2024 Federal Government Inquiry into Local Government Sustainability – RCV Submission
While all tiers of government must be responsible for raising revenue to fund operations and service delivery, the capacity of regional local governments to do so is constrained by relatively smaller populations, the capacity of community to pay, and legislative impediments.
Commonwealth and state government grants are the second highest source of revenue for Victorian councils after rates and charges.
In an environment where councils’ expenses are persistently growing well above inflation (9.3 per cent in 2022-23), previously shared costs are being shifted onto local government by the state either intentionally or through static funding arrangements (e.g. public libraries; school crossing supervision; maternal and child health services; landfill and waste services levies; and disaster response and reconstruction), and increases to general rates and municipal charges are capped by state law at an amount based on the forecast Consumer Price Index (CPI); untied funding from the Australian Government is critical to the functioning of local government.
In March 2024, the Victorian Auditor-General’s Office (VAGO) reported another decline in the adjusted underlying result indicator – a measure of a council’s ability to generate a surplus from its ordinary course of business (excluding capital receipts) – for Victorian councils, noting that a continuing “longer-term negative trend in this indicator could force councils to reduce the services they offer their communities”.
Significantly, VAGO noted that “[the sector’s] financial performance would have declined had the Australian Government not advanced 100 per cent of the 2023–24 financial assistance grants in 2022–23.”
Recommendation 1:
Restore Financial Assistance Grants to at least one per cent of Commonwealth taxation revenue.
Recommendation 2:
Reform the Financial Assistance Grant formula such that distributions are made on an equity basis, based on an assessment of local governments’ relative capacity to raise revenue.
Recommendation 3:
The Australian Government ‘reset the payment cycle’ with an additional once-off payment, to address the bring-forward of Financial Assistance Grants.
Infrastructure and service delivery obligations: Australia’s housing shortage is exacerbating local government financial sustainability problems
Infrastructure demands are placing an increasing burden on local government as population growth in regional cities outpaces all previous forecasts. More than 40 houses need to be built in regional Victoria every single day for the next 10 years to meet the Victorian Government’s Housing Statement targets.
Whether new houses are in greenfield or brownfield developments, they often necessitate the augmentation of water mains, sewerage plants, and an upgrading of local roads and nearby intersections. Higher populations also place greater demand on council-run facilities and services such as public libraries, community centres, playgrounds, parks and open spaces, maternal and child health services, kindergartens, and early childhood education centres.
Grant funding (distinct from debt facilities) from the Commonwealth and from state and territory governments is urgently needed to bring forward and/or make viable infrastructure projects that support new housing. This includes essential services like water, power, and sewage; footpaths; local roads; upgraded and/or signalised intersections; and infrastructure projects that provide amenities to support new housing, including shared facilities like community centres and parks.
Developers have a responsibility to help pay for this infrastructure. However, they cannot bear this cost alone without the risk of regional Australians being priced out of owning a home. Additionally, ‘pioneer developers’ are reluctant to install infrastructure at their own cost to the benefit of future developments. At present, a ‘first mover disadvantage’ exists in identified growth areas across regional Victoria.
In Victoria, the abolition of the Regional Jobs and Infrastructure Fund further restricts the ability of regional councils to access funding towards civic infrastructure. Regional cities do not have access to the state’s Growing Suburbs Fund nor the Growth Areas Infrastructure Contribution Fund (including the Growth Areas Public Transport Fund and Building New Communities Fund). The state’s windfall gains tax revenue associated with land rezoned for housing within local government areas in regional Victoria is not hypothecated for any related purpose.
Recommendation 4:
Make permanent the Housing Support Program to support enabling infrastructure projects and provide certainty with recurrent funding through the 2025-26 Budget.
Recommendation 5:
Reinstate the Local Roads and Community Infrastructure Program through which local governments may nominate projects for the construction, maintenance or improvement of local roads and council-owned assets, up to a nominal funding allocation determined by the Commonwealth.
Recommendation 6:
Commonwealth infrastructure funding be equitably distributed, noting that some programs (e.g. Growing Regions Program) disadvantage those Australians living in states like Victoria where local government cannot readily access co-contributions from the state.
Infrastructure and service delivery obligations: building back better after natural disasters is a critical investment in long-term sustainability
Essential public assets (e.g. roads and bridges) and community infrastructure such as libraries, community centres, playgrounds, sports and recreation facilities underpin the liveability of regional communities. However, they are often impacted by flood, fire, and severe storms.
