Funding competition to create more vibrant city

12 Dec 2018

The City of Newcastle resolved last night to make business improvement associations (BIAs) compete in a free market of ideas to generate more events and initiatives of a higher standard throughout the city.

An annual contestable process for a yet-to-be determined percentage of the $1.345 million in commercial ratepayer funding will replace existing agreements with four BIAs and New Lambton Village following the decision to end the current funding model, which was recommended by consultants AECOM.

Newcastle Business Improvement Association (Newcastle Now), Hamilton Business Improvement Association, and Mayfield Business Improvement Association, Wallsend Business Improvement Association will compete with other organisations under the new model for some of the funding currently exclusively available to them.

The new framework will ensure funding is directed to events, local projects and small infrastructure such as parks improvements from 1 July 2019 and not spent on consultants, employees and administration costs.

"Under the new model, BIAs will not be able to request funds from the City of Newcastle for administrative costs and staff salaries. It’s clear from a review of the BIAs that many millions of dollars have been spent on administration that should have gone into the delivery of on-the -ground events," City of Newcastle CEO Jeremy Bath said.

"Four of the five BIAs have this year requested Council funding and collectively propose to spend 46 per cent of their ratepayer funds on administration and salaries.

"From July next year, BIAs will compete for a percentage of the funds with any number of other groups who have compelling ideas for events and initiatives. These events will need to benefit the local business area that is paying the special rate. This change will improve the quality of events and projects that commercial ratepayers’ money is spent on. It will encourage fresh, dynamic ideas for how we drive better visitation and spend in our local business areas.

“The City needs more events, and more focus on tourism and economic development. BIAs can play a critical role in achieving this. Wallsend and Hamilton BIAs have done an outstanding job cultivating events that draw large numbers and, going forward, successful events like the Wallsend Winter Fair, Hamilton Carnivale and China Week will be able to apply for funding in three-year blocks to give them certainty."

In August, CN engaged independent firm Centium to investigate compliance with the Deed of Agreement with Newcastle Now following serious governance concerns.

The report found payments made by the City had not been supported by business plans submitted by Newcastle Now, that it had failed to meet standards of acquittal for projects since 2016 and inappropriately used the special rate levy funds for projects.

The Centium report was prompted by the discovery that around $7 million had been paid since 2012 to Newcastle Now without an approved business plan, a requirement stipulated in the association’s funding agreement signed by its then and current Chair Edward Duc in November 2011.

The AECOM report found that the governance arrangements for BIAs required significant improvement after Newcastle Now spent at least 43 per cent of its funding on administrative costs and salaries every year over the past five years.

"In 2016, this figure exceeded $600,000 out of total funding of $1,161,596," Mr Bath said.
"In 2017, 56 per cent of Newcastle Now’s funding was diverted to administration and salaries, a record percentage.

“It should be noted that this spending occurred before their current Executive Manager commenced in May this year.

“Every dollar that is spent on administration and salaries is a dollar that isn’t going towards on-the-ground delivery of events and programs that attract people to local shops and businesses.

“AECOM recommends that administration expenses instead be managed by a single independent third party on behalf of all five BIAs. Through economies of scale, this will ensure an estimated half a million dollars more is invested into local business areas in the form of events and programs rather than in red tape and bureaucracy”, Mr Bath said.

Collected by the City, BIA funding is made available from a special rate paid by commercial ratepayers to fund additional promotion and marketing of their local business area.