Talk of ‘eroded’ fiscal climates for local governments have recently been aired in discussions within the council chamber, government inquiries and as major concerns during council elections.
Putting figures to these concerns, former Yarra Ranges Council mayor and economics degree holder Tony Stevenson presented the straining financial outlook for municipalities at the Tuesday 10 December council meeting.
Mr Stevenson said essentially the council is “financially strangled” meaning “our whole community suffers”.
Quantifying the declining financial support from the State and Federal Government, Mr Stevenson said “our community needs to understand the financial stress that council faces in serving our community’s future needs”.
“We are fortunate to live in a wealthy nation with a progressive taxation system…The federal government is very much progressing its tax take,” he said.
“In fact, they’re now commanding over 80 per cent of all taxes collected, and they’re growing them at 11.4 per cent per annum over the last four years up to the end of June 2023.
“State Government tax is doing something very similar, 11.1 per cent, but across Australia, local governments have been running at a much lower rate, 3.7 per cent and much, much lower than that in Victoria due to rate capping.”
Local governments typically provide over 100 services to its communities, from sport pavilions to road maintenance, libraries and parks, rubbish collection and environmental protection.
“The Federal Government is very good at collecting taxes but it doesn’t deliver many services. Instead, it shares revenue with state and local governments for local service delivery.”
Based on the council’s last budget, Mr Stevenson said it was predicted that operating grants would only grow at 1.75 per cent per annum – a figure not even keeping pace with inflation.
“I realise that’s a projection from the council, but that’s based on learned history that there’s not very much money. 1.75 per cent is less than inflation. It means going backwards in real terms, which really is simply not acceptable,” he said.
Because of the 2.75 per cent rate cap, based on projections of CPI Consumer Price Index, “costs are growing faster than the rate cap” making the council’s major projects and upkeep of infrastructure a harder task.
“So while the council income is throttled to CPI, the actual cost of capital works has been growing faster than CPI, the real cost of capital works has increased by an average of 4.5 per cent over the past four years.
“And 64 per cent of council expenditure is affected by this. Capital works, roads, drains, footpaths, building and property maintenance are all being hit by that 4.5 per cent increase.
“So the facts demonstrate the council is expected to do more with less.”
Mr Stevenson said if you look at the most recent granting of $5.7 million to upgrade the Don Road sports pavilion in Healesville, it shows what could be achieved if higher levels of government worked with councils on funding arrangements.
Despite this, Mr Stevenson said “the federal government is simply giving us back a small fraction of their massive tax take”.
“Our community needs the Federal Government to provide more permanent funding indexed to real costs for local projects and infrastructure.”
With projects like the Snowy 2.0 project reaching a cost of $12 billion in August 2023, six times the original estimated value, as well as Federal funding being pulled for road resurfacing projects across the Yarra Ranges and Cardinia, Mr Stevenson said when councils can manage and execute projects, “local government actually spends money well, not perfectly, but well”.
“And the less tax the Federal Government returns to council, the more the burden falls on taxpayers.”
When asked what should or needs to be done, Mr Stevenson said even a return to the system of 2000, where “one per cent of federal tax collection was diverged to local government for local investment” would make a significant difference.
Mr Stevenson said with Federal elections ahead in 2025 it is up to all community members not just councils “to put pressure on those making the decisions in Canberra” and as candidates announce themselves to “politely seek a commitment that more of our tax dollars are reinvested back in our local community”.
