Local Government National Report

2005 06 06 Local Government National Report 2005 06 Report on the Operation of the Local Government (Financial Assistance) Act 1995

Commonwealth of Australia 2007 ISSN 1441 5739 ISBN 0 9756884 3 X Information present in this document may be reproduced in whole or in part for study or training purposes, subject to the inclusion of acknowledgment of the source and provided no commercial use or sale of the material occurs. Reproduction for the purposes other than those given above requires the written permission of the Department of Transport and Regional Services. Requests for permission should be addressed to the Assistant Secretary, Local Government and Natural Disasters Branch at the address below. The report is also available on the Internet at <www.dotars.gov.au>. Acknowledgments This report has been compiled by: Mervyn Carter Fleur Leary Mark Mansfield Barry O Neill Diana Rankin Valentine Thurairaja For further information about this report contact: Department of Transport and Regional Services Local Government Section GPO Box 594 Canberra ACT 2601 Phone: 1800 065 113 Fax: (02) 6274 6249 Editor: Jenny Cook, PenUltimate Designer: Philippa Lawrence, Sprout Design Indexer: Michael Harrington Printer: National Capital Printing, Fyshwick ACT

Foreword I am pleased to present to Parliament the 2005 06 report on the operation of the Local Government (Financial Assistance) Act 1995. In 2005 06, the Australian Government provided $1.618 billion in financial assistance grants through state governments to councils in support of the services they provided to communities. These funds are distributed in accordance with the national principles and this report provides an account of how the states and the Northern Territory allocate these funds between councils. Importantly, these grants to councils are untied, so councils are able to devote these funds to the priorities they themselves have identified. The government s response to the report of the House of Representatives Standing Committee on Economics, Finance and Public Administration s inquiry into local government, entitled Rates and Taxes: A Fair Share for Responsible Local Government (known as the Hawker Report), was tabled on 22 June 2005. This national report includes an update on progress made by the Australian Government in addressing the recommendations of the Hawker Report it agreed to pursue. The most significant achievement in addressing the Hawker Report recommendations in 2005 06 was the signing of a tri-partite inter-governmental agreement on local government. The agreement, entitled The Inter-governmental Agreement Establishing Principles Guiding Inter-governmental Relations on Local Government Matters was finalised in April 2006. For the first time, the three spheres of government have agreed on a framework within which services are to be funded and delivered to the community at the local level. The inter-governmental agreement offers the possibility of a new relationship between local government and the other spheres of government. The agreement obtained in-principle agreement from governments that when a responsibility is devolved to local government, local government is consulted and the financial and other impacts on local government are taken into account. The objectives of the inter-governmental agreement include providing for greater financial transparency between the three spheres of government in relation to local government services and functions. In addition, the agreement aims to improve the relationship and consultation between governments on local government matters. The inter-governmental agreement also seeks to provide an overall framework for developing further agreements between local government and the other spheres of government. This includes consulting and making agreements with individual local governing bodies and, where appropriate, local government peak representative bodies. This report has been prepared with the cooperation of all spheres of government and I would like to thank the state and territory governments and the local government associations for their contributions. The Hon Jim Lloyd MP Minister for Local Government, Territories and Roads iii

Contents Foreword Preface iii ix Chapter 1 Local governance in Australia 1 Local government roles 2 Local government functions 2 Size and diversity 3 Involvement in inter-governmental structures 9 National representation of local government 11 Local government finances 12 Local government revenue 12 Local government expenditure 18 State comparison of expenditure by purpose 19 Grant funding 20 State and territory funding 24 Assets and liabilities 25 Chapter 2 Financial assistance grants to local government 27 Current arrangements 29 Determining the quantum of the grant 29 Determining entitlements for 2005 06 and 2006 07 30 Inter-jurisdictional distribution of the grants 34 Quantum of financial assistance grants allocations 36 Principles for determining the distribution of grants within jurisdictions 41 Determining the distribution of grants within jurisdictions 43 Bodies eligible to receive financial assistance grants 44 Local government grants commissions methods 45 Allocation of grants to councils in 2005 06 46 Councils on the minimum grant 49 Reviews of Grants Commission methods 52 Impact of grants commission capping policies 53 Acquittal of the grants 53 Chapter 3 Local government efficiency and performance 55 National Competition Policy and local government 56 A new National Reform Agenda 57 Local government performance and efficiency 58 Local government financial position 59 Summary 59 iv

Chapter 4 Local government infrastructure 61 Local government infrastructure responsibilities 62 Extent of council-managed local road network 64 Road funding by each sphere of government 65 Australian Government funding for local roads 65 State government funding 68 Chapter 5 Local government service provision to Indigenous communities 75 Reporting requirements 77 Australian Government expenditure and progress 82 National Awards for Local Government 83 Chapter 6 Australian Government response to Rates and Taxes: A Fair Share for Responsible Local Government 85 A tri-partite inter-governmental agreement 86 A Parliamentary resolution on local government 87 Consultations on impediments to prudent borrowing 87 Enhancement of the National Awards for Local Government 88 Council amalgamations 88 Review of the financial assistance grants 89 The future financial governance of local government 89 Appendixes 91 A. National principles for allocating general purpose and local road grants 92 B. State methods for distributing financial assistance grants 2005 06 95 C. Comparison of local government grants commission distribution models 144 D. Distribution of financial assistance grants to local governing bodies in 2005 06 157 E. Ranking of local governing bodies on a relative needs basis 2005 06 189 F. Australian classification of local governments 212 G. Progress in improving efficiency of local government 215 H. Progress on performance of local government in service provision to Indigenous communities 249 I. Best practice in local government 269 Bibliography 294 Glossary 296 Index of local governments 300 General index 308 v

