Councils and miners on collision course over road funding

By Julian Bajkowski

The mining industry has given the cold shoulder to a renewed push from local governments, engineers and the federal bureaucracy to introduce a national ‘user-pays’ road-funding system to arrest the deteriorating state of regional roads.

The resources sector now looks unlikey to come on-board with broader federal efforts to reform the revenue base for millions of kilometres of bitumen.

Councils and engineering groups have been advocating for the introduction of a new road funding system that would transfer road upkeep costs to heavy vehicle owners and operators based on the mass of vehicles and which roads they use.

Federal treasury has also thrown its weight behind the idea.

Along with trucking and transport firms, the minerals sector is regarded by many councils as a logical target for any new user pays road system because of its reliance on road transport to convey equipment and supplies to mine sites.

The contribution of trucks to the deteriorating condition of roads is a serious issue for many cash-strapped councils which are increasingly forced to choose between the upkeep of bitumen or the delivery of essential services to constituents.

However the minerals lobby argues it already contributes substantial revenues to governments and that the issue of funding distribution is one for governments to sort out among themselves.

A spokesman for the mining industry’s peak body, the Minerals Council of Australia told Government News that the resources sector was already providing “pretty generous inputs” to government coffers through the $20 billion in taxes and royalties levied each year.

He said that the majority of mining product was conveyed by rail – on tracks built by miners – to ports.

“If councils think they need more then perhaps they should look to government,” the Minerals Council spokesman said.

A core issue for local governments is that under the existing funding model, the price of road maintenance can outstrip the revenue available, in turn creating longer term problems for the viability of local governments.

At the same time, mining exploration is facing increased oppostion from farmers and environmental groups in some regional areas through the growth of the 'Lock-the-Gate' campaign.

But it now looks unlikely that either councils or Canberra will forgo the notion of user-funded roads without a fight, not least because the Henry Review of taxation suggested that fuel taxes be replaced with the more localised model that distributes funds based on traffic that causes wear and tear.

In March 2012, the head of Treasury’s Markets Group, Jim Murphy, said in a speech that it was “imperative that we, as a nation, come to grips with our infrastructure funding challenges.”

“It's a generally accepted proposition among economists that user charging can help to promote economic efficiency,” Mr Murphy said.

“The idea is that those who use a piece of infrastructure – for instance, a road – pay for that usage. Under a user charging approach, ideally, the costs associated with the infrastructure would not generally be subsidised by non-users, through taxes or other means”

Mr Murphy said that in light of the fiscal challenges facing governments, user charging was an effective way for governments to create opportunities for greater private sector investment in infrastructure.

“It leads to revenue streams that widen the scope of commercially attractive projects,” Mr Murphy said.

“This can also help take some of the funding pressure off governments and allow them to focus their funding efforts on projects that may not be well suited to user charging arrangements.”

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