The revelation that Lake Macquarie City Council has been using money set aside for infrastructure development to cover its broader budget raises a number of serious questions about the council's operations.
Freedom of information documents show the council has "borrowed" almost $45 million from a fund of more than $110 million accumulated over the years through various schemes and levies known as "developer contributions".
These schemes have broadened to the point where the NSW government's "planning portal" lists three ways that developers are tapped for funds: voluntary planning agreements, special infrastructure contributions and local infrastructure contributions, previously known as Section 94 agreements.
While local councils and the NSW government say the various contributions help pay for a broad range of infrastructure needs generated by large scale greenfield developments, developers say the costs are unfairly borne by new-suburb buyers having to pay for what people in established areas take for granted.
Confirmation that Lake council has been sitting on more than $110 million of this money - and feels able to dip into it without compromising the rate of infrastructure delivery - indicates that something is seriously out of kilter.
That other councils have apparently approached Lake council to find out how they, too, can prop up their finances from a supposedly dedicated pool of money, seems to show the Lake is not the only local government body sitting on such a substantial reserve of developer contributions.
Other aspects of this "loan" plan invite questions, especially as the decision appears to have been taken when the Coalition government was pushing an amalgamation process - ultimately abandoned - that required each stand-alone council to be financially "fit for the future".
It is unclear at the moment how much the government knew about the council's move.
While the contribution legislation might be administered by the Planning Department, the Local Government Department should surely have enough authority to keep dodgy accounting practices in line.
While the evidence so far calls for an inquiry, it will only do half the job if it does not look at how the money was accumulated in the first place.
How many other councils are sitting on handy pots of "dedicated" funds they can tap for a rainy day?
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