Tables Table 1.1: Local government employment, by jurisdiction, 2002 06 4 Table 1.2: Selected characteristics of local governing bodies by jurisdiction, as at 1 July 2006 5 Table 1.3: Characteristics of selected councils, 2005 06 8 Table 1.4: Share of taxation revenue by sphere of government and source of revenue, 2005 06 12 Table 1.5: Local government revenue sources by jurisdiction, 2005 06 14 Table 1.6: Local government revenue by source by jurisdiction, $ per capita, 2005 06 14 Table 1.7: Local government expenditure by purpose, by jurisdiction, 2005 06 18 Table 1.8: Local government expenditure by purpose, by jurisdiction, $ per capita, 2005 06 19 Table 1.9: Specific purpose payments from the Australian Government direct to local government, by jurisdiction, 2005 06 ($ 000) 22 Table 1.10: Regional Partnership grants approved for local government in 2005 06 by jurisdiction 23 Table 1.11: Grants from states to local government by purpose, 2004 05 ($m) 24 Table 1.12: Local government assets and liabilities, at 30 June 2005 ($m) 26 Table 2.1: Calculation of financial assistance grants actual entitlements and adjustments for 2005 06 32 Table 2.2: Calculation of financial assistance grants estimated entitlements and cash grant paid for 2006 07 33 Table 2.3: 2005 06 allocations of general purpose and local road grants among jurisdictions 35 Table 2.4: 2006 07 allocations of estimated grant entitlement among jurisdictions and percentage change from 2005 06 actual grant allocation 35 Table 2.5: National financial assistance grant allocation, 1974 75 to 2006 07 ($) 36 Table 2.6: Financial assistance grant allocation New South Wales and Victoria, 1974 75 to 2006 07 ($) 37 Table 2.7: Financial assistance grant allocation Queensland and Western Australia, 1974 75 to 2006 07 ($) 38 Table 2.8: Financial assistance grant allocation South Australia and Tasmania, 1974 75 to 2006 07 ($) 39 Table 2.9: Financial assistance grant allocation Northern Territory and Australian Capital Territory, 1974 75 to 2006 07 ($) 40 Table 2.10: Distribution of local governing bodies by type by state at June 2006 44 Table 2.11: Average general purpose grant per capita to councils by state and ACLG category, 2005 06 ($) 47 Table 2.12: Average local road grant per kilometre to councils by state and ACLG category, 2005 06 ($) 48 Table 2.13: Minimum grant council statistics by jurisdiction, 1996 97 to 2006 07 49 Table 2.14: Status of major methodology reviews undertaken since July 1995, by state, as at 30 June 2006 52 Table 3.1: National Competition Policy payments, 2004 05 and 2005 06 ($m) 57 vi

Table 4.1: Estimated value of local roads and bridges 63 Table 4.2: Value of local government buildings, net of depreciation $m, 2004 05 64 Table 4.3: Local road statistics based on council data at June 2006 64 Table 4.4: Estimated spending on council-managed local roads, 2001 02 to 2003 04 65 Table 4.5: Australian Government funding for council-managed local roads, 2001 02 to 2006 07 66 Table 4.6: AusLink Roads to Recovery program planned expenditure 67 Table 4.7: Strategic Regional Program planned estimated expenditure 67 Table 4.8: Australian Government additional funds for local roads in South Australia, 2004 05 to 2010 11 68 Table 4.9: New South Wales state government funding for council-managed local roads 69 Table 4.10: Victoria state government funding for local roads 69 Table 4.11: Queensland state government funding for council-managed local roads, Transport Infrastructure Development Scheme 70 Table 4.12: Western Australia State Road Funds to Local Government Agreement 71 Table 4.13: Western Australian local road expenditure by source of funds, 2000 01 to 2004 05 71 Table 4.14: South Australia state government funding for council-managed local roads, 2003 04 to 2006 07 72 Table 4.15: South Australia council expenditure on local roads 72 Table 4.16: Tasmania state government direct spending on council-managed local roads, 2004 05 and 2005 06 72 Table 4.17: Tasmania council expenditure on local roads 73 Table 5.1: Distribution of Indigenous councils by eligibility type and by state, June 2006 82 Table B.1: Cost drivers and average expenditure per unit Victoria 104 Table B.2: Average grant revenue per unit Victoria 106 Table B.3: Standardised fees and charges per unit Victoria 108 Table B.4: Changes in general purpose grant entitlements from 2004 05 to 2005 06 Victoria 109 Table B.5: 2005 06 natural disaster assistance from general purpose grant funding Victoria 109 Table B.6: Changes in local road length from 2004 05 to 2005 06 Victoria 110 Table B.7: Average annual costs used in allocating local road grants for 2005 06 Victoria 111 Table B.8: Changes in local road grant entitlement from 2004 05 to 2005 06 Victoria 112 Table B.9: Outline of expenditure assessment for 2005 06 Queensland 115 Table B.10: Rural roads standards and cost adjustors Queensland 117 Table B.11: Urban roads standards and cost adjustors Queensland 117 Table B.12: Definition of terms used in formulae Western Australia 124 Table B.13: Local road grant funding 2005 06 Western Australia 125 Table B.14: Expenditure functions, standard cost and units of measure South Australia 128 Table B.15: Expenditure functions, standard cost, units of measure and aggregate units of measure South Australia 130 Table B.16: Description of non-road expenditure functions Tasmania 134 vii

