2025-26 grant, paid for by other councils above the minimum (presentation, slide 38). Bega Valley's report reads that floor as not reaching the shire: Equivalent protection, however, is not currently proposed for other councils that may experience substantial reductions (item 11.4, p 6). The Commission's timetable has submissions in by 9 October, feedback considered in October and November, and the new method applied from the 2027-28 year (presentation, slide 48).

The figures each council has put on paper

Indicative Financial Assistance Grant under the draft methodology, as published by each council

Council	2025-26 actual	Proposed	Change
Bega Valley, total	$10,030,678	$6,187,548	−$3,843,130 (−38.3%)
Bega Valley, general purpose	$7,198,245	$3,520,229	−$3,678,016 (−51.09%)
Bega Valley, local roads	$2,832,433	$2,667,319	−$165,114 (−5.82%)
Shoalhaven, total	$16.2 million	$14 million	−$2.2 million
Shoalhaven, local roads	just under $5 million	just over $3.2 million	−$1.6 million (−34%)
Eurobodalla	not published	not published	an increase, unquantified

The Shoalhaven figures come from a council media release and a Mayor's message, not from the Commission's letter, which the council has not published. The release says the Office of Local Government informed Council of the numbers (release, 9 September). No report on the grant has gone to a Shoalhaven council meeting: the July, August and September agendas and minutes record only the receipt of grant instalments, including a $13 million advance payment of the 2026-27 grant in June (agenda, 28 July, p 3, PDF page 6). Eurobodalla's figure does not exist in public at all: the draft submission its councillors endorsed says only that the Commission's estimate points up, and that the council's support is based on the principles, transparency, and robustness of the model rather than the projected funding outcome (agenda, p 13).

Why neighbours land on opposite sides

The Commission's own summary table shows regional councils gaining as a class. Under its preferred option, grants to inner regional councils rise by 1.1 per cent of their total income and outer regional councils by 1.9 per cent, while major city councils lose 0.5 per cent (presentation, slide 44). Bega Valley and Shoalhaven are regional councils losing money inside a regional average that goes up. The averages hide the spread, and the Commission has published nothing at council level: its maps of winners and losers carry colour bands but no names and no numbers (slides 35 and 39).

Two inputs explain much of the South Coast's exposure, on the councils' reading. The first is disaster money. Revenue capacity includes a four year average of operating grants, so a shire that draws heavy recovery funding looks, to the model, like a shire with revenue. Bega Valley's report puts it bluntly: the more disaster funding a council receives to repair damage the lower its FA grant will be (item 11.4, p 8). Eurobodalla, which expects to gain, raises the same point and asks the Commission to make sure councils hit by disasters are not inadvertently disadvantaged through the treatment of external funding that is outside their control (agenda, p 14). The Commission has already modelled a fix. Its long list of options includes a Disaster Grant Adjustment that would strip storm and flood damage grants out of revenue capacity because of timing mismatches. That adjustment is not in the preferred option (presentation, slides 43 and 44).

The second is rates. Bega Valley's report says It is understood that current income levels through rates is an input into the model meaning that Councils who have recently undertaken SRV's are disadvantaged (item 11.4, p 9). Both losing councils have done exactly that. IPART approved a permanent special variation for Bega Valley of 48.3 per cent including the rate peg over 2023-24 and 2024-25 (IPART determination, June 2023, executive summary), and a permanent 12 per cent for Shoalhaven from 2025-26 (IPART final report, May 2025, executive summary). Whether the model actually counts that income is less clear than Bega's report makes it sound. The Commission's letter says residential rating capacity is assessed from household income and household numbers, not from what a council collects, which is the effort neutrality principle in action (letter, p 15). But its presentation lists the audited Annual Permissible Income Workpapers, which carry each council's notional rate yield, as a data source (presentation, slide 24), and a special variation lifts that yield permanently. Bega's own report concedes the uncertainty in its first line of analysis: Limited details are available on the modelling itself. Only high-level generic statements are provided. (item 11.4, p 4). The council's chief executive has asked the Commission for a meeting and a copy of the inputs and assumptions (draft minutes, resolution 143/26, p 21).

