Local Government Reform

Local government reform is currently on the table. The State Government appointed an independent board two years ago to oversee a review of the sector. Since then the board has done significant work with community and councils to investigate shared services, boundary adjustment and amalgamations.

However, throughout this process neither the board nor the Rockliff Government have articulated what the problem is they are trying to solve.

The State Government most frequently points to financial sustainability of councils as justification for wholesale change. However, interrogating the current situation will reveal that financial sustainability of councils is driven by a comparable lack of revenue from State Government grants and accounting standards set by the State.

Around the country, councils receive about 14% of their revenue from State Government, yet in Tasmania we receive and average of 4% Why is this? Who in the State Government has decided to chronically underfund councils to deliver services, then cry the system is broken?

Not only that, but every time services are threatened or cut, councils pick up the tab around the State. From medical clinics to childcare services, councils are providing more services than ever before with an increasingly smaller part of the funding pie. In fact around the country, Councils are responsible for about one third of all assets but only raise 3.6% of the gross tax revenue through rates.

In Hobart city, we provide 150 different services, often used by many visitors to the municipality, who don’t significantly contribute to their funding. The Doone Kennedy Aquatic Centre is a good example of such a service. The pool is used by people from all over Hobart. We keep the entry fees very low, because as a council, we recognise the importance of learning to swim in the Australian context and we place a high value on the community wide social and health benefits it brings.

However, under accounting standards set out by the State Government, Hobart City Council has to fund the aquatic centres depreciation each and every year. This accounting standard means that we estimate what the cost of rebuilding the entire facility would be in thirty years time, and fund that replacement cost in each budget. 

So, Hobart Ratepayers are picking up a $2.5 million tab every year to ensure that the aquatic centre is funded in perpetuity, even though if it was to rebuild, it would almost certainly attract State and Federal grants. Each year councils around the country lose 20% of their budget to asset depreciation compared to 6% for the States, and 2% federally.

But here’s the rub: The State don’t follow the same accounting standards. Imagine if the State Government had to fund depreciation of the Royal Hobart Hospital or our significant port infrastructure in each budget!

At the State level, they seek funding from the Federal Government to do major infrastructure projects including asset renewal, such as the port upgrade. And then they sell it as a great achievement that they have injected $20 million on a project. Meanwhile most councils are doing this every year as a budget measure.

Who on earth believes that amalgamations will fix anything in the absence of more simple and effective reforms?

There is significant efficiencies to be made with shared services. IT infrastructure and cyber security are great examples. Providing services like these at a State level will result in more efficiency and be significantly less costly than any amalgamations.

We also need the State to review The Local Government Act, and introduce progressive and modern measures like developer contributions, which will again enable councils to better manage their bottom line for the benefit of residents.

At the end of the day, amalgamations are a risky premise. They risk the viability of small towns where council employees make up a significant part of the entire workforce of a town. They are incredibly expensive to deliver, and they proffer no real solutions other than the smoke and mirrors of economies of scale. 

They combine highly disparate communities, such as the proposal to merge Derwent Valley with Brighton, Glenorchy and Hobart City. It will result in dilution of local representation and increase social inequities across municipalities. Put simply residents in Brighton and Derwent Valley will pay more for their rates and get less services for it. 

Mergers and amalgamations are not the silver bullet the State Government will have you believe they are. They solve little, are incredibly expensive to deliver, will likely result in worse services in some areas and risk viability of whole townships in Tasmania. Why not start with comprehensive shared services, a review of accounting standards and adequate funding from the State and go from there.