Table B.17: Application of cost adjustors to expenditure standards Tasmania 135 Table C.1: Features of local government grants commission models for assessing local road need, 2005 06 145 Table C.2: Differences in the distribution models grants commissions use for the general purpose component for 2005 06 allocations 147 Table C.3: The scope of equalisation of grants commission general purpose models 148 Table C.4: Grants treated by inclusion in general purpose grant allocations for 2005 06, by jurisdiction 154 Table D.1: Distribution of financial assistance grants to local governing bodies by classification and population, 2005 06 and 2006 07 158 Table E.1: New South Wales councils ranked by financial assistance grant funding 2005 06 191 Table E.2: Victorian councils ranked by financial assistance grant funding 2005 06 195 Table E.3: Queensland councils ranked by financial assistance grant funding 2005 06 198 Table E.4: Western Australian councils ranked by financial assistance grant funding 2005 06 202 Table E.5: South Australian councils ranked by financial assistance grant funding 2005 06 206 Table E.6: Tasmanian councils ranked by financial assistance grant funding 2005 06 209 Table E.7: Northern Territory councils ranked by financial assistance grant funding 2005 06 210 Table F.1: Structure of the classification system 213 Table F.2: Number of councils by ACLG by category and by state, June 2006 214 Table F.3: Changes in ACLG category for 2005 06: reasons for change by state, June 2006 214 Table G.1: Actual payments to local governments under the National Competition Policy Financial Incentive Package, 1997 98 to 2003 04 228 Table G.2: ACT NOWaste benchmarks 245 Table G.3: Roads ACT benchmarked assets 246 Table H.1: Financial assistance grant entitlements to Indigenous councils for 2005 06 265 Table I.1: Categories for the 2006 National Awards for Local Government 271 Figures Figure 1.1: Local government revenue by source, by jurisdiction, 2005 06 13 Figure 1.2: Local government rate revenue per capita for 1998 99 to 2005 06, expressed in 1998 99 $, by jurisdiction 15 Figure 1.3: Local government expenditure by jurisdiction, 2005 06 20 Figure 4.1: Australian Government local roads funding 66 Figure A.1: National Principles for allocating general purpose and local road grants 93 Figure G.1: General purpose grants as a proportion of local government revenue, 1995 96 to 2004 05 223 Figure G.2: Aggregate capital funding gap 224 viii

Preface The Local Government (Financial Assistance) Act 1995 requires that the minister report to Parliament on the operation of the Act as soon as practicable after 30 June each year. This annual report to Parliament must include an assessment of: the extent to which allocation of financial assistance grants has been made on a full horizontal equalisation basis the methods local government grants commissions used in making their recommendations the performance by local governing bodies of their functions including: their efficiency services provided by them to Aboriginal and Torres Strait Islander communities. Submitting an annual report to Parliament seeks to achieve two of the government s goals in relation to the arrangements under the Act. They are: to increase the transparency and accountability of methodologies used in allocating the Australian Government s grants to local governing bodies to promote consistency in the methods by which grants are allocated to achieve equitable levels of services by local governing bodies. Reporting on local governing bodies performance helps to assess whether two of the Act s purposes are being achieved. These purposes are: to improve the efficiency of local government to improve the provision by local governing bodies of services to Aboriginal and Torres Strait Islander communities. The report covers all local governing bodies in receipt of grants under the Act. It fosters transparency and accountability by enabling an interstate and an intrastate comparison of the allocation of grants to local governing bodies. Chapter 1 provides an overview of local government in Australia, including its roles, functions, size and diversity, finances and governance arrangements. Chapter 2 provides an overview of the process and principles of apportioning funding between the states and between local governing bodies within a state. Appendix D sets out the financial outcomes for all local governing bodies in receipt of financial assistance grants. The National Principles for allocating the general purpose and local road components of the financial assistance grants is at Appendix A, and the methodologies each state adopted in allocating funding to local governing bodies are summarised at Appendix B. Appendix C provides a comparison of the distribution models used by the state and Northern Territory grants commissions. The grant outcomes for each council in 2005 06 is at Appendix D, while Appendix E shows the ranking of local governing bodies within a state on a relative needs basis. The classification system used in Appendixes D and E to categorise local governing bodies is described in Appendix F. ix

Local government efficiency and performance is discussed in Chapter 3, which reports on state developments, Australian Government activities to support local government performance improvement and application of the National Competition Policy. State reports on performance and reform are at Appendix G. Improved performance of local governing bodies continues to be promoted through the National Awards for Local Government. The 2006 Award winners are at Appendix I. Chapter 4 addresses infrastructure issues, primarily local roads, and asset management issues, and has a bearing on the efficiency and effectiveness aspects of local government performance. A report on delivery of local government services to Aboriginal and Torres Strait Islander people is in Chapter 5 and the reports from the states and territories are at Appendix H. Also included in Appendix H is a table providing the financial assistance grants for 2005 06 to the 91 identified Indigenous councils. This year Chapter 6 is a report on the Australian Government s progress in addressing those recommendations of the report Rates and Taxes: A Fair Share for Responsible Local Government (the Hawker Report) it agreed to pursue. x

