Private schools have a moral duty to pay council rates

3 months ago 21

The sandstone mansion Graythwaite House sits atop a grassy hill in North Sydney, with views down to the harbour.

It was built on an early 1800s land grant and grew in grandeur as its owners became more illustrious; the fig trees they planted as saplings are now lush and shady. After the Gallipoli campaign, owner Thomas Dibbs was moved to donate it to the state government as a home for wounded soldiers, and it was used as a nursing home until around 2008, when the operator could no longer afford the upkeep.

Built in the early 1800s, Graythwaite House was sold to Shore School in 2009 despite residents’ protests.

The battle to keep Graythwaite in public hands was fierce; residents worried that if privatised, it would be closed off entirely. The Supreme Court ruled it should be sold. The Commonwealth made an offer but was outbid by $10 million by Shore School. It restored Graythwaite, and now uses it as an office area. The purchase expanded the school’s grounds by almost half, and the sprawling site now takes up a sizeable chunk of land to the south of North Sydney CBD.

Happily for Shore, it does not need to pay rates on that growing parcel of land because schools have an exemption. Shore can keep that cash for other things – such as buying even more land. Most recently, it has asked North Sydney Council if it can buy a chunk of Edward Street, to make pick up and drop off easier for parents.

North Sydney Council is, like many other councils across state, struggling financially (its position has not been helped by its disastrous renovation of the once-magnificent North Sydney Pool, which has not only been a financial nightmare, but must count as one of the most egregious cases of historical vandalism in recent history). The council may well sell the road to Shore, if it can’t get a land swap deal; it needs the money.

To swell its coffers, the council has repeatedly asked local private schools to pay voluntary rates. North Sydney’s is an extreme case – about 10 per cent of the council area’s land is occupied by schools, and many of those schools are very, very rich. In its 2024 report to the charities register, Shore valued its assets at $426.2 million, while Redlands’ were worth $205.8 million, and Wenona’s were worth $132 million.

In its 2024 report to the charities register, Shore valued its assets at $426.2 million.

Some of the schools have bought up all the houses along entire streets in North Sydney, which they use for various things such as administration and teacher accommodation. The council estimates it’s missing out on at least $1 million a year in rates because so much land is occupied by schools (Shore does pay rates on the 17 houses it rents to private tenants, and some of the schools are public ones, such as North Sydney Boys and Girls).

But every time the council asks, the schools say no. They argue that even a voluntary payment would interfere with their not-for-profit status under section 83C of the NSW Education Act, which would in turn affect their eligibility for government funding – although that’s a matter of interpretation. Others think that a contribution would have no impact on a school’s not-for-profit status. A review underway into 83C is likely to clarify that schools are at greater liberty to waive their rate exemption than they might think.

The council argues that high-fee schools are using community facilities without contributing to them, while building plush facilities of their own. The council must deal with the impact of all the foot and vehicle traffic from the schools. Loreto Kirribilli (which, in 2010, bought the Tremayne Private Hotel for $20 million) and high-rise St Aloysius use Bradfield Park as extra play space, and Reddam House, which has branched out to North Sydney, is expected to use local parks, too (while it’s a for-profit entity, Reddam is still exempt from rates because it’s a school).

For some things, though, the high-fee schools don’t need to rely on local facilities; there has been no frustration at the blown-out renovations of the local aquatic centre for Shore, Monte or Wenona, as they have pools of their own.

Across NSW, rate exemptions have become the biggest chunk of the cost-shifting bill faced by local councils, which occurs when councils carry the can for state or federal services they aren’t funded to deliver. Cost shifting resulted in a $1.5 billion burden on local government last year, and almost $300 million of that was exemptions. Across NSW, that equates to $500 of each household’s rate bill.

Schools are exempt for good reason. They’re essential; it’s in everyone’s interests that children are well-educated, and for the vast majority of schools, handing over money for rates would leave less for education. This applies not only to public, but also to most Catholic and independent schools, which are low-fee.

But there’s a line. When schools are so wealthy that they can build opulent facilities – the $45 million Scientia building at the Sisters of Mercy’s Monte Sant’ Angelo, Shore’s $75 million physical education centre, Redlands’ $114 million revamp – they can afford to give something back, whether it’s in the form of voluntary rates, or opening their facilities to council-approved groups for free (a North Sydney orchestra had to pay $9000 to hire a hall from a high-fee school) or even returning some government education funding, with a note saying, “not necessary, but thanks”.

Rate exemptions were not designed for a world in which councils are broke and schools are wealthy. If section 83C turns out to be a problem, the government could legislate to exempt voluntary contributions to councils and the like, or could find a level at which the exemptions no longer apply, such as when the school’s surplus exceeds its government funding, or when a certain amount – $50-odd million? – has been spent on new buildings in a 10-year period, or on land that is not directly used for educational purposes. The council needs the money; by refusing to pay, schools are shifting the burden onto their neighbours.

The other question is a moral one. To refuse to contribute when it’s warranted, these mostly-Christian schools are teaching their students an odd lesson; that we should find and exploit loopholes for our own benefit, and if we are privileged, we should hoard that wealth and give back only on our own terms. That might be the way of the modern world, but one wonders what Thomas Dibb and the Sisters of Mercy would think.

Jordan Baker is chief reporter for The Sydney Morning Herald.