The evolving role of local government is placing “significant financial strain” on councils to meet community expectations, a federal parliamentary inquiry has found.
In its interim report released on Friday, the House of Representatives Standing Committee on Regional Development, Infrastructure and Transport said the responsibilities of local government has changed fundamentally and its having to navigate complex regulatory environments while managing limited financial resources and addressing diverse and competing community needs.
“Local governments around Australia are increasingly being called upon to provide healthcare services and housing, managing ageing infrastructure and assets, and respond to current and future climate adaptation needs,” committee chair Luke Gosling said. “These additional responsibilities are placing a significant financial strain on local governments who are struggling to meet community expectations.”
The role of local governments has expanded exponentially beyond the three Rs – rates, roads and rubbish, reads the report. “They have increasingly been relied upon to deliver services and infrastructure which were traditionally under the purview of the Commonwealth, state and territory governments.”
Stakeholders indicated to the committee that many new roles and responsibilities are a consequence of cost shifting. “Throughout the inquiry to date, the committee received substantial evidence through submissions and at public hearings on how local government financial sustainability and funding frameworks were being impacted by evolving infrastructure requirements, service delivery obligations and cost shifting,” said the report.
The key theme to emerge from the inquiry: the current distribution model was not working and needed an overhaul.
President of the national peak for local government Matt Burnett told GN the report’s findings were no surprise. “It says exactly what we’ve been saying for a long time – you need to increase financial assistance grants and there needs to be other forms of revenue coming to local government from the federal government.”
Increasingly, “councils are expected to do more with less”, said Burnett. “What we need are additional funds from the federal government.”
Burnett – also Mayor of Gladstone and president of Local Government Association of Queensland – told GN he was recently in Canberra meeting with parliamentarians. “They heard loud and clear from us – we need increased support from the federal government. Ideally, we’d like that in financial assistance grants, untied funds, which is what the report says. Council needs support for community infrastructure as well. Now we need the federal government and the opposition to acknowledge that and put more money towards local government.”
Beginning in March last year, the committee into local government sustainability received more than 280 submissions and held 16 public hearings in regional areas of Australia.
As well as local governments , the inquiry heard from state and territory governments, federal departments, unions, academics and others in an effort to explore the key financial pressures facing councils, including the extent they rely on Commonwealth and state and territory funding to meet expanding service delivery obligations.
Among the key recommendations:
- review the financial assistance grants program
- ensure the allocation of grants are consistent with horizontal equalisation between councils in all jurisdictions
- consider local governments’ role in national cabinet and ministerial forums
- consider developing a new tripartite agreement between all three levels of government, that ends the cost-shifting onto local governments
- consider making councils eligible for fringe benefit tax exemptions and concessions
- the Department of Defence and other Commonwealth agencies to contribute to infrastructure required to service their operations
- develop a national working group to proactively prepare and mitigate natural disasters and climate change impacts, with funding for local programs.
“We often deliver more services than are our core responsibilities.”
Murray River Council – an LGA in the Riverina region of New South Wales – was among the councils to submit feedback to the inquiry. “Successive state and federal governments over an extended period have reduced, removed, or transferred services, even though communities still required them. This encouraged disaffected and desperate councils to delve into non-core businesses to make up financial shortfalls – often with mixed success,” the submission said.
The inquiry received evidence that showed the current funding model favouring metropolitan regions over rural and remote councils. In its submission, Murrumbidgee Council, also in the Riverina region of NSW, said: “In our collective experience, rural local government has always struggled to meet criteria set as the determining matrix for financial sustainability. We often have small rate bases, we often deliver – out of necessity rather than desire – more services than are our core responsibilities.”
As an example, the council’s submission points to healthcare delivery. “We provide three medical centres at low rent and we provide accommodation at no rent. We budget annually for such things as accreditation, computer and software upgrades and immunisation fridges. If we did not assume this service, we would not have two doctors servicing our three towns and rural area.”
In its submission, the peak body for local government in Western Australia highlighted revenue constraints. “In recent times this has been exacerbated by rapid increases in costs primarily because of skyrocketing construction costs in response to global supply chain pressures and the Covid-19-induced stimulus,” said the Western Australian Local Government Association. “As these factors start to unwind, growth in local government costs will begin a path back towards the long-term average levels. However, the real costs faced by local governments will stabilise at a new high and are not expected to return to their pre-pandemic levels.”
Representing 37 councils across country Victoria, Rural Councils Victoria focused on the challenges of meeting the needs of small communities dispersed over a large geographic area. “Not least being that rural councils have small rate bases and little access to substantial or helpful levels of ‘own source’ income.”
Addressing climate adaptation, the District Council of Tumby Bay in South Australia told the inquiry regional coastal towns are increasingly having to implement measures to protect against climate change impacts.
“However, implementing these measures presents significant financial challenges for our small community,” said the submission. “The cost of effective coastal adaptation strategies is often beyond the financial capacity of regional councils, which rely heavily on limited ratepayer funding and grants. Without improved support from state and federal governments, we risk losing important assets that are vital to our community’s economy and heritage.”
Also addressing the impacts of climate change, the recently established Northern Tasmanian Alliance for Resilient Councils said: “It is clearly established that the current funding arrangements – including those for the Tasmanian local government sector – are insufficient to meet their current asset and service needs, let alone, the additional costs incurred from the changing climate and increased natural hazards and disasters.”
In its submission, the Shire of Gnowangerup in south-east WA said rising costs, difficulty in attracting workers and the structural housing problem is negatively impacting the region’s financial strength. “With a limited rates base, difficulty to achieve economies of scale and the need to incur costs beyond metropolitan councils, the Shire is heavily reliant on state and federal grants.”
While making no formal policy recommendations to government of its own at this stage, the committee will now review submissions it has received and release its findings in due course, said Gosling. “The committee is thoroughly reviewing the substantial evidence it has received to date and carefully considering the numerous and varied recommendations put forward in the submissions aimed at improving the sustainability of local governments.”
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