Speeches: 2005
Tackling local government's infrastructure crisis
Australian governments are working together to deliver the funding from the Natural Heritage Trust and the National Action Plan for Salinity and Water Quality through regional, catchment-based arrangements.
Address to the National Water Summit
Cr Paul Bell
President, Australian Local Government Association
30 March 2005, Sydney
Thank you Chair
I have been asked to address local government's role in developing and implementing water policy. In doing so, I'd like to do three things.
First, I will outline local government's role in water management.
Second, I will talk specifically about the National Water Initiative - about local government's involvement in the development of the Initiative and the outcomes we want to see emerge from it.
Third, I will talk about some specific problems confronting local government and the infrastructure solutions needed to address them.
Role of local government
There are 675 councils in Australia. They range in size from the Brisbane City Council with almost a million residents in a city covering 2,000 square kilometers, to the Shire of Murchison in Western Australia that caters for the needs of 150 people spread over an area the size of Holland.
Our councils are not only diverse in terms of demography, they are also diverse in terms of function. All councils, however, have a direct interest in water. This arises through their role as custodians of the land and environment, both as a manager of land in their own right, and as the principal authority for local land use planning.
They have a direct role in environmental protection and natural resource management, investing around $2.6 billion a year on environmental protection and a further $1.5 billion on natural resource management. This equates to 27% of total expenditure by local government, 86% of which is entirely derived from own-source revenue.
In Queensland, regional New South Wales and Tasmania, local government has long had a core role in the provision of water services. Those councils that have a water utility function - and there are around 320 of them - vary enormously in terms scale. Gold Coast Water, a business unit of the Gold Coast City Council, provides water, wastewater, trade waste and laboratory services to a consumer base of 370,000 and 2.3 million visitors each year. It has assets of $1.3bn including two dams, two water treatment plants, five wastewater treatment plants and 550 pumping stations and has an annual turnover of $130m.
On the south coast of NSW, the Shoalhaven City Council operates and maintains the water supply, sewerage schemes and effluent collection throughout the Shoalhaven region. The water supply scheme serves no less than 45 towns with a total of 45,000 properties covered. The council runs ten separate sewerage schemes. Water planning at the state and regional level is carried out in the broader context of natural resource management. So let me make some comments on these arrangements.
The Australian Government, the states, territories and local government are working together to deliver the funding from the Natural Heritage Trust and the National Action Plan for Salinity and Water Quality through regional, catchment-based arrangements. While regional governance arrangements are broadly welcomed, there remain significant difficulties with them. If we are to roll out programs that deliver results in regional areas, it would be logical to build them around local government structures. But this was not the case and effective engagement of local government has not always been achieved.
ALGA has completed a survey of councils in four states to gauge the level of awareness and participation in regional NRM processes. Prior to the introduction of the second phase of the Natural Heritage Trust, councils could access funding directly for environmental projects, however they must now work with the regional organisations to have their local priorities incorporated into regional plans. The NRM activities outlined in the regional plan are then prioritised and investments in projects made accordingly.
Almost all councils said they were aware of - or were participating in -the regional processes. But the degree of participation varied greatly. Only 12% reported inputting local information into the plan, but 73% had attended briefings. Most councils believe their regional plan does address local issues to some extent - but very few believe local issues are addressed well.
Councils identified a number of reasons why they have not been more active in plan development. The primary reason was a lack of resources with 56% of councils highlighting a lack of human or financial resources to effectively participate. Only 31% believe they have a good or comprehensive capacity to develop and implement the regional plans. Some councils sited a lack of consultation or a lack of recognition of their skills and experience by the regional organisation as reasons for low participation rates.
There clearly needs to be further work to address regional governance issues if we are to ensure the objectives of our natural resource management strategies are to be met in full. In the long run, we believe that there is a need to revisit our regional governance arrangements with a view to put local government in the driving seat - not the backseat.
National Water Initiative
The National Water Initiative is a bold and welcome plan designed to achieve two principle goals - secure important environmental outcomes for our nation and achieve water security for our communities. The reform agenda will fail - however - if it doesn't achieve a balance between these two, sometimes competing objectives. From a local government perspective, our interests reflect both these objectives. Our primary focus is on water security for our communities. But we are also custodians of the land and are therefore fully supportive of the environmental objectives of the Initiative. The Initiative is - incidentally - a good example of how the Australian federation should work.
We have a whole of government approach achieved through the Council of Australian Governments - a body that brings together the Prime Minister, the state and territory first ministers, together with the President of the Australian Local Government Association. ALGA - while supportive of the Initiative and its objectives - has some concerns. I'll deal with three of them.
