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HEARINGS IN ADELAIDE — 9 MAY 2013
WESTERN AUSTRALIA LOCAL GOVERNMENT GRANTS COMMISSION
Opening remarks
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WA LGGC said the State government is responsible for the number of councils. It also
said it did not think the State government is not providing enough funding for local
government despite the growth in its own revenue. WA LGGC said that many of the
historical State Agreement Acts limit councils’ ability to raise revenue from mineral
wealth.
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WA LGGC noted that without the recent methodology changes wheatbelt councils in
the south west would have become minimum grant councils. These councils have a
lot of roads to maintain and need to provide doctors because the State does not do
so in remote hospitals. A reduction in their grants was not considered a desirable
outcome so the LGGC changed its methods to prevent this.
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WA LGGC noted that FIFO workers do not tend to access services in mining areas.
FIFO workers access local government services in Perth.
Sustainability
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Mr Reynolds said it was his personal view that structural change is needed and this
would help address sustainability issues. For example, most councils have a CEO and a
treasurer. Staff in similar positions in Canning (large urban council) and Halls Creek
(large remote council) are paid similar amounts despite having different roles and
responsibilities. Large salaries are required to attract staff to remote councils. In the
remote councils, salaries account for a significant proportion of grants. Despite this,
amalgamation of large remote councils is not likely to improve sustainability.
Amalgamations of other types of councils are likely to be beneficial.
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Councils face a large road task. WA LGGC said ore is initially transport by local roads
and this is adding to the freight task on local government roads. Different councils
have different capacities ‘to get a good deal’ from the mining companies for roads.
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When asked if States should have the ability to withhold grants to failing councils, the
LGGC did not consider that appropriate because services still need to be provided to
residents.
Tied grants
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The LGGC considers that councils are best placed to determine spending priorities.
For example, councils know if funding should be spent on roads or housing. Therefore
general purpose grants should not be tied, although there maybe some benefit in
considering tied payments for roads or Indigenous services. See below.
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Reward payments
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WA LGGC said reward payments could be tied to amalgamations or asset
maintenance, including roads, but tying rewards to spending on particular functions
may not be very effective because councils have considerable discretion in how
funding is allocated to functions.
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WA LGGC expressed concerns about the quality of financial data available which
could be used to allocate grants and the capacity of small councils without strong
rates bases to compete for reward payments. The WA LGGC considers that the power
to provide rewards would better sit with the State Government than with the LGGC.
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WA LGGC noted that councils have been seeking Royalties for Regions capital
payments due to the grant benefits. Capital grants are treated by exclusion but
payments for road maintenance are not. Now Royalties for Regions are more
focussed on regional priorities.
Minimum grants
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The WA LGGC considers all councils deserve a share of general purpose grants and
supports the continuation of 30% for minimum grants. The LGGC recognises that this
means large assessed needs are not met for non-minimum grant councils. However, it
raised the possibility that the needs it calculates may be overstated because remote
councils are being compared with metropolitan standards. Its methods do not
recognise that lower standards of services might be provided/require in remote
areas. It said that it would seem to be a reasonable expectation that local services
should be of the same standard across the country. The same standards of service
tend to be provided in townships but not outside, especially in relation to remote
roads.
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In Western Australia 76% of the population live in 30 minimum grant councils. WA
LGGC noted that more councils are expected to become minimum grant councils in
the short-term due to their strong revenue raising capacity. These include
Kalgoorlie/Boulder, Broome, Roebourne and Albany.
National principles
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The WA LGGC is happy to work with the apparent conflict between the HFE and
minimum grant principle on the understanding that every council should get
something and that the HFE principle is really about reducing relative need rather
than achieving HFE.
14
National principles are subject to interpretation by LGGCs and LGGCs in different
States interpret and apply the principles differently. WA LGGC said there should be
more guidance on how principles should be interpreted and applied. Despite this
being identified as an issue, WA LGGC said that in the past it has looked at applying
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different methodologies to the same datasets and the grant outcomes have been
similar.
Other
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Local government services in indigenous communities. While some councils provide
specialist Indigenous services, such as language centres, interpreters and child care,
indigenous communities reported that some councils were not providing services in
Indigenous communities. The old methodology recognised indigenous needs through
an indigenous assessment (based on indigenous populations) and a dispersion
assessment (recognising the number of Indigenous communities in a council area). To
better assess council Indigenous needs, the new methodology no longer recognises
indigenous communities in the dispersion assessment although it still includes an
indigenous population assessment. This reduced the level of funding to councils with
indigenous communities. The amount allocated to indigenous needs in the new
methodology is $7 million. It is not based on what councils are actually spending on
Indigenous services.
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Use of State averages. WA LGGC said State averages do not really work because
circumstances in urban and remote councils are very different. By adopting a State
average, remote councils are being given the capacity to do things they don’t actually
do.
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Assessing needs. In WA, fringe metro councils experiencing rapid population growth
face high costs that are not being adequately recognised.
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WA LGGC said their methodology recognises the cost of GP services for councils that
provide these services and therefore there is a degree of policy contamination.
However, they consider such an assessment is needed to assist councils that have
been forced to provide these services.
SOUTH AUSTRALIA LOCAL GOVERNMENT GRANTS COMMISSION
Sustainability
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SA LGGC identified number of reasons councils are unsustainable:

