The data, revealed under a NSW Labor freedom of information request, show that just over $38 million was allocated from the $72.7 million funding pool.

A quarter of the 250 grant applications tendered for the money were rejected for areas including Kempsey; the Central Coast; Port Macquarie; Port Stephens; Ballina; Bega Valley; Coffs Harbour; Nambucca Valley; MidCoast; Shoalhaven and Wollongong.

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Shadow Minister for Local Government Greg Warren said he couldn't understand why the government had denied funding to communities that had been impacted by erosion and other serious waterway issues.

"Councils like Newcastle and Central Coast have had to beg for funding relief to assist communities that were severely affected by erosion," he said.

Port Stephens MP and Shadow Minister for the Environment and Heritage Kate Washington said "the problem hasn't gone away" for areas including Stockton, where erosion remains a major challenge.

"We have coastlines washing away. We have houses hanging from cliffs, and councils desperate for more resources," she said.

"The government has already committed this funding. They've made the announcement, they've asked for the kudos, but then they refuse to spend the money."

A spokeswoman for NSW Local Government Minister Shelley Hancock told Sydney media more applications and grants flowed after changes in the 2020-21 financial year.

She said councils could seek more funds under changes to approved projects where sound reasons were provided.

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