Chapter 1 Local governance in Australia Chapter 1 Local governance in Australia 1

Local Government National Report 2005 06 Chapter 1 Local governance in Australia In Australia, the division of responsibilities between the Commonwealth Government and the state governments flows from the Australian Constitution. Section 51 of the Constitution enumerates the areas of responsibility the states granted to the Commonwealth (or Australian) Government at the time of Federation in 1901. These powers included immigration, foreign affairs, defence, customs and excise, international and interstate trade, and currency. Later the Commonwealth also assumed responsibility for Australian territories that were not within any state at the time of Federation. The states reserved all other areas to themselves, including health, education, most rail transport, water and sewerage, land development, policing and justice. The area of control for the Australian Government has since been extended or clarified either by constitutional amendment or by High Court decisions. Local government is not one of the areas identified as an Australian Government responsibility and thus remains a state responsibility. Each state and the Northern Territory provide the legal and regulatory framework for council operations. As a consequence, there are significant differences between jurisdictions for overseeing the roles, functions and responsibilities of councils and the services they deliver. The Australian Government has recognised that the national interest is served through improving local governments capacity to deliver services to all Australians, while also enhancing the performance and efficiency of the sector. The Australian Government uses the Local Government (Financial Assistance) Act 1995 as the primary means to achieve these goals. Local government roles State legislation provides the framework for local government roles. These roles are not prescribed, so local government bodies in all jurisdictions have the authority to provide generally for the good governance of their local government area. In effect, this confers on local government the powers of general competence, or the power to take action in any area not expressly precluded by other legislation. Local government has roles in governance, advocacy, service delivery, planning and community development, and regulation. Local government functions Councils determine service provision according to local needs and the requirements of the various state local government Acts and they are increasingly providing services above and beyond those traditionally associated with local government. Examples of local government functions and services include: 2

engineering (public works design, construction and maintenance of roads, bridges, footpaths, drainage, cleaning, waste collection and management) recreation (golf courses, swimming pools, sports courts, recreation centres, halls, kiosks, camping grounds and caravan parks) health (water sampling, food sampling, immunisation, toilets, noise control, meat inspection and animal control) community services (child care, elderly care and accommodation, refuge facilities, meals on wheels, counselling and welfare) building (inspection, licensing, certification and enforcement) planning and development approval administration (of aerodromes, quarries, cemeteries, parking stations and street parking) cultural/educational (libraries, art galleries and museums) water and sewerage (in some states) other (abattoirs, sale-yards, markets and group purchasing schemes). Chapter 1 Local governance in Australia Unlike local government in many other Organization for Economic Cooperation and Development (OECD) member countries, including the United Kingdom and the United States, Australian local governments do not have primary responsibility for services such as education, policing and public housing in Australia, these are primarily state and territory government responsibilities. Size and diversity Local government has a small but significant role in the Australian economy, with local government expenditure around $19.43 billion in 2004 05, representing 2.07 per cent of gross domestic product. In 2005 06, 701 local governing bodies were eligible to receive financial assistance grants from the Australian Government and of these 91 were Indigenous bodies. The term local governing bodies is defined in the financial assistance grants legislation and includes councils established under state and territory legislation as well as declared bodies. Declared bodies are provided with financial assistance grants and are treated as councils for the purposes of grant allocations. However, declared bodies are not councils and do not have the same legislative requirements as councils. Declared bodies include the Outback Areas Community Development Trust in South Australia, the Roads Trust in the Northern Territory and certain Indigenous Community Councils. Due to differences in defining councils and local governing bodies, some of the data provided in tables and figures in this report that relate to councils may not be strictly comparable with those for local governing bodies. Employees In May 2006, 167 400 people were estimated to be employed by the local government sector nationally (see Table 1.1). Between May 2002 and May 2006, local government in the Northern Territory (37.5%) had the largest increase in the number of employees, followed by South Australia (20.2%) and Victoria (18.8%). The smallest increase was in New South Wales (3.5%). The population served per employee varies considerably across jurisdictions from 62 in the Northern Territory to 154 in South Australia with the national average being 121. The differences between states reflect the relative size of the local government sector in the state, the extent of outsourcing, and the range of functions local government performs. 3

Local Government National Report 2005 06 Table 1.1: Local government employment, by jurisdiction, 2002 06 Employees b ( 000) Population served Jurisdiction Population a March 2005 ( 000) May 2002 May 2004 May 2006 per employee May 2006 NSW 6 817.14 48.7 51.1 50.4 135 Vic. 5 078.47 32.5 36.5 38.6 132 Qld 4 035.71 38.9 38.4 43.5 93 WA 2 042.78 14.7 15.8 17.1 119 SA 1 552.32 8.4 9.9 10.1 154 Tas. 488.70 4.1 4.1 4.4 111 NT 205.92 2.4 3.4 3.3 62 Total 20 221.04 149.7 159.2 167.4 121 Sources: a Australian Bureau of Statistics, Australian Demographic Statistics, cat. no. 3101.0, March 2006. b Australian Bureau of Statistics, Employed Wage and Salary Earners, Australia: Original Series, cat. no. 6248.0, various issues. Australian Bureau of Statistics, Wage and Salary Earners, Public Sector, Australia: Original Series, cat. no. 6248.0.55.001, May 2006. Population Table 1.2 shows that across all jurisdictions, the average population for local governing bodies at 30 June 2005 was just over 28 432. However, 50 per cent of local governing bodies have less than 7293 residents. Population ranges from zero for the Roads Trust in the Northern Territory to 971 757 for Brisbane City Council. Although the Roads Trust is considered a local governing body for the purpose of grants, it has no physical area and no responsibility for providing local government services other than roads. The average population size of local governing bodies by jurisdiction differs markedly, varying from 3016 in the Northern Territory, where there are many small Indigenous communities, to 62 774 in Victoria. Table 1.2 shows different characteristics of the distribution of local governing bodies by population within jurisdictions. These different measures are provided because average population size can mask the variability of the population of local governing bodies within a jurisdiction. For instance, the average population for Queensland local governing bodies is around 25 234, but half of them have a population of less than 3558. The median population size for Western Australian local governing bodies is 2743 the smallest median for all the states. Western Australia is the only state not to have undergone major structural reform since the early 1990s. 4