Adverse impacts on communities: First, with the expansion of permanent trading in water will ensure we achieve more profitable use of water. There are - of course - benefits and risks associated with the development of a water market. While there will clearly be many winners from a national water policy and the introduction of a national water market, there will also be some losers. We must make sure that adversely affected communities can successfully plan for changing circumstances as water entitlements pass to high value users. ALGA argued at COAG for the development of community-focused structural adjustment packages for communities that will be adversely affected by the introduction of a water market.
In NSW, the Namoi Valley structural adjustment package is a good example of how funding can be applied to help communities embrace change brought about by significant reforms to water and land use management. Up to $20 million over 10 years will be provided for community adjustment through proposals which promote future growth of the region, diversify industry and generate long term employment. The geographic scope of the package is the Namoi groundwater zones, which include the local government areas of Liverpool Plains, Gunnedah, Narrabri and Walgett. A socio-economic analysis of the Namoi Valley is has been undertaken as part of this package with the results helping to ensure that funding assistance is effectively targeted.
Community-focused structural adjustment has the potential to ensure effective intervention by empowering and resourcing communities to develop local responses and solutions to changing economic and social circumstances. In July last year, the Council of Australian Governments effectively backed ALGA's call for structural adjustment arrangements to be an integral part of the National Water Initiative.
State governments signing the water agreement committed themselves to 'consult with affected stakeholders and provide adjustment assistance if necessary'. COAG recognised the importance of - and I quote - "involving all stakeholders in the development and implementation of water plans, providing understandable and up-to-date information on water, and addressing significant adjustment issues arising from reductions in water availability as a result of the implementation of the water agreement". We shall keep them to their word.
I might add that the agreement also calls for national standards for water accounting, reporting and metering together with actions to better manage the demand for water in urban areas. This will include a review of temporary water restrictions, minimum water efficiency standards and mandatory labeling of household appliances, and national guidelines for water sensitive urban design. At the national level, ALGA has input into the water policy development at several points. We are a full member of COAG and have actively participated in the senior officers' water group. We also participate on some 14 ministerial councils, including those dealing with natural resource management, environmental protection and local government and planning issues. However, the implementation of water policy - including water reforms - is being carried out at a state level. It is critical that local government is closely involved in the development of state and regional water plans.
Impact on council rates: A further issue of importance to local government concerns property values. The water market will require the value of water entitlements to be separated from property values. The concept is not hard to understand - some land, without its water may be notionally worth significantly less than previous valuations. This issue has been raised by ALGA and state associations as the impact on rate revenue could be considerable.
In Queensland, amendments have been made to the Valuation of Land Act to allow for a 12 month period between when the water separation comes into effect and when the new valuations are undertaken. This provides councils with time to adjust their rate categories to maintain their overall revenue base.
In NSW, there are 44 councils and 10,000 rural properties with water entitlements that will be subject to changes in valuation when the provisions of the Water Management Act are fully implemented. Some $50m in council income is at stake. The state minister for local government is now taking a package of options to Cabinet that - we understand - largely meet the concerns of the affected councils.
All jurisdictions need appropriate transitional arrangements to ensure that no councils are financially disadvantaged as an unintended consequence of water reform. ALGA will continue to monitor progress.
Water security and affordability for communities: Local government is also concerned about water security for communities. We have been working to ensure that we retain access to water that is affordable, is of high quality and is highly secure for community purposes. Issues surrounding the delivery of reliable and cost-effective water services to communities are rightly the domain of the state jurisdictions.
It is worth noting that - in developing the National Water Initiative under the auspices of COAG - state and territory governments have agreed to work on collaboratively with the Commonwealth and other states and territories. In other words, COAG could not dictate what the NSW Government will or won't do in regard to its own state water policies. The National Water Initiative takes the form of a mutual agreement to work together on a commonly agreed agenda. While states will roll out water plans under the Initiative, national concerns for local government includes affordability and, therefore, pricing policies.
The key issue here is the way in which full cost recovery principles are balanced against the need for affordable water for our communities. The methodology for full cost recovery and the pricing of externalities is yet to be determined. Local government is therefore pushing hard for the recognition of community service obligations in the provision of this essential service. While we support pricing as a tool to regulate use, no community should be denied fair access to reasonable water supplies on the basis of cost.
Urban water reform: A further issue of concern will be urban water reform. This will reinforce the need for urban users to use water efficiently through such activities as water recycling, the introduction of new efficient technologies, and pricing policy. Change here will occur at the state and local level under the broad principles of improved water use efficiency, demand management, water recycling, improved storm water management and water sensitive urban design.
There are a number of issues here from a local government perspective. They include the need for policy settings at a national and state level to do three things.
