Liberal councillor Brad Luke says the public endorsement of Labor election candidates by the contractor managing Newcastle's business improvement associations demonstrates why the scheme should be scrapped.
Hamilton businesswoman Janice Musumeci was awarded a two-year, $235,000 council contract in August to provide business support and secretariat services to the city's four BIAs.
This month, she has shared Labor election posts with her Facebook friends and on November 6 urged them to vote for Labor's Carol Duncan in ward two.
"She has been a great supporter of the Hamilton Business Association and a proud Hamilton community member," Ms Musumeci wrote above a campaign image of Cr Duncan.
"Please vote Labor and Vote Carol Duncan if you are in Ward 2. It's important to have people like Carol on Council."
Cr Luke, who is stepping down at next month's election but is managing the Liberal campaign, said taking money from businesses and handing it to someone who then posted material favouring one party and was "actively participating in the election process ... clearly raises concerns".
"We have a person who has just received a contract with a Labor-controlled council of almost a quarter of a million dollars over two years working for the council and is posting pro-Labor electoral material," he said.
"That is a prime example of why the business community is raising so many questions about the special business rate and is a clear example of why the special business rate needs to be scrapped immediately."
The business improvement associations are funded by the special rate, which is levied on commercial landlords across four precincts.
Ms Musumeci declined to comment when contacted on Wednesday.
The two other political groupings on the council, Newcastle Independents and Newcastle Greens, also declined to comment.
City of Newcastle chief executive officer Jeremy Bath said the council's code of conduct and Office of Local Government guidelines did not restrict staff, volunteers, grant recipients and contractors from endorsing political candidates.
"What matters is that council resources are not used in any promotion," he said.
"Ms Musumeci's comments were made via her personal social media account and so she's just as entitled as anyone else to have an opinion on the upcoming local government election and to share it with her friends.
"Further, the contract to manage the four BIAs was awarded after an open tender managed by City of Newcastle staff. No councillors were involved in this process.
"The tender by Ms Musumeci was by a considerable margin the strongest bid."
The NewcastleHerald contacted Cr Duncan for comment.
Deputy lord mayor Declan Clausen said it was "wonderful to have such broad support for the Newcastle Labor team from across the small business community".
"Many small business operators have seen the success of the sweeping and transparent changes that Newcastle Labor made to our BIAs and the targeted support this Newcastle Labor-led council has delivered for small business during this global pandemic," he said.
The BIA scheme has been beset by controversy during the council term.
Mr Bath cut off funding to the Newcastle BIA in 2018 over what he regarded as its failure to submit business plans and sacked two council staff members overseeing the scheme.
The council then banned Hamilton Chamber of Commerce and Newcastle Now from applying for BIA funds.
At the time, Hamilton Chamber of Commerce was led by businessman Nathan Errington, who ran unsuccessfully in the 2017 council election as part of the Newcastle Independents team.
In 2019, the council set up a panel comprising lord mayor Nuatali Nelmes and three staff to decide who would receive BIA funds.
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