Table 1.2: Selected characteristics of local governing bodies a by jurisdiction, as at 1 July 2006 Jurisdiction No. of bodies Characteristic Minimum First quartile b Median c Third quartile d Maximum Average Total NSW 155 Population (no) 57 6 789 20 357 59 500 283 458 41 339 6 773 615 Road length (km) 0 477 881 1 257 3 245 895 143 782 Area (sq km) 0 221 2 689 4 945 53 511 4 568 708 067 Vic. 80 Population (no) 3 191 15 751 39 744 110 078 217 349 62 774 5 021 886 Road length (km) 7 599 1 293 2 401 5 168 1 615 129 171 Area (sq km) 3 114 1 532 4 032 22 087 2 841 227 316 Qld 157 Population (no) 57 1 012 3 558 12 545 971 757 25 234 3 961 698 Road length (km) 2 265 834 1 322 5 562 904 174 522 Area (sq km) 0 695 2 422 10 501 117 084 11 153 1 751 096 WA 142 Population (no) 150 959 2 743 12 282 182 047 14 156 2 010 113 Road length (km) 9 507 738 1 121 4 147 866 122 993 Area (sq km) 2 852 2 000 6 924 378 533 17 515 2 487 130 SA 74 Population (no) 67 2 403 8 282 20 670 154 514 20 838 1 542 033 Road length (km) 0 308 941 1 397 3 882 1 018 75 310 Area (sq km) 0 56 984 3 826 8 860 2 102 155 581 Tas. 29 Population (no) 877 5 784 11 454 20 914 65 021 16 733 485 263 Road length (km) 154 298 437 721 980 485 14 079 Area (sq km) 80 654 1 158 3 556 9 750 2 379 68 982 NT 64 Population (no) 0 320 530 1 307 69 262 3 016 193 035 Road length (km) 5 51 145 301 2145 220 14 108 Area (sq km) 0 0 5 257 28 700 1 453 92 989 All jurisdictions 701 Population (no) 0 1 437 7 293 28 807 971 757 28 432 19 987 643 Road length (km) 0 310 727 1 273 5 562 923 646 965 Area (sq km) 0 113 1 824 4 787 378 533 7 833 5 491 161 Notes: a Includes all local government bodies that received financial assistance grant funding in 2004 05. b The first quartile is the characteristic size at which 25 per cent of local governing bodies have smaller populations and 75 per cent are larger. c The median is the characteristic size at which 50 per cent of local governing bodies have smaller populations and 50 per cent are larger. d The third quartile is the characteristic size at which 75 per cent of local governing bodies have smaller populations and 25 per cent are larger. Source: Derived from local government grants commission s unpublished data. Chapter 1 Local governance in Australia 5

Local Government National Report 2005 06 Local road length maintained In 2005 06, local governing bodies were responsible for around 647 000 kilometres of local roads nationally. This is a significant proportion (over 80%) of the nation s roads by length. For all jurisdictions, except Queensland and the Northern Territory, the proportion of the length of local government roads that is sealed is around 33 per cent with the proportion varying from 14 per cent in the Northern Territory to 48 per cent in Tasmania. Table 1.2 shows the average length of road for which local governing bodies are responsible is 923 kilometres. However, 25 per cent of local governing bodies are responsible for less than 310 kilometres of local road and 25 per cent are responsible for more than 1273 kilometres. The local governing body responsible for the longest road length is Brisbane City Council with 5562 kilometres. Table 1.2 shows that in New South Wales and South Australia the minimum road length is zero. This is due to some local governing bodies, although eligible for financial assistance grants under the Act, not having a local roads responsibility. Area Table 1.2 highlights some of the variations in the area of local governing bodies in Australia. It shows that, like population, the area of local governing bodies varies considerably within and between states. Nationally, the average area of local governing bodies is 7833 square kilometres. However, 50 per cent of local governing bodies have an area of less than 1824 square kilometres. Nine local governing bodies in Western Australia and Queensland cover areas greater than 100 000 square kilometres. The council with the largest area is East Pilbara in Western Australia with 378 533 square kilometres. Table 1.2 shows that the minimum for many jurisdictions is zero square kilometres. Some local governing bodies are recorded as having no area because either their boundaries are not defined (for example, some Indigenous community councils) or they are not responsible for providing property services within a particular area of land, such as the Outback Areas Community Development Trust in South Australia. With 75 per cent of local governing bodies in the Northern Territory occupying less than 257 square kilometres, local governing bodies in the Northern Territory have the smallest areas. This is because a large proportion of the Northern Territory is unincorporated (that is, not included within the boundary of a local governing body) and many Indigenous community councils do not have their boundaries defined. The area of local governing bodies in South Australia is generally smaller than the area in other states and this reflects the fact that a large proportion (around 85%) of South Australia is unincorporated. Diversity Diversity can be great both within and between jurisdictions and goes beyond rural metropolitan differences. In addition to size and population, other significant differences between local governing bodies include: range and scale of functions councils fiscal position (including wide disparity in revenue-raising capacity), resources and skills base physical, economic, social and cultural environments of local government areas attitudes and aspirations of local communities legislative frameworks within which councils operate, including voting rights and electoral systems. 6

