The heads of four business groups have written to the Office of Local Government seeking an "urgent investigation" into how Newcastle council is managing a levy on commercial ratepayers.
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Edward Duc, Nathan Errington, Paul Newey and Ivor Davies, the leaders of levy-funded "business improvement associations" in the CBD, Hamilton, New Lambton and Mayfield, say in their letter to the OLG this week that they are concerned about the "procedural fairness and lack of natural justice evident" in a council-led review of their operations.
Mr Errington said the Hamilton Chamber of Commerce board had endorsed the letter and wanted the OLG to "step in straight away".
City of Newcastle chief executive officer Jeremy Bath cut off funding for Newcastle Now on December 31 and on Wednesday said he had asked the group to explain a $1.1 million "discrepancy" in the group's staff costs.
He said employee costs provided by Newcastle Now for an external review of the BIAs conflicted with the group's audited annual reports for the past three years.
Mr Duc disputes this claim.
The letter to OLG says allegations raised by the AECOM review, and an earlier review of Newcastle Now by another consultant, Centium, have led to "serious repercussions and reputation damage".
The Centium review, which remains confidential, led to the sacking of two council staff responsible for liaising with Newcastle Now. A third employee resigned.
Mr Duc said Newcastle Now had withdrawn from a planned meeting with AECOM next week.
The BIA leaders say the council initiated the reviews without consulting the business community.
They say the AECOM report that informed a council decision to end the BIAs' funding deeds was "misleading and inaccurate".
Newcastle Now has handed back a $170,000 grant from the Department of Justice for a night-time lighting project in the CBD, Hamilton and The Junction in which the council was a partner.
The levy on commercial ratepayers which funds the BIAs dates back to 1990 and is designed to pay for beautification works and other projects supporting businesses.
It raises about $1.3 million a year, $950,000 of which goes to Newcastle Now.
The dispute between the council and Newcastle Now began a year ago when Mr Duc and lord mayor Nuatali Nelmes clashed publicly over how best to help traders during light rail works.