The issue of cost shifting onto regional councils has reared its ugly head again with claims from the United Services Union (USU) that the NSW Government has been withholding over half a billion dollars annually that has been collected from local councils.

The unions claims this money is being lost through a poorly designed waste levy that lacks reinvestment to assist councils with their waste collection services and assets as intended, which is only adding to their financial distress.

According to a Cost Shifting Survey conducted by consulting firm, Morrison Law earlier this year, among the hardest hit LGA's are Lachlan, Bogan, Brewarrina and Narromine.

At the time, Narromine Shire Council Mayor, Craig Davies said this was nothing new.

 "With every new state budget, there appears to be another cost shifting exercise from the state government, particularly to local government to take on further responsibilities without the resources to do it," he said.

According to the Cost Shifting Survey, the waste levy, with a total of $292.9 million was one of the biggest examples of the cost shifting practice.

These latest claims of government withholding funds were this week presented to the NSW Standing Committee on State Development's inquiry into local government financial sustainability, along with a firm recommendation to end rate pegging, which has crippled the finances of the overwhelming majority of NSW councils.

 Narromine Mayor Craig Davies

Claims included that the waste levy collected would be significantly more if the waste levy funds collected by the state government were reinvested into new local and regional landfill sites, particularly in northern NSW where most councils are transporting their land fill waste over the border to Queensland due to a lack of current sites being available in their region.

Waste being transported to Queensland is at a cost to ratepayers and results in no waste levy being collected in some regions.

"The NSW Government is withholding money collected from local councils and their communities to the tune of $500 million a year through the waste levy," said USU General Secretary Graeme Kelly. "This is a great example of cost shifting by the NSW Government."

"Councils are struggling to fund essential services and infrastructure, but the state is happy to use them to raise revenue."

The USU argues that the waste levy issue compounds the financial pressures on councils already battling the impact of rate pegging, declining grants, and increased service demands. The report finds that over the past 20 years, rate pegging in NSW has resulted in higher council debt levels, larger infrastructure backlogs, and lower municipal efficiency compared to other states without rate caps.

"The evidence is clear - rate pegging is crippling local government in NSW," Mr Kelly said.

“Every council is different, rural councils supply water and deal with wastewater, city councils don’t, that’s an incredible difference, so we can see councils need to be able to go to their ratepayers with projects, services and rates tailored to their constituents."