Business improvement associations set for overhaul

Council will consider a recommendation to introduce competition for funding among local business improvement associations, to generate more events and initiatives throughout the city, tomorrow night.

More than $10 million has been paid since 2012 to the business improvement associations (BIAs) of the City Centre’s Newcastle Now, the Hamilton Chamber of Commerce, the Wallsend Town Business Association, the Mayfield Business Association and the New Lambton Chamber of Commerce.

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

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

An annual contestable process for the $1.345 million in ratepayer funding is recommended following the finalisation of a report by AECOM (below). The report, which will be considered at the Council meeting tomorrow night, lists 34 issues relating to governance that require addressing by the BIAs.

Council will also consider a recommendation to replace the current model of funding agreements with a new framework that ensures funding is directed to events, local projects and infrastructure. BIAs will not be able to request funds from the City of Newcastle for administrative costs and staff salaries.

A separate, independent report by the Centium Group into funding provided to Newcastle Now will also be shared with Councillors Tuesday evening. This report was prompted by the discovery that around $7 million has been paid to Newcastle Now without a business plan submitted or approved, a requirement stipulated in the association’s funding agreement signed by its then and current Chairman Edward Duc in November 2011.

City of Newcastle’s Chief Executive Officer Jeremy Bath said the AECOM report found that the governance arrangements for BIAs require significant improvement.

“Earlier this year a BIA requested more than $100,000 with no explanation of how the money would be spent," Mr Bath said.

"Another requested to spend all (and more) of their special rate funding on administration.

“More than $10 million of commercial ratepayers’ money has been provided to BIAs during the past seven years. During this time, the amount that is being diverted to administration and salaries has substantially increased.

“For example, every year for the past five years, Newcastle Now has spent at least 43 per cent of its funding on administrative costs and salaries. In 2016, this figure exceeded $600,000 out of total funding of $1,161,596. And in 2017, 56 per cent of Newcastle Now’s funding was diverted to administration and salaries, a record percentage.

“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 recommend 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.

“The City needs more events, and more focus on tourism and economic development. BIAs can play a critical role in achieving this.

“Significantly, Council will also introduce a more open and contestable process for at least a portion of the annual $1.345 million that is currently exclusively available to the BIAs.

“Competition will bring about a lift in the quality of events and projects that ratepayers’ money is spent on. It will encourage fresh, dynamic ideas for how we drive better visitation and spend in our local business areas.

“Wallsend and Hamilton BIAs have done an outstanding job cultivating events that draw large numbers to their areas and positively promote local shops. 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 ensure events have certainty from year to year.

“City of Newcastle is contacted every week regarding inspiring new ideas for events or activations that could promote Newcastle and increase economic activity. BIAs will now compete with these groups for the funds that commercial property owners pay annually in the CBD, Darby Street, Hamilton, Mayfield, Wallsend and New Lambton.

“To further improve governance, any funding request will now include KPIs that explain how the success of an event or program is measured.

“The proposed framework includes improved transparency around the boards of the five BIAs and a clear process for recruitment and selection to a board. A number of property owners who pay the special levy have indicated a view that BIA boards are a closed shop with limited turnover and visibility of how decisions are made.

“A vision and purpose must also be better articulated to ensure consistency in the evaluation of a BIA’s performance. For example, Newcastle Now has a goal to “help and encourage the city (of Newcastle) to live up to its name as Newcastle Business Improvement Association”.

“This goal is at best ambiguous, and at worst makes no sense. Either way, evaluating its performance in meeting its goals is impossible.

“Council will separately review the geographical boundaries of the BIAs. It’s clear that the City’s rapid transformation in recent years which has seen improved establishment of local business areas in Honeysuckle, Carrington, Waratah and the Junction, is an opportunity for the creation of new or expanded BIAs,” Mr Bath said.

Download the AECOM report (pdf)