Newcastle's conservative councillors have called unsuccessfully for a rates freeze as the city emerges from coronavirus restrictions.
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The council approved a budget on Tuesday night which includes a 2.6 per cent rates increase in 2020-21 and a $22.7 million deficit, the first time in seven years the city will go into the red.
The budget includes a record $116 million spend on capital works, including $33.8 million added since the budget went on public exhibition in March. The extra spending is designed to help stimulate the economy.
The works program includes $22.9 million for road and footpath upgrades; $9 million on an organics facility to compost food and green waste; $14.2 million for upgrades in the Hunter Street Mall, Wallsend, Kotara, Merewether, Shortland and Stockton; $8.2 million for parks, playgrounds, sporting and aquatic facilities; $5 million on cycleways; and $5 million to implement the council's climate action plan.
The Newcastle Independents alliance and Liberal Brad Luke voted against the budget, arguing many could not afford the rates increase.
Cr Andrea Rufo questioned why the council was spending $3.3 million on a community relief package while increasing rates.
"How can we be giving with one hand and taking with the other," he said.
Almost every council in NSW plans to increase its rates revenue by 2.6 per cent, the maximum allowable under the latest Independent Pricing and Regulatory Tribunal ruling on rates rises.
Newcastle has increased rates by 46.9 per cent over the past five years after applying successfully for a special rate variation in 2015.
Lord mayor Nuatali Nelmes said councillors could not support the "job-creating" works program while rejecting the revenue increase which would deliver it.
"It makes it very easy to stand in opposition and say you're not supporting the budget," she said.
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Chief executive officer Jeremy Bath told the meeting that the pandemic had been devastating for some, but not all residents were suffering hardship. Only 1 per cent of ratepayers had asked for rates deferrals.
Mr Bath said the $3.3 million for those "doing it tough" included $250,000 for the city's coronavirus taskforce, $250,000 to continue online training programs, $175,000 in community grants, funding for expanding the city's digital library, $116,000 for the Lean in Newy app, $800,000 for a community wellbeing program, $250,000 for the Newcastle After Dark program, $150,000 for arts and culture grants, $70,000 for economic development grants and $250,000 for events sponsorship.
He said history showed that "blunt instruments" such as rates freezes were an "overwhelming failure".
But Cr Luke said "highly praised" government interventions such as JobKeeper could also be described as blunt instruments.
"My concern with the rates tonight is that we are increasing rates by 2.6 per cent after five years of fairly substantial rises at a time when we've gone into this downturn we are clearly ... in a recession," he said.
"In that sort of time, you do not tax your way to prosperity. Tax increases, that's what rates really are.
"Two-point-six is not that substantial, but I believe it would have been a much better gesture to the public if we had not done that rise.
Greens councillor John Mackenzie supported drawing on reserves to increase spending in response to COVID-19 but said he had hoped it would be targeted better at the arts community and other sectors which had suffered most.
Independents Kath Elliott and John Church did not speak at the meeting but issued a media release slamming the rates rise.
"If ever there was a time to freeze rates for the next 12 months, surely now is that time," Cr Elliott said.
"And surely there is merit in scrapping the special business rate."
Cr Church said the council should "take a long hard look at the cost side of the organisation" and work harder to find savings.
Also on Tuesday night, councillors endorsed a draft coastal management program for Stockton which they hope will pave the way for a solution to the suburb's erosion problems.
The city recorded a surplus of almost $12 million in 2019-20 and has been in the black for six consecutive years.
The council budget includes $4 million for sand nourishment and infrastructure works at the beach.