As I recently read through the Tasmanian Auditor General’s report on the financial sustainability of Tasmanian councils, it occurred to me just how hard it is getting to balance the books and keep everyone in the community happy.
While we have a national government with spiralling debt and states headed the same way, councils are placed under the microscope and scrutinised within an inch of their life at every turn. The wonders of accounting standards and the requirement to actually fund the cost of depreciation is an imperative for councils, but is an art form lost on our big brother governments.
Accrual accounting, and the expectation council finances be run in the same way as a business, is an interesting discipline but seems to miss the point — that councils are organisations in perpetuity. Intergenerational infrastructure and debt are not generally hallmarks of businesses, especially in these times of uncertainty.
There is little understanding in the community about the fact that the bridge that might have cost $1 million 10 years ago, and which has dutifully been depreciated, has now been revalued (in accordance with accounting standards) and is now worth twice or three times as much as was paid for it in the context of its replacement value.
So, surely that’s a good thing – council has just doubled, even trebled, the value of an important asset. Well, it would be if council didn’t then have to adjust its depreciation schedules to reflect the new cost of replacement and then on-charge the ratepayers to meet the now widened gap of funding required to meet the future replacement obligation.
This is a very difficult conversation to have with the community, with escalating energy costs, increasing water and sewerage charges, high unemployment and the general undercurrent of uncertainty in the economy. In seeking to maintain the same standard and level of service that existed previously there is suddenly a need to dramatically increase the cost of the service to allow for its continued enjoyment into the future. These are tough discussions in tough times.
So having explained that it is going to cost more to do the same as what was being provided before, there remains an expectation that standards will improve and increased services will be made available. The government that is closest to the people is expected to deliver the services those people want and the projects and infrastructure they need. But if the community can’t afford it, and the state government is not likely to consider it, where does the funding come from?
Herein lies the long tradition of federal/local government financial relations. Local projects have long been assisted by injections of funding from the Federal Government for the benefit of the wider community, and that same community has applauded this involvement. However, the recent case law placing this ongoing relationship in doubt should be of grave concern to communities around the country.
Not only are there pressures associated with ageing infrastructure but the new kinds of facilities and infrastructure that mould and bring communities together are often beyond the immediate financial reach of many communities. The financial support provided through the direct financial relationship between federal and local governments allows these communities to grow and survive.
If ever there was a need for the community to demand that this relationship is maintained, then now is the time. Constitutional recognition for local government shouldn’t be a request – it should be a demand by every community in the country to ensure that they continue to have access to a funding source that allows for the provision of necessary local infrastructure.
The recently appointed federal parliamentary committee, which will be examining whether to hold a referendum on constitutional recognition of local government in 2013, has a key role in the journey to maintaining this relationship. It is sincerely hoped that through its prominence, and the continuing efforts of councils and state-based local government associations, that the community’s awareness of this significant issue is awakened where it needs to be and heightened where it already exists.
These are tough times for many communities around the nation and the last thing that we need at this time is to make things tougher.