The same fortnight, three sets of pressure

The letters arrived while all three councils were already talking to their communities about money. Shoalhaven's chief executive is running twelve public finance sessions ahead of an updated Long Term Financial Plan, telling residents of a $280 million roads renewal backlog and a forecast that bringing roads to an acceptable standard needs more than $800 million over ten years: the data is telling us we cannot continue with business as usual (release, 17 September). Eurobodalla's draft 2025-26 accounts show an operating deficit before capital grants of $8.51 million, better than the prior year's $14.27 million only because the Commonwealth paid $12.4 million of grant in advance against $6.1 million the year before; strip that timing out and the council says its underlying performance was broadly the same (agenda GMR26/014, p 19). Bega Valley's report says the cut would in some ways erode the efforts taken to increase revenue through the SRV process and lists the fallbacks: more own-source revenue, which could affect the size, timing or duration of any future Special Rate Variation proposal, deferred maintenance and renewals, or drawing on unrestricted cash (item 11.4, p 10).

One detail shows how coordinated the losing side's response is. Shoalhaven's release and Bega Valley's report carry nearly the same sentence: that the community expects safe roads, reliable infrastructure, quality libraries, well-maintained pools and the essential services that make the place a great place to live, and that reducing funding would only make it harder to address the growing infrastructure backlog (Shoalhaven release; Bega item 11.4, p 11). Neither document says where the wording came from. Bega's report does say that across the Canberra Region Joint Organisation the councils estimate a net loss of funds into our regions' local government sector of $14.45m next year alone, a figure we have not been able to check against any published modelling (item 11.4, p 5).

Our view

This is opinion, built on the documents above. The Commission's case for change is reasonable: its old formula ran on council-supplied cost data it no longer trusts, and a balanced budget model is what every other state except South Australia uses (presentation, slides 8 and 19). But a redistribution of this size cannot be judged on principles alone, and the Commission is asking councils to do exactly that. Its submission guide tells councils to Avoid focusing solely on whether the methodology increases or decreases your council's allocation (template guide, p 1), while releasing no council-level outcomes and no inputs. The result is that the only numbers in public are the ones losing councils chose to publish, and a resident of Moruya has no way to know what Eurobodalla stands to gain. The council that gains agrees: the first of Eurobodalla's four recommendations is Publish the council-level indicative funding outcomes used during consultation. (agenda, p 16). The Commission should do that before it decides, for all councils, with the expenditure and revenue estimates behind each number.

The second gap is transition. Since at least 2016 the Commission has limited year-to-year movement with a cap and collar, in its latest settings minus 4 to plus 6 per cent (presentation, slide 7). The draft protects 14 remote councils from any fall and leaves a 38 per cent cut to Bega Valley to land in a single year. Both losing and gaining councils on this coast ask the same question in different registers: Bega wants limits on annual reductions, minimum grant protections or staged implementation (item 11.4, p 7) and Eurobodalla asks whether capping and collaring arrangements, or an alternative transition mechanism, will continue to apply (agenda, p 15). A phased path is the obvious answer and the Commission's materials do not say whether one is on the table.

How to make a submission

Submissions go by email to grantscommission@olg.nsw.gov.au. The Commission's letter, its presentation and the Office of Local Government's web page all give the closing date as 9 October 2026 (letter, p 13; presentation, slide 48; OLG page). The submission template guide on the same page says something different: Please note that submission receipts will only be accepted up to and including 7 October 2026. (template guide, p 3). Anyone writing should treat Wednesday 7 October as the safe date. The materials are addressed to councils, but the letter says the Commission is seeking council and stakeholder feedback (letter, p 12), and the guide's nine suggested topics (overall position, principles, practicality, transparency, data sources, impacts, risks, improvements, other comments) work as well for a resident as for a finance director.

Locally: Bega Valley's chief executive is authorised to lodge the council's submission by 9 October, built on ten endorsed principles plus any councillor additions (draft minutes, resolution 143/26, p 21). Eurobodalla's submission, dated 9 September and signed by its chief financial officer, was endorsed on 29 September (minutes, resolution 26/135). Shoalhaven says it will provide detailed written feedback before 9 October (release, 9 September); nothing on the grant appears on its council agendas to date. We will publish each council's lodged submission when we obtain it, and the Commission's decision when it is made.