small communities that are not growing quickly

lack of revenue base

benefits that could flow from further amalgamation are unlikely to be realised
because local government is often the only presence in some communities and
there is reluctance to see this go

high cost of providing road services with aging infrastructure
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
community demand for services and expectations, including expectations
arising out of the State government 30 year plan for Adelaide

demand for infrastructure in growth areas, such as Mt Barker, which are not
necessarily funded by developer contributions (a KPMG report on developer
contributions will be available shortly.
Tied grants
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SA LGGC said untied grants allow councils to meet community needs. Sustainability
can be improved through decisions about the level of rates and service provision.
Elections are a powerful force to encourage councils to do better. There is often a
tension between Commonwealth objectives and local needs but better accountability
is achieved if FAGs are untied.
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A personal view of the Chair of the LGGC is that there may be benefit in tying funds
provided to the APY lands councils to particular purposes specified by the State. She
expressed the view that it was not obvious how grants were being used in by these
councils. The formula for determining grants for these councils is currently under
review.
Collaborative service provision
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There is an exception. SA LGGC has a unique arrangement in which 15% of all local
roads funding is quarantined into a special fund for strategic road projects with the
agreement of councils. Councils work collaboratively to develop proposals for local
roads with regional importance. Under this arrangement councils must provide
matching funding for approved projects. This approach enables maximum outcomes
to be achieved across councils.
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This funding could be tied or embedded in a separate pool or national principle.
Similar funds could be used to encourage other areas of collaboration. The LGGC take
responsibility for facilitating such programs.
Consistency in methods Vs need to recognise diversity (National principles)
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SA LGGC said the national principles do not lead to consistent outcomes for
comparable councils across Australia. As a national program, the LGGC expected
there should be a national framework and some consistency. However, it
acknowledged that the current LGGC methods reflect the structure of local
government in South Australia and some flexibility to recognise local needs was
desirable.
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Other
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Assessing capital needs. Currently there is no recognition of population growth in the
commission’s assessments. Capital needs are recognised through an assessment of
depreciation expenses.
SOUTH AUSTRALIAN LOCAL GOVERNMENT ASSOCIATION
Opening remarks
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LGASA asked the Commission to consider including comments in its report on future
of the Supplementary Road Funding for South Australia.
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LGASA said regional councils face particular challenges but amalgamations are not
necessarily possible.
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LGASA said the current indexation arrangements for FAGs do not reflect the costs
councils face.
Sustainability
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Local government funding is inadequate. Without grants, councils could do less and
some could raise more revenue. But pain for residents would be too much to bear,
particularly where service provision is already minimal.
Tied grants
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LGASA support the current arrangement that sets aside 15% of all local roads funding
in South Australia for strategic road projects. These funds are made available to
councils through a competitive bid process and a committee of local government
representatives makes the decisions. However, LGASA considers there should be not
be further tying unless councils support further similar collaborative arrangements
for other purposes.
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Tying funding to particular functions could lead to distortions in the allocation of
‘other costs’.
Rewards payments
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LGASA said if facilitation and reward payments were based on competitive bid
process, large efficient councils may be more able to benefit. Larger councils would
also be more likely to meet financial performance targets. Care would need to be
taken to the ensure process for obtaining funds was not inequitable.
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Reviews into the efficiency of local government and how it could be improved have
helped to improve the performance of the sector. The SALGA will release a paper in
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June with the results of an expert panel review into the operations of local
government.
Minimum grant – who should decide?
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LGASA said that, if the State had the discretion to determine the level of the
minimum grant, which had some appeal because of the diversity of the States, this
could increase the level of engagement in the funding process.
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