As natural disasters become more frequent and intense, every tier of government has a responsibility to ensure that public monies are committed wisely during the recovery phase and with a long-term view, to best support communities and build resilience to future disasters.
Historically, there has been no provision by the Commonwealth or state and territory governments for community infrastructure projects to be redesigned to remove or reduce the risk of damage from future natural disasters. For many regional cities, the risk of rebuilding community infrastructure in the same disaster-affected area without extra protective provisions has been deemed too great a risk and – in the absence of additional funding to improve these facilities – they have not been rebuilt.
Following a disaster, ‘infrastructure betterment’ is the restoration or replacement of damaged assets (at a higher cost) to a more disaster resilient standard than its pre-disaster standard. It is a cost-effective opportunity to reduce the risk posed by future disasters and help reduce recovery costs on governments longer-term. Infrastructure betterment can also bring additional social, economic, and environmental benefits for local communities.
RCV recognises that the Australian Government has acted in response to this need and responsibility.
However, infrastructure betterment funding remains available only through Category D (“relief or recovery carried out to alleviate distress or damage in circumstances which are, in the opinion of the Commonwealth, exceptional”) of the Disaster Recovery Funding Arrangements (DRFA). It is not possible, for example, for local governments to access betterment funding through a Community Recovery Fund activated under Category C of the DRFA to support “severely affected” communities.
Recommendation 7:
The Commonwealth work with states and territories to include infrastructure betterment provisions within Category B and Category C of the Disaster Recovery Funding Arrangements, in acknowledgment that building resilience to natural disasters is not an exceptional circumstance.
Attraction and retention of a skilled workforce in the local government sector
The local government sector in regional Victoria is experiencing extreme workforce challenges due to a statewide shortage of planning, building, and engineering staff. This is impacting local government’s ability to approve building and planning permits in a timely manner, exacerbating issues including housing shortages.
While all local governments may struggle to recruit and retain strategic planners, statutory planners, municipal building surveyors and development engineers, regionally-based councils face additional barriers, including:
- struggling to match salaries offered in metropolitan roles or the private sector
- the need to attract staff not only to a role, but to the region, when seeking to source staff from outside the LGA
- challenges associated with working in smaller teams, including burnout
- challenges of working in small communities, where planners are highly visible to developers and other permit applicants outside their professional life
- lack of accommodation options available to house new staff to the region.
RCV acknowledges the Victorian Government’s efforts to bolster support to councils, including through the resources of the Department of Transport and Planning and the Victorian Planning Authority. However, expanding the capacity of these bodies often results in a negligible net impact, as the state recruits from the same small pool as local government – leading some people to leave local government roles rather than adding genuine capacity to the workforce.
Long-term, we must encourage more highly-skilled Australians to consider a career in local government. However, action and incentivisation must be taken now.
Internal strategies identified by our member councils include: increasing the use of consultants; fostering career changes from within each organisation; formalising remote working arrangements (including accommodating interstate employees, where necessity of the task demands such flexibility to an applicant); and reimbursement of relocation costs.
The efforts of local government must be complemented and amplified by other tiers of government. The Australian Government can play a role in attracting critical workers to the local government sector, including through skilled migration.
Recommendation 8:
A 12-month international advertising campaign be established, to attract planners, development engineers, and other in-demand workers, to live and work in regional Australia within the local government sector.
Recommendation 9:
The Skilled Work Regional (Provisional) visa (subclass 491) be streamlined, making it less complex and less costly for local governments in regional areas to facilitate the migration of an employee to a critical role, including allowing sponsorship by a local government (in addition to “a state or territory government agency” or an “eligible relative”).
Recommendation 10:
That the occupations of Urban and Regional Planner (ANZSCO 232611), Civil Engineer (ANZSCO 233211), Civil Engineering Draftsperson (ANZSCO 312211), and Civil Engineering Technician (ANZSCO 312212) be included in the Commonwealth’s final Core Skills Occupation List.
Recommendation 11:
The Australian Government deem statutory planners critical to the National Housing Accord and encourage more people to take up this occupation in the public sector. Consideration should be given to establishing scholarships; forgiving Higher Education Loan Program (HELP) debt for practitioners who live in regional Australia and work in local government; and extending eligibility for the ‘Commonwealth Prac Payment’ to students undertaking mandatory placements whilst studying a course accredited by the Planning Institute of Australia.
