Funding for business group Newcastle Now suspended pending external review

23 Jul 2018

City Of Newcastle will not make further payments to an inner-city business improvement association (BIA) pending an investigation into its governance and a broader review of the BIA model.

Late Friday afternoon, Council CEO Jeremy Bath confirmed that City Centre BIA Newcastle Now has been receiving annual funding of almost $850,000 since at least 2013 without providing an annual business plan, as required under the Funding and Service Deed of Arrangement signed by both parties and endorsed by the elected Council in 2011. 

The Funding Deed is intended to ensure strong governance and transparency around the spending of the levies, with the business plan detailing how Newcastle Now intends to spend its funds, which are raised via levies paid by inner city commercial property owners. 
 
Further, under the terms of the Deed, Newcastle Now must also provide a tax invoice for funds sought each year matching the costs of the projects, events and activities detailed in the business plan. Lastly, an account balance for unspent funds from the previous financial year must be provided, which is then offset against funds requested for the current financial year. 

On Friday evening, Council advised Newcastle Now to refrain from spending further rate monies levied on businesses until the BIA meets its obligations and that Council will arrange for an independent review of past funding practices. “Newcastle Now will at the least need to provide a detailed business plan outlining projects, events and activities for the 2018/19 financial year before Council extends any further funding,” Chief Executive Officer Jeremy Bath said.

“In 2013 or possibly earlier, Newcastle Now ceased the agreed practise of supplying an annual business plan in advance of receiving funding. Council is required to ensure that all transactions by Newcastle Now and, for that matter, all BIAs, are administered strictly in accordance with the deed.”

Newcastle Now's four-year strategic plan for the years 2016 to 2020 is not a substitute for a detailed annual business plan, Mr Bath said.
 
"My task is to ensure that going forward funds are only released in strict accordance with the terms of the 2011 Funding Deed," he said.  

"Councillors will be fully briefed once the external review is completed."

Mr Bath has also advised Newcastle Now that it cannot legally - under the Local Government Act - provide direct financial assistance to individual businesses, the subject of a Notice of Motion (NOM) before Council tomorrow night.

"Special rates levied on commercial property owners in the CBD were done for the specific purpose of defraying the additional costs of promotion, beautification and development of the City Centre Benefit Special Rate Area. This is stated annually in Council's approved budget," Mr Bath added.

“To comply with section 409 of the Act, any program in response to the light rail project will require businesses to use funding for projects, events or activities that promote, develop or beautify the City Centre. This is clearly not how Newcastle Now is intending to use ​the requested funds."

Before any further funding for any purpose can be released, Newcastle Now must first provide Council the following:
 
  • A business plan in the standard template form that applies to all BIAs
  • A tax invoice for funds sought in 2018/19 matching the costs of the projects, events and activities ​detailed in the business plan
  • An account balance for unspent funds from the 2017/18 financial year, which will be offset against funds requested for the current financial year. 
Until the requirements of the Funding Deed are met by Newcastle Now, Council will hold special levies in a reserved fund. As stated above, the funds can only be used for the purpose of promoting, developing and beautifying the City Centre.