LAKE Macquarie City Council has forecast a $9 million operating deficit for the 2015-16 financial year, but will raid asset replacement reserves to cover this shortfall.
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Councillors voted last week to call for public comment on its draft budget, which includes expenditure of $208 million and revenue of $199 million.
Councillor Barry Johnston said the council was "robbing Peter to pay Paul" to balance the budget.
He said people should understand where the money was coming from.
Mayor Jodie Harrison said "we want to make sure we're not gold-plating infrastructure if the community doesn't want that".
Council finance manager Ross Gilshenan said for every $100 that needed to be spent on replacing assets, the council would set aside $81.
Mr Gilshenan said this was a good achievement because many councils set aside no money for this purpose and let their assets deteriorate.
He said the council's approach would maintain the value of its assets, with the goal of "replacing them when they wear out".
Mr Gilshenan said the council would like to set aside 100 per cent of the money needed to replace assets, but it had to "pay the bills".
Cr Johnston said the council was "behind where we want to be" and steps should be taken to remedy this.
Mr Gilshenan said a fall in interest rates, reduced federal grants and increased fuel excise had hit the budget.
Lake Macquarie council's overall draft budget, including capital revenue, was $236 million.
It forecast it would receive $109 million from rates, $32 million from annual charges and $15 million from fees in 2015-16.