It seems perverse to blame our councils for rate rises when they don't have all the tools they need to reduce their reliance on rates for their financial sustainability.
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In recent weeks we have seen much written about the rating increases of our state's councils, with commentary too often negatively focused on council rate rises above CPI. Putting to one side the fact that many of the cost drivers for councils, such as capital works, are exceeding CPI, blaming individual councils for their rate rises does not accurately portray the real situation.
The problem is not with individual councils but with the broader funding environment of the Tasmanian local government sector itself. Our councils face a range of pressures beyond their control and have only limited options available to them within their current funding envelope to respond.
Councils primarily generate revenue through property taxes (rates), user charges for services like parking, and grants from State and Federal governments. Rates and user charges constitute most of their independent revenue. While media commentary is focused on this independent revenue, it is too often the case that the State and Federal funding approaches and revenue distribution challenge local government's financial sustainability.
For instance, the State Government often collects sustainable user-based charges, but then does not distribute them to local government to sustain the very services they are charged on. A prime example of this is the State Government's Heavy Vehicle Motor Tax, a charge to recover road construction and maintenance costs resulting from heavy vehicle road usage. The State Government does not distribute the revenue from this tax to councils equitably to cover the costs of heavy vehicle impacts. Each year the State Government collects around $29 million from the Heavy Vehicle Motor Tax. Yet only $1.5 million of this is provided to councils even though they manage 80 per cent of Tasmania's road network, some 14,400 km. Councils are then forced to raise rates and subsidise heavy vehicle road access while the State Government reserves the revenue that is specifically designed to cover the costs of heavy vehicle usage.
The situation is not much better when it comes to the Federal Government, which provides Financial Assistance Grants to help councils provide local services and infrastructure. This core funding to local government has been in relative decline since the mid-1980s, slipping from 1 per cent of Commonwealth taxation revenue, to just half a per cent today. This decline has been most strongly felt in regional, rural and remote councils, where Financial Assistance Grants often make up a much higher component of their annual operating revenue.
Councils support community wellbeing and the economy in a range of important ways. There are things local councils can do better than other spheres of government, assuming they have the right capability and resources at their disposal. This requires our State and Federal governments to fairly re-distribute the revenue they collect. Without this, the burden falls onto councils to use their independent revenue sources, rates and user charges.
Local government has a clear future. But more than ensuring business as usual, local government is fundamental to supporting communities to manage the social, economic, and environmental changes we face. Local government must be sustainable, well-resourced, and given the tools it needs to support every Tasmanian.
Dion Lester - CEO Local Government Association of Tasmania
