The recent announcement of the category winners for the 2006 National Awards for Local Government resulted in the South Australian Local Government Association (LGA) winning the Efficiency Improvement category for its Independent Inquiry into Financial Sustainability in South Australia. A statewide inquiry that investigated and made recommendations on the long term financial viability of Councils, this 2005 inquiry was a first for Australian Local Government. Since then other State Associations have run similar inquiries.
The New South Wales Local Government and Shires Associations carried out its own independent inquiry earlier this year and, more recently, the Western Australian LGA has commissioned its independent Systemic Sustainability Study. In all these inquiries, a similar result is emerging that between ten and 40 per cent of Councils are facing serious challenges as to their ongoing financial viability. Cost shifting, a burgeoning infrastructure backlog, and inadequate funding arrangements are impacting on the capacity of some Councils to deliver for their communities.
In September, the Municipal Association of Victoria (MAV) organised a full day summit that focused on this growing financial crisis that is impacting Local Government nationally, seeking to develop strategies to reverse this trend.
“Around the nation Local Governments are suffering severe financial distress,” said MAV President, Councillor Dick Gross. “They are not suffering in silence but in silos. Councils are not working in a strategic, national way. We are not as a sector being sufficiently strategic.”
Councillor Gross said the sector’s survival depended on the provision of substantial additional external funding, together with affirmative action by Councils to improve efficiency, performance and accountability.
“In particular the sector must unite in its quest to achieve a new pool of funding from the Federal Government that is well targeted and linked to agreed performance benchmarks, such as demonstrated asset management capability.
“Local Government must also show it is deserving of external assistance by adopting smarter and more widespread innovative practices such as regional collaboration and shared service models, as well as having more transparent accountability and performance frameworks.”
In her address at the summit, Victorian Minister for Local Government, Candy Broad, said that local communities are not interested in which sphere of government provides a service but expect all levels to work together in meeting new needs and planning for growth. Advocating an increase from the Australian Government of its tax take, back to the level of government closest to the community, the Minister said it is important to present a consistent view to the Commonwealth on this matter.
“Taking the whole community with us in this debate is also vital,” Minister Broad said.
Speaking on Commonwealth/Local Government relations, Chief Executive of the Australian Local Government Association, Adrian Beresford-Wylie, said that in 2006-2007 the Commonwealth Government will raise $210 billion in taxes, and this does not include the GST.
“Local Government’s annual revenue is $21 billion, with 85 per cent of this raised from its own sources,” he said. “Only 13 per cent comes from grants from the other spheres of government.”
He said of all Australian taxes, Local Government raises just three per cent, while the State Governments raise 13 per cent and Commonwealth 85 per cent.
Adrian Beresford-Wylie added that while Local Government is raising 85 per cent of its revenue from its own sources, a major issue is that the bulk of this revenue stream, namely rates, is not a growth tax. Turning to the Roads to Recovery program, he said that this is an important model of direct funding to Local Government, where Councils decide local priorities while the Australian Government is responsible for the total program.
“But audits of this program have found that some Councils failed to meet the requirements of the grants which could put direct funding under threat,” he said. “Ensuring all Councils meet their obligations is vital.”
