AUSTRALIAN LOCAL
GOVERNMENT ASSOCIATION
Local Government and Federal
Government – the importance of the direct
relationship, now and into the future
Mayor Troy Pickard, President
Australian Local Government Association
29 May 2015
Importance of the Relationship
• For Local Government – significant source of revenue
to support and meet community needs
• For the Federal Government – partnership
• Delivering national interest outcomes locally
Key Factors Influencing the
Relationship into the Future
• The Commission of Audit Report
• The Reform of Federation White Paper
• The Taxation White Paper
White Paper Processes
• Commonwealth processes to develop Commonwealth
policy
• Issues Papers – out now
• Green Papers – probably September 2015
• White Papers – probably 1st half 2016
• Federation and Tax Reform proceeding in parallel
Federation White Paper
• Terms of Reference released in June 2014
• Roles and responsibilities and sovereignty focus
• Eliminate duplication, waste, improve productivity, simpler
for citizens
• Guiding principles
Federation White Paper (cont.)
• Broad scope but narrowing to key areas of health,
housing and education
• Being developed through COAG but with Steering
Committee of officials
• Prime Minister’s Expert Advisory Panel
Taxation White Paper
• Treasurers leading
• No released Terms of Reference
• Two objectives:
1. Fairer and more competitive tax system
2. Revenue aligned with roles and responsibilities
(complementing the Federation White Paper)
• Issues Paper released with submissions by 1 June
Federation Reform
Issues for Local Government
• Term of Reference focus on limiting Commonwealth to
Section 51 responsibilities:
• Picks up Commission of Audit recommendations
• Future of $3 billion in annual federal funding for local
government
• Main grants program (FAGs) already vulnerable through
indexation freeze
Federation Reform
Issues for Local Government (cont.)
• No constitutional link between Federal and local
governments and none to be considered.
• Opportunity to gain recognition of local government role in
the Federation on the ground
• Delivering national interest outcomes at the local level:
• Equitable service access for all citizens wherever they
live
• Improved productivity
• Road safety
Taxation White Paper Issues
• Rates our only tax base
• Challenge to maintain the integrity of rates
• Illustrate importance
• Important revenue source $14 billion in 2013-14
• 38% of revenue across local government
• Highlight threats
• Rate Capping, exemptions, concessions
Taxation White Paper Issues (cont.)
• Flag issues around land tax reform
• Opportunity to argue for fair allocation of tax revenue
What is our Fiscal Position
Expenditure
Expenditure of $32 billion in 2013-14
Main Items of Expenditure:
• Housing and Community Amenities
• Transport and Communications
• General Public services
• Recreation and Culture
24%
22%
19%
15%
• Move to community based services away from infrastructure
What is our Fiscal Position
Expenditure (cont.)
Assets are a major issue for local government:
• Local Government
$354 billion
• State Government
$588 billion
• Federal Government
$106 billion
Total Non Financial Assets
$1048 billion
• Depreciation is a much greater burden for local government
• Infrastructure renewals backlog estimated to be $14.5 billion in
2006
What is our Fiscal Position
Revenue
Revenue of $38.6 billion in 2013-14
Main Sources of Revenue
• Rates, local government’s only tax base
38%
• Sale of goods and services
28%
• Current grants (mostly FAGs and R2R)
7%
• Other (capital grants, fines developer charges, etc) 24%
• For other levels of government, tax is most important source
Implications for Local Government
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Relatively limited tax base
Move to cost recovery in recent decades
Increasing focus on human services
Asset Management task
Infrastructure backlog
Intergovernmental transfers important
Importance of the relationship with the Federal Government
which provides most of those transfers
Responding to the Challenges Financial
Assistance Grants
1. Restore the indexation of FAGs
2. Increase FAGs funding
Freeze of the indexation of FAGs
• 2014-15 indexation of FAGs frozen for 3 years
• Total cost to local government is $925 million over the full period
• Permanent reduction in FAGs base by 13%
• In 1996 Local Government’s share of Commonwealth taxation = 1%
• Today it is less than 0.7%
• In 2016-17 it will be less than 0.6%
FAGs Campaign
Part 1 - Restore Indexation
What can councils do?
o
Make representations to your local Federal Member
explaining the impact of the freeze
o
Pass a resolution acknowledging the importance of
FAGs to your council
FAGs Campaign
Part 2 - Increase FAGs Funding
2014 National Commission of Audit
‘to assess the current split of roles and responsibilities between and
within the Commonwealth government and State and Territory
governments, including areas of duplication’
'... States have access to the personal income tax system so that they
are in a better position to fund their own priorities. This will include
support for local government.'
'... tied grants to local government cease, and to the extent that
programmes are identified as priorities, local or State governments
provide them to the communities they service.'
The Longer Term Strategy
The White Papers
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ALGA input to drafting
Submissions on Issues Papers, especially Taxation
Engagement in roundtable processes
COAG Leaders Retreat in July
Submissions to Green Papers
Engagement with the Federal Opposition so they know
our position and to understand their position
The White Papers
What Can Councils Do?
• Importance of councils making submissions to Issues Papers
and the Green Papers
• 2015 National General Assembly opportunity to hear updates
and consider issues
• Engage with Federal Government MPs as debate develops
• The White Paper will be the Government’s policy and MPs will
be central to its adoption
Questions?