Illawarra councils are eligible to share in NSW's $1.3 million "summer fund", to help them run free events or experiences this summer.
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Grants of up to $10,000 are available through the Festival of Place program, which is part of the state's COVID recovery plan to activate the community and encourage people to stay local.
Kiama MP Gareth Ward said events could include innovative lighting displays, outdoor markets, micro-festivals, open-air theatre, street parties, or lawn libraries.
"Businesses across the Kiama electorate have done it tough this year and this funding will help to get people out and about in a safe way just in time for the festive season," he said.
"I encourage local councils to put forward innovative ideas for events that will help people connect after a challenging year.
Minister for Planning and Public Spaces Rob Stokes said the fund formed another part of the government's inaugural Festival of Place, which celebrates the diversity of NSW's public spaces.
"We've already seen how our public space programs such as Streets as Shared Spaces and Your High Street have restored confidence and helped to lift local business activity," he said.
"These $10,000 grants, in addition to the relaxation of planning rules for alfresco dining and local events, will give councils the tools they need to attract people to come out, shop locally, and enjoy our magnificent summer weather.
Councils can submit an Expression of Interest with a simple online form, in December or January, to boost events over Christmas and during summer.
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