Local, Independant and Effective

New approach needed to fund rural and regional local government

Posted June 18, 2018


Cathy has called upon the Federal Government to take a new approach to funding local government to ensure the long-term viability of rural and regional councils.

Ms McGOWAN (Indi) (12:43): I move:

That this House:

(1) notes that:

(a) the Commonwealth's Financial Assistance Grants are a key source of revenue for local governments, especially for regional and rural councils;

(b) the impact of the indexation freeze in the 2014-15 budget meant that local councils missed out on $925 million in funding to provide better infrastructure and better services for our local communities—in Victoria this equated to $200 million in cuts to funding for local roads and community services;

(c) the impact of the indexation freeze was magnified in rural and regional areas where local governments have small ratepayer bases and ageing infrastructure and these councils cannot afford a repeat of the indexation freeze;

(d) cost shifting onto local governments places them under increasing pressure to deliver services and maintain assets previously provided by other tiers of government and for rural and regional councils the impact is magnified due to their limited ability to increase revenue;

(e) the two main sources of funding for councils are rates and grants and as grant income declines, councils have had to fill the revenue gap by increasing rates or reducing services;

(f) the ability of rural and regional councils to increase revenue via rates is limited due to a high proportion of 'non-rateable' land and a smaller population, and revenue raising via user charges for facilities, parking fees and development applications adopted by metropolitan councils is not an option for regional councils; and

(g) rural and regional councils often have higher costs per capita than metropolitan councils, with:

   (i) older, more disadvantaged or more vulnerable populations, who require more services from councils;

   (ii) larger asset bases relative to the population;

   (iii) an environmental stewardship role, including responsibility for weed and pest animal management and flood mitigation infrastructure;

   (iv) more dispersed populations, which increase the amount of travel needed to deliver services or which require duplicate facilities to be provided in multiple locations to meet local needs; and

   (v) reduced competition among service providers and suppliers, which can increase costs for councils when purchasing goods and services; and

(2) calls on the Government to:

(a) commit to the sustainability of rural and regional councils by guaranteeing the Financial Assistance Grants will not be subject to another indexation freeze;

(b) work with the states and territories and local governments to review the funding methodology of Financial Assistance Grants so that distribution of funds supports the sustainability of rural and regional councils; and

(c) support the development of regional strategic plans with the states and territories and local governments to guide investment and avoid cost shifting and duplication.

Ms Stanley: I second the motion.

Ms McGOWAN: This motion calls on the government to commit to the sustainability of rural and regional councils by guaranteeing that the financial assistance grants will not be subject to another indexation freeze. It also calls on the government to work with states, territories and local governments to review the funding methodology of the Financial Assistance Grants Scheme so that distribution of funds supports the sustainability of rural and regional councils and supports the development of regional strategic plans with the states, territories and local government to guide investment and avoid cost shifting and duplication.

Throughout the year, I brought together the mayors and CEOs of the nine local governments across my electorate for the Indi local government round table. They told me they face serious challenges when it comes to financial sustainability. They have small, dispersed populations and large geographic areas with significant environmental stewardship responsibilities and large asset bases, resulting in high costs and limited capacity to raise revenue. While rates are a significant revenue source for most, they can vary right across Victoria, depending on local government areas. For example, the rates payable on an $800,000 property range from $962 in Stonnington in the city to $4,201 in Towong Shire. As a percentage of median household income, the difference is outstanding—from one per cent in the City of Stonnington to 10 per cent in Towong. Rate capping in Victoria has added another strain to these local governments.

The Victorian parliament's inquiry into the sustainability and operational challenges of Victoria's rural and regional councils tells us that for municipalities such as Melbourne, Yarra and Port Phillip, the FAGs, the Financial Assistance Grants Scheme allocation, can amount to less than 1.5 per cent of their total revenue. This is not the case in rural and regional councils. The three-year freeze that the Commonwealth imposed on the FAGs between 2014 and 2017 put enormous pressure on local governments in my electorate. The Municipal Association of Victoria estimates that, in one year alone, $5 million has been lost to the electorate of Indi as a result of this freeze. For Towong Shire, the immediate reality was a cut in services. They are a responsible council, so Towong reduced their swimming pool's summer season and saved $6,000. The casual road-maintenance work was reduced, saving $75,000. They ceased mobile library services, saving $50,000. They ceased funding a staff position with the Towong Alliance partnership, saving $23,000, and they reduced the opening hours of the Corryong council office and library, saving $3,000. These are real impacts on real people in real communities.

While that was important and seen as a one-off, in the long term there's a real impact on the role of government in our communities. Local governments in my electorate tell me it's absolutely unsustainable. Murrindindi Shire Council stated that, after taking service reviews, they found that they have no capacity to undertake new initiatives, strategies or policy work other than fulfilling their statutory obligations. The Benalla Rural City Council indicated that it had significantly targeted management positions for reduction so that it could keep doing service delivery. Mansfield Shire Council says:

… we could borrow more, but how does this help us become financially sustainable? Increasing debt is a band aid solution, which is not only unfair on our ratepayers but also ignores the root cause of the issue – lack of income to provide core services.

In opening up this topic for debate in parliament, in the week that we've got Australian local government people meeting in Canberra—and I know they've got a motion similar to this on the books—I call on my federal government colleagues and on the Minister for Regional Development, Territories and Local Government, John McVeigh, who is the former chair of the inquiry into regional development and decentralisation. He heard about these concerns in Wodonga. He knows they're real. Local government in rural and regional Australia is not looking for a handout, but cost shifting lands on their shoulders and has a direct impact on my constituents. It's not good enough. We need, and I absolutely call for, a review of funding for local government, particularly rural and regional local government, so that they can continue to play their rightful role in our communities and deliver for all of us, as I think is the key plank of our democracy. I'm looking forward to my colleagues' comments. (Time expired)

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