Cathy McGowan (Indi, Independent) Share this | Link to this | Hansard source

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.

Anne Stanley (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

I second the motion.

Cathy McGowan (Indi, Independent) Share this | Link to this | Hansard source

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)

Sharon Claydon (Newcastle, Australian Labor Party) Share this | Link to this | Hansard source

I want to note that the member for Werriwa has seconded this motion and has reserved her right to speak.

Damian Drum (Murray, National Party, Assistant Minister to the Deputy Prime Minister) Share this | Link to this | Hansard source

It's a fantastic opportunity to be able to rise and talk on this issue in relation to local government funding. It is certainly an area that's very dear to me, because I spent a large part of my political career in the state parliament, building relationships with local governments right around Victoria. As Parliamentary Secretary for Regional Development to the Minister for Regional Development, I had the opportunity to meet every regional local government in Victoria. There are 48 of them which are clearly defined as being outside the metropolitan zones. They were eligible for the $500 million Regional Growth Fund that we had going in Victoria. They were also eligible for a $160 million program for building better roads and bridges in the regions. Immediately upon coming to government, the state Labor Party scrapped that $160 million Country Roads and Bridges Program. It was a program that gave all of the councils the opportunity to spend in the vicinity of $4 million each on their roads and bridges, which would normally be a cost that would fall back on them.

There's no doubt that regional councils have been struggling recently. The greatest indication here, and the evidence that we heard when we took the Select Committee on Regional Development and Decentralisation on the road, was the impact of the state Labor government in Victoria introducing a cap on rates. That measure was put in place to stop the enormous councils in Melbourne who had hundreds and hundreds of employees spending tens and hundreds of millions on payrolls, which were getting bigger. That was an idea to try to stop their spending, with that spending flowing over to a continual increase in rates. In order to stop these large, monolithic councils in Melbourne, all of a sudden, a one-size-fits-all blanket funding cap for regional councils was put in place. It affected every regional council, who no longer had the ability to deliver the services that were needed. I'm a little bit disappointed that the member for Indi didn't include that in her contribution, although I did come into the chamber part way through her speech. She may very well have listed the impacts of rate capping on the ability of regional councils to deliver the services that they need.

This is the biggest issue that we have. Although we did put a freeze on increases, we have been able to keep funding programs such as the Roads to Recovery Program, possibly the most popular funding program for all regional councils because they have control over where that money goes. We also have the Bridges Renewal Program, the Building Better Regions Fund, the Regional Growth Fund, and a Stronger Communities Program. The electorate of Murray has been very strongly supported through these projects. There are also the Regional Jobs and Investment Packages, which my area of Hume was very well supported by. That has enabled the Moira shire to get a $2½ million grant for a tourism project at Yarrawonga which is going to see 2½ kilometres of walking space around Lake Mulwala. That will be an amazing project that will enable tourism to go ahead in the big area around the lake. Other funding programs that have gone through include tourism projects. The Shepparton council will have a major truck museum funded by the federal government.

The federal government introduced this freeze on increases in its assistance grants solely to bring the budget under control. We have done that. Now the small percentage of funding that goes to local government from the federal government is going to be increased. Over $800 million will flow into local governments in the very near future. It's a sensible way to go about funding local governments. As I say, the major portion of funding is derived from the states.

Anne Stanley (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

I thank the member for Indi and I note her concern about the strain on local government but also note it's not limited to rural and regional councils; it includes councils within large cities and councils in my electorate. Before I had the honour of representing the people of Werriwa in this parliament, I served the people of Liverpool as a councillor for almost eight years. During my years as a councillor, one of the major issues my council faced was the demand to deliver more services with an ever-decreasing revenue base. My council was not alone, and in conversations I've had with mayors, councillors and staff of local government recently, I'm assured this has still not changed.

I note that this week Canberra is hosting the Australian Local Government Association's 2018 National General Assembly of Local Government. There is no doubt that local councils have a responsibility to extract every last bit of value from their rates and charges, provide services to their communities and still manage their budgets responsibly. However, sound fiscal management by local government has been put under increasing strain by both state and federal governments through cost shifting, faux reform and a freeze on the indexation of the federal assistance grants. The impact of the indexation freeze in the 2014 budget has meant that local councils have missed out on close to $1 billion in funding. When grant income declines councils have no choice but to fill that revenue gap with either increased rates and charges or a reduction in services, less footpaths, less bus shelters and less time for people to enjoy local pools.

I commend the New South Wales Labor opposition for, earlier this month, committing to a review of the formulas for both the general purpose and local road components of the financial assistance grants. This is long overdue, and examples highlight just what this freeze has done. Dungog, with 602 kilometres of road, received—

A division having been called in the House of Representatives—

Sitting suspended from 12:56 to 13 : 09

For the 2017-18 financial year, Dungog, with 602 kilometres of road, received only $880,000 worth of funding. If you compare this with the City of Sydney, which has 301 kilometres of road, it received just over $1.25 million. And Liverpool, in my electorate, has in excess of 900 kilometres of road and received $2.1 million. You can see that there are challenges with the way that these things are looked at.

In New South Wales, the local government sector has faced the additional challenge of a state Liberal government who, to put it kindly, have been antagonistic towards local government. This is a state government that has forcefully merged councils against the wishes of their residents, stripped away decision-making powers of councillors and overridden local development controls to let developers run wild under the guise of reform. With the implementation of the state Liberal government's Fit for The Future faux reform program, New South Wales councils are also subject to a series of ratios and measures. These ratios are an attempt to measure a council's ability to generate revenue, provide value for money and adequately maintain infrastructure while adhering to a debt service ratio. Any council that fails to meet these ratios is faced with the threat of dismissal. Despite being democratically elected representatives of their communities, councils can be sacked for not meeting a narrow ideologically driven set of numbers imposed in Macquarie Street.

There is a saying that all politics is local. However, the state and federal liberal governments appear to have taken this as a licence to abrogate their responsibility and recklessly cost-shift to local government. The peak body for councils in my state, Local Government NSW, estimates that cost shifting by state and federal governments is costing local councils upwards of $800 million a year. Some of the more egregious examples of cost shifting include shortfalls in cost recovery on regulation undertaken by councils on behalf of state government and various emergency services levies, and the list just goes on and on. What we have here is a perfect storm—an increased expenditure burden through cost shifting, a reduced revenue base through freezing grants plus the additional burden of Fit for the Future ratios. Local governments all over Australia now face a lose-lose situation where costs are shifted onto them by other levels of government, meaning their residents are completely left in the cold.

Sharon Claydon (Newcastle, Australian Labor Party) Share this | Link to this | Hansard source

There being no further speakers, the debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.

Sitting suspended from 13:12 to 16:00