For instance, in relation to legislative frameworks, Indigenous councils are established under different arrangements. Indigenous councils can be established under the mainstream local government legislation of a jurisdiction, or through separate, specific legislation, or can be declared to be local governing bodies by the Australian Minister for Local Government, on advice from a state minister. Chapter 5 has more details on this issue. Table 1.3 gives some flavour of the physical and financial diversity showing, for a selection of councils, the range of areas, populations, local road lengths and income from rates and financial assistance grants. For instance, it shows the variation in population between an urban fringe council (Casey City in Victoria with 210 389 people) and a rural remote council (Barcoo Shire in Queensland with 464 people). The population density of councils can vary significantly too. The City of Marion in South Australia with an area of 56 square kilometres has a population density of 1438 residents per square kilometre compared with Shark Bay Shire, a rural remote council in Western Australia, with an area of 2500 square kilometres and a population density of 0.39 residents per square kilometre. Table 1.3 shows that total grants per capita in rural areas are usually significantly higher than in urban areas. This can be explained by the need for assistance in accessing services in rural areas like Jerilderie Shire in New South Wales with a population of 1883 and an area of 3375 square kilometres. Jerilderie Shire received nearly $785 per capita in 2005 06. Some rural councils Jerilderie, Barcoo and Shark Bay shires received more in financial assistance grants than they received in rate income. Per capita grant versus per capita rate income also varies significantly. The grant per capita for Barcoo ($4195) is more than 98 times that of the grant per capita for the City of Hobart ($42.68). Conversely, rate income per capita for the City of Hobart ($1221) is nearly 4.4 times that of Wollondilly Shire ($278). Appendix D lists all local governing bodies, the area they cover, their population, their local road length and details of financial assistance grants they receive. Chapter 1 Local governance in Australia 7

Local Government National Report 2005 06 Table 1.3: Characteristics of selected councils, 2005 06 Council State Classifiation a Population Area (sq km) Road length (km) Rate income ($ 000) Rate income per capita ($) 2005 06 financial assistance grant entitlement General purpose ($) Local road ($) Total ($) Total grant per capita ($) Hobart City b Tas. UCC 48 533 120 296 59 260 1 221.02 810 666 1 260 782 2 071 448 42.68 Marion City b SA UDL 80 512 56 464 36 694 455.76 1 341 865 1 040 408 2 382 273 29.59 Bayswater City b WA UDM 56 565 33 344 22 629 400.05 947 017 558 898 1 505 915 26.62 Casey City Vic. UFV 210 389 410 1 205 76 522 363.72 10 514 455 1 410 334 11 924 789 56.68 Thuringowa City Qld UFM 57 448 1 867 543 25 345 441.18 1 335 692 719 156 2 054 848 35.77 Wollondilly Shire NSW UFM 40 661 2 557 688 11 320 278.40 1 648 723 921 631 2 570 354 63.21 Coffs Harbour City NSW URM 66 529 1 118 703 20 728 311.56 4 221 074 1 319 294 5 540 368 83.28 Alice Springs Town NT URS 28 328 327 250 10 102 356.61 989 959 732 725 1 722 684 60.81 Tennant Creek Town NT URS 3 395 25 45 1 256 369.96 394 845 140 079 534 924 157.56 Surf Coast Shire Vic. RSG 22 471 1 553 1 011 19 217 855.19 1 457 415 922 128 2 379 543 105.89 Moyne Shire Vic. RAV 15 851 5 478 3 471 9 350 589.87 2 387 613 2 730 726 5 118 339 322.90 Dorset Municipal Tas. RAL 7 131 112 739 5 514 773.24 910 987 1 318 698 2 229 685 312.67 Kingston District SA RAM 2 313 3 363 947 2 259 976.65 398 897 175 245 574 142 248.22 Jerilderie Shire NSW RAS 1 883 3 375 998 1 204 639.41 795 838 681 832 1 477 670 784.74 Barcoo Shire Qld RTS 464 61 974 1 696 485 1045.25 1 283 673 663 033 1 946 706 4195.49 Shark Bay Shire WA RTS 968 2 500 602 558 576.45 1 104 094 592 555 1 696 649 1752.74 Notes: a Australian Classification of Local Governments see Appendix F. b These councils received the minimum per capita general purpose grant in 2005 06. Source: Derived from Department of Transport and Regional Services unpublished data. 8

