From playgrounds to libraries, sports fields to sewage treatment plants, not to mention its network of local roads, footpaths, and cycleways - Council is responsible for building and maintaining hundreds of millions of dollars’ worth of assets.

Depreciation, in other words, the amount identified in Council's budget to cover the deterioration of our assets is one of Council’s biggest categories of expenditure - reaching a whopping 21% of Council’s total operating expenses in the last year.

Not only is the community’s expectation of the number and quality of assets Council should provide increasing, but the State Government continues to “shift” costs they have historically been responsible for to local Councils without any additional funding. One of the most controversial examples of this is the “red fleet” (Rural Fire Service and SES vehicles) which the State Government requires Councils to fully account for, even though they don’t own or control them.

An added challenge is that almost every source of Council’s recurrent income is capped by the State Government at below the cost of providing the service. Nowhere is this more evident than in Council’s rate income, which is pegged at 3.2% despite CPI running at 6-7% for several years. Inflation for construction materials, which is one of Council’s main expenses, is even higher.

This means that Councils are forced to complement their recurrent income through a range of other sources. The largest of these is grants from the State and Federal government. Not only are these grants entirely speculative, but they usually only fund more assets and almost never fund their ongoing maintenance, so they only add to our depreciation problem!

Council also generates income from selling or leasing land or buildings it owns. This is an essential source of income for Council and one that the State Government can’t get its hand on. However now the price of land has skyrocketed, it’s essentially a finite source, with only a few remaining landholdings yet to be capitalised.

Because recurrent expenditure such as depreciation requires a source of recurrent income to renew and maintain our assets so that they continue to meet community expectations, one thing Council can do is gear its remaining property investments towards that purpose. For example, Council owns 30 residential lots in Wollongbar and up to 60 residential lots in Lennox Head that could be developed into affordable housing for key workers. This would serve a community need and provide Council with a valuable source of recurrent income (from leasing) as opposed to up-front income (from selling the lots).

Depreciation is a wicked problem that ultimately requires action from the State Government, including putting and end to cost-shifting and developing a fair methodology for funding Councils that reflects the actual cost of providing essential services to communities. It also needs to make developers pay more, including by indexing developer contributions to reflect the enormous increases in land values in recent years.