Treasurer Scott Morrison has given Australia’s local councils a boost by unfreezing the indexation of federal financial assistance grants (FAGs) from July 1 and extending funding for local roads.
The Abbott government decreed an indexation freeze of the grants in its 2014 Budget, much to the horror of councils, who saw inflation eat away at their bank balances. The government’s estimates indicate that the measure cost councils more than $600 million in lost income.
FAGs are vital to councils, particularly regional and rural councils who tend to have a lower rates’ base and fewer revenue raising options, because they are not ring fenced and can be spent on community priorities such as parks, pools, roads and libraries.
But councils are counting the cost of the three-year freeze at the same time, arguing that it has permanently reduced the grants and damaged local government’s ability to maintain community infrastructure, roads and services.
Local Government NSW President Keith Rhoades said the freeze had had a “harsh impact” on NSW councils, which were also dealing with rate capping and cost-shifting from other levels of government.
Mr Rhoades estimated that it had cost NSW councils up to $300 million in lost funding over this period.
“Unfortunately despite this welcome restoration, the freeze has resulted in a permanent base reduction of around 13 per cent.” Mr Rhoades said. “It is exactly these sort of financial constraints that make it almost impossible for councils to get ahead.
“The significant financial losses sustained as a result of the FAGs indexation freeze cannot help but impact on the quality of local services and infrastructure councils currently provide.”
Municipal Association of Victoria President Mary Lalios agreed that ending the freeze was good news for local government.
“This will be good news for councils, particularly councils in rural areas as their communities have been hurting as a result of the lost funding,” Ms Lalios said. “The grants help councils to meet the costs of providing more than 100 essential services to local communities and maintaining $80 billion worth of community infrastructure.
“However, councils will still be left playing catch-up as they recover from the $200 million that has been lost since the freeze began.”
Local Government Association of Queensland (LGAQ) President Mark Jamieson called the decision a “welcome relief” to the state’s councils.
“Returning indexation to these grants has been an advocacy priority for the LGAQ and the Australian Local Government Association since the freeze on indexation in 2014.
“We welcome the common sense decision by the government to return this vital funding to Queensland councils who now have some certainty in their ability to plan and invest in important infrastructure and projects in their communities”. Mr Jamieson said.
Vice President of the Australian Local Government Association, Damien Ryan said councils could now begin to pick up the pieces.
“Financial Assistance Grants are an important untied payment that councils invest in providing better infrastructure and better services for our local communities,” he said.
“By restoring indexation to this important payment, the government is honouring its commitment to communities to ensure that, as far as possible, every citizen regardless of where they live can have equitable access to municipal services.
“However, there is still a long road ahead before councils recover from the freeze as it permanently reduced the base level of the Financial Assistance Grants payments.”
Local Government Association of South Australia’s Executive Director of Public Affairs, Lisa Teburea, said the freeze had cost the state’s councils 36 million over the past three years and wiped 13 per cent off the total value of the fund.
“These grants are particularly valuable as they are un-tied, meaning councils can use this funding to provide the facilities and services most needed by their ratepayers,” Ms Teburea said.
“The government’s decision to freeze indexation on FAGs in its 2014/15 budget has had a significant impact on South Australian councils, with regional communities – where the grants make up a higher proportion of councils’ total revenue – the hardest hit.”
A further budget bonus for Australia’s local councils has been a two-year extension of federal government’s Roads to Recovery funding beyond the 2018-19 cut-off date.
The fund is directed at local councils and is earmarked for maintaining and upgrading local roads. It was introduced in 2000 to address the growing maintenance backlog.
“Roads to Recovery provides much-needed funding to help councils maintain 85 per cent of Victoria’s road network, to achieve better safety, economic and social outcomes for their communities,” Ms Lalios said.
Program funding is $700 million for 2017/18, $364.5 million in 2018/19, and increases to just below $400 million in 2019/20 in line with the government promise to boost funding for this program by $50 million per annum from 2019/20.
Mr Rhoades said the funding extension was “very welcome recognition of the dire state of many roads across the nation” but added “it is important to note the delay before the additional funding kicks in, as well as the fact that the funding boost is spread nationally”.
“It’s sobering to think that even if the entire $50 million for R2R was invested in NSW, it would still be insufficient to bring thousands of kilometres of particularly country roads up to the standard our communities need and deserve.”
South Australia will receive supplementary road funding of $40 million over two years, after having this pulled in 2014-15.
Ms Teburea called this “another significant win” for South Australian communities.
“South Australian councils manage 11 percent (75,000km) of the nation’s local road network, have over 7 percent of the nation’s population, and yet receive only 5.5 percent of Identified Local Roads Grant funding,” Ms Teburea said.
“This was rectified in 2004/05, through an annual ‘top-up” supplementary payment of around $18 million per annum to South Australia. However, this payment was removed in 2014/15.
“Over the past three years we’ve continued to advocate for the return of this payment, and we appreciate the federal government restoring fair and equitable road funding to South Australian councils in this year’s Budget.”