Involvement in inter-governmental structures Council of Australian Governments COAG is the peak inter-governmental forum in Australia comprising the Prime Minister, state premiers, territory chief ministers and the Australian Local Government Association (ALGA) President. COAG s role is to initiate, develop and monitor the implementation of policy reforms which are of national significance and which require cooperative action by Australian governments. The issues COAG considers generally arise from international treaties that affect the states and territories, initiatives of one government that impact on other governments, and ministerial council deliberations. Ministerial councils are regular meetings of commonwealth, state and territory ministers sharing common responsibilities. Chapter 1 Local governance in Australia There are over 40 commonwealth state ministerial councils and forums currently facilitating consultation and cooperation between governments. Ministerial councils initiate, develop and monitor policy reform and take joint action to resolve issues that arise between governments. In particular, they develop policy reforms for COAG consideration and oversee implementation of COAG-agreed policy reforms. Local Government and Planning Ministers Council The Local Government and Planning Ministers Council includes federal, state and territory local government and planning ministers, the New Zealand local government minister and the ALGA President. The Council s primary objective is to lead debate and decision-making on key strategic policy matters for local government and planning in Australia and New Zealand that can be addressed at the national level. The Council s terms of reference are to: agree policy and strategic approaches for local government and planning issues exchange information and brief jurisdictions on significant current and emerging local government and planning issues, experiences and initiatives promote cooperation between all levels of government and encourage harmonisation across jurisdictional boundaries in the development and implementation of public policy, strategies and programs affecting local government and planning foster accountability to stakeholders through the monitoring and evaluation of policies, strategies and programs developed and implemented under the aegis of the Council provide leadership to all areas of government, industry and the community in working collaboratively to advance local government and planning issues liaise with other ministerial councils and other bodies on matters relevant to the activities of the Council. The Local Government and Planning Joint Committee supports the Council, with the Local Government Joint Officers Group and the Planning Officials Group as standing sub-committees. The Local Government and Planning Joint Committee consists of senior officers from the Australian Government, state, territory and the New Zealand departments with responsibility for local government and planning matters, and a senior representative from ALGA. 9

Local Government National Report 2005 06 In June 2004 the Council held a special roundtable meeting in Canberra with the Presidents of ALGA and the state and Northern Territory local government associations to discuss the recommendations of the report of the House of Representatives Standing Committee on Economics, Finance and Public Administration inquiry into Local Government and Cost Shifting, Rates and Taxes: A Fair Share for Responsible Local Government (the Hawker Report). During 2005 06 the Council met once in August 2005 (see Outcomes from the Local Government and Planning Ministers Council in 2005 06 for a report on the issues the Council considered during the year). A special meeting of the Council involving only the local government ministers and the President of ALGA was held on 12 April 2006 to consider a draft inter-governmental agreement to guide relations between local government, the Australian Government and the states and territories. This was one of the recommendations of the Hawker Report. At this meeting the Inter-Governmental Agreement Establishing Principles to Guide Inter-Governmental Relations on Local Government Matters, was agreed to and signed. The Council endorsed the objectives of the inter-governmental agreement that include providing for greater financial transparency between the three spheres of government in relation to local government services and functions. In addition, the agreement aims to improve the relationship by increasing consultation between governments on local government matters. The agreement contains an in-principle agreement from governments that when a responsibility is devolved to local government, local government is consulted and the financial and other impacts on local government are taken into account. Further details on the inter-governmental agreement are included in Chapter 6. OUTCOMES FROM THE LOCAL GOVERNMENT AND PLANNING MINISTERS COUNCIL 2005 The Local Government and Planning Ministers Council met in August 2005 in Melbourne. Prior to its meeting, it met jointly with the Housing Ministers Conference to discuss developing cross sectoral approaches for improving housing affordability. The key issues on the Council s agenda were: considering the Australian Government response to the Hawker Report recommendations and developing an inter-governmental agreement to guide relations between the states and territories, the Australian Government and local government supporting communities affected by rapid population growth (including sea change) developing strategies that might be adopted to address the impact of the Commonwealth s regulation of airport master planning under the Airports Act 1996 reviewing a draft leading practice model for development assessment prepared by the Development Assessment Forum considering urban infrastructure and related issues raised at the National Summit on the Future of Australian Cities and Towns and providing direction for a forward work program over the next five years for the Planning Officials Group. 10

Other ministerial councils In its 2001 review of ministerial councils, COAG agreed that the ALGA be represented on ministerial councils where there is a clear local government interest. Other than where membership is explicitly set out by statute or agreement, it is up to individual ministerial councils to decide whether ALGA should be a member or attend proceedings. Within the Transport and Regional Services portfolio, in addition to being a member of the Local Government and Planning Ministers Council, ALGA is also a member of the Regional Development Council and an observer on the Australian Transport Council. National representation of local government Australian Local Government Association ALGA is a federation of local governing body associations from each of Australia s six states and the Northern Territory. The Australian Capital Territory Government is also a member. The Association aims to add value, at the national level, to the work of state and territory associations and their member councils. ALGA represents the interests of local government through its participation in the Council of Australian Governments (COAG) and membership of a number of ministerial councils. Chapter 1 Local governance in Australia Local Government Managers Australia Local Government Managers Australia is a professional association of local government managers throughout Australia and the Asia Pacific. Local Government Managers Australia is committed to developing and improving local government management, maintaining high professional and ethical standards and ensuring that its members are at the forefront of change and innovation. Local Government Managers Australia has state divisions in New South Wales, Victoria, Queensland, Western Australia, South Australia and Tasmania with a national office in Melbourne, Victoria. Institute of Public Works Engineering Australia The Institute of Public Works Engineering Australia is a professional organisation providing member services and advocacy for those involved in and delivering public works and engineering services to the community. Previously known as the Institute of Municipal Engineering Australia, the organisation has expanded its traditional local government engineering focus to public works and thereby covers all levels of government and private practice. The Institute has Divisions in New South Wales, Victoria, Queensland, Western Australia, South Australia, Tasmania and the Northern Territory, with a national office in Sydney, New South Wales. 11

Local Government National Report 2005 06 Local government finances Share of taxation revenue by sphere of government In 2005 06, local government directly raised $8920 million in taxation revenue that is 3.0 per cent of all taxes raised across all spheres of government in Australia. Local government s taxation revenue is raised through a tax on property (see Table 1.4) that is exclusively raised through land rates. Local government taxation revenue increased 7.4 per cent from $8306 million in 2004 05 to $8920 million in 2005 06. Compared with local government, the states and territories raised almost twice as much in taxes on property at $16 043 million. This includes taxes on financial and capital transactions of almost $12 460 million as well as land taxes of almost $3583 million. Table 1.4: Share of taxation revenue by sphere of government and source of revenue, 2005 06 Revenue source Federal (%) State (%) Local (%) Total (%) Taxes on income 59.14 0 0 59.14 Employers payroll taxes 0.12 4.39 0 4.38 Taxes on property 0.01 5.68 2.99 8.68 Taxes on provision of goods and services 22.76 2.72 0 25.51 Taxes on use of goods and performance of activities 0.27 2.03 0 2.30 Total 82.31 14.85 2.99 100 Source: Australian Bureau of Statistics, Taxation Revenue, Table 1, cat. no. 5506.0. Local government revenue There is wide disparity in the ability of individual councils to raise revenue due largely to differences between urban, rural and remote councils, in population size, rating base and the ability or willingness of councils to levy user charges. The national averages for proportions of revenue from particular sources do, however, disguise the circumstances of individual councils that vary considerably. While a general indication of these variations can be obtained from Figure 1.1 and Table 1.5, significant variation in revenue raised between councils within the states and the Northern Territory remains. Table 1.6 shows the variation of revenue per capita across states for the various revenue sources. It shows, for example, that while South Australian councils collect the lowest total revenue per capita, they levy the highest rates per capita but raise the lowest revenue per capita for most other revenue sources. 12

Figure 1.1: Local government revenue by source, by jurisdiction, 2005 06 100% 90% 80% 70% 60% 50% Other Interest Income Sale of Goods & Services Grants and Subsidies Chapter 1 Local governance in Australia 40% 30% 20% 10% Taxation Revenue 0% NSW Vic Qld WA SA Tas NT Aust Source: Australian Bureau of Statistics, Government Finance Statistics, cat. no. 5512.0. Rates The only tax available to local government is rates on property. In 2005 06, 39 per cent of local government revenue came from rates nationally. The proportion of revenue from rates varied appreciably between jurisdictions, from a high of 60 per cent for South Australia to a low of 24 per cent for the Northern Territory. Table 1.6 shows that, on a per capita basis, rates revenue was the lowest for the Northern Territory at $297; and for the states, rates revenue per capita varied from $385 for New South Wales to $503 for South Australia. 13

Local Government National Report 2005 06 Table 1.5: Local government revenue sources by jurisdiction, 2005 06 Revenue source NSW Vic. Qld WA SA Tas. NT Total a Taxation revenue $m 2 613 2 519 1 807 928 785 207 62 8 920 % 36.6 51.9 27.1 41.5 60.2 32.6 23.8 38.6 Sale of goods $m 2 447 943 2 597 478 217 258 60 7 000 and services % 34.3 19.4 39.0 21.4 16.6 40.6 23.1 30.3 Interest $m 319 69 134 74 21 20 7 644 % 4.5 1.4 2.0 3.3 1.6 3.1 2.7 2.8 Current grants $m 635 547 464 190 154 69 56 2 117 and subsidies % 8.9 11.3 7.0 8.5 11.8 10.9 21.5 9.2 Other revenue $m 1 124 779 1 656 564 128 81 76 4 407 % 15.7 16.0 24.9 25.2 9.8 12.8 29.2 19.1 Total $m 7 138 4 856 6 659 2 234 1 305 635 260 23 088 % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Notes: a The sums of all individual state jurisdictions may not agree with total state figures due to transfers between jurisdictions. Source: Australian Bureau of Statistics, Government Finance Statistics, cat. no. 5512.0. Table 1.6: Local government revenue by source by jurisdiction, $ per capita, 2005 06 Revenue source NSW Vic. Qld WA SA Tas. NT Average Taxation revenue 384.78 495.04 446.21 455.30 503.35 423.69 296.97 441.06 Sale of goods and services 360.34 185.32 641.29 234.52 139.14 528.08 287.39 346.12 Interest 46.98 13.56 33.09 36.31 13.47 40.94 33.53 31.84 Current grants and subsidies 93.51 107.50 114.58 93.22 98.75 141.23 268.23 104.68 Other revenue 165.52 153.09 408.92 276.71 82.07 165.79 364.02 217.91 Total 1 051.13 954.32 1 644.34 1 096.06 836.77 1 299.74 1 245.34 1 141.61 Source: Australian Bureau of Statistics, Government Finance Statistics, cat. no. 5512.0 and Australian Bureau of Statistics unpublished data. 14