- Encourage water agencies to promote water efficiency;
- Encourage consumers to adopt better water use practices; and
- Help councils manage storm water to optimise the use/reuse of this water and d) develop urban design standards to conserve water and manage discharge.
Each of these solutions requires considerable community engagement. There is an urgent need for community education to assist communities understand the issues and ultimately change individual and family behaviours in relation to water use and water management.
Councils - as planning authorities - are ever mindful of the need to find sustainable solutions in order to reduce consumption rates and enhance conservation. We want to encourage innovation, such as the use of third pipe systems, rainwater tanks and grey water recycling. We also welcome initiatives such as the development of water efficiency labeling. With households accounting for 8% of water use, more sustainable water use is critically important.
Water and infrastructure
I'd like to turn now to the issue of coastal councils and the increasing demands placed upon their infrastructure - particularly water infrastructure.
A survey conducted by ALGA earlier this year of 82 coastal councils from across Australia revealed considerable pressure on their resources, particularly during holiday periods when populations swell dramatically. A quarter of all Australians live within three kilometres of the coast, and this proportion continues to increase. The survey found that 87% of councils experienced population increases over the past five years. Of these, more than 60% have experienced annual growth rates of 3% or more.
In addition, 67% of coastal councils reported experiencing increased pressure from tourism over the past five years. For instance, on average, coastal shires in Victoria must plan for their population to increase two and a half fold during peak tourism periods. The biggest environmental issue coastal councils are dealing with is adequate water supply. Large increases in population over a relatively short period of time have greatly increased demand for resources that have highlighted the inadequacy of water infrastructure development and capacity.
Councils are responding to a range of environmental pressures by developing new planning policies and environmental plans. In addition, many are providing incentives, such as extension services, to help conserve resources. But the pressures will continue to build unless we can secure some additional support for local government. This needs to take three forms.
First, local government - at the federal level - needs access to growth funding. At present, the Australian Government provides local government with around $1.5bn each year through financial assistance grants. These grants increase in line with inflation and population growth - which means they are essentially flat lining grants, which fail to grow with the real costs of providing services to our communities. What we seek - as the states and territories have successfully sought - is access to growth funds. This could easily be achieved through access to a fair share of national taxation revenue. We ask for just one percent. Such a move would dramatically increase the capacity of local government to meet the needs of our communities.
Second, we need to develop new partnerships with state and federal governments for specific purposes. These partnerships would ideally be based on the successful and much needed Roads to Recovery program. Under this program, the Australian Government is providing a total of $2.4bn over eight years to assist us with the maintenance and repair of local roads - roads which comprise nearly 85% of the entire Australian road network.
We envisage new partnerships in areas such as sustainable water supply. Under the Australian Water Fund, the Australian Government is providing $2bn for innovative water projects. Essentially, there is a pot of money - $1.6bn - for major projects. While this pot of money - to be administered by the National Water Commission - is open to local government and the private sector - it will largely be chewed up by big, state government projects. There is a second bucket of money - $200m over five years - or just $40m a year - that will be available for small projects at the community level. What local government needs- particularly those that have a water utility function - is a third pot of money that will facilitate medium level initiatives that can enhance water efficiency and innovation. Such initiatives might include augmenting existing water supply systems to cater for tourist influxes or implementation of third pipe projects, introduction of new technologies to facilitate water recycling or development of urban catchments.
Third, local government also needs assistance with infrastructure across the board. My guess is that some of you here today would have read the editorial in the Weekend Australian over Easter. The editorial picked up on the Business Council of Australia's report on the crisis confronting the nation's infrastructure. The editorial said - and I quote - "the BCA has given us a big picture report that must shake federal, state and local governments out of their reform torpor".
Well, I'm pleased to say that when it comes to infrastructure reform - local government is on the side of the angels. Our only problem is that - unlike our cashed-up counterparts in federal and state government - we don't have the resources to drive reform. But we do have ideas. Local government needs support for infrastructure replacement, renewal and acquisition.
Local government - particularly local government in regional areas - lacks the independent financial resources to fund directly large-scale infrastructure projects from current expenditure or reserves. We need an innovative, new funding model for regional infrastructure combining finance from all three spheres of government. This model would reduce the risk and cost of borrowing capital for local governments through additional financing provided by federal and state governments.
A flexible repayment schedule incorporating short and medium-term loans from the Australian Government and state governments would minimise the risk of long-term loans to local government. Operating additionally to existing grant financing of infrastructure, ALGA seeks $200m over four years from the Australian Government to initiate a new mechanism for funding regional infrastructure and leveraging contributions from state, territory and local governments. Such a fund would go a long way to assisting local government address the infrastructure challenges we face.
Summary
I might conclude by outlining some local government priorities as water reform gathers pace.
We need to ensure the commitment to structural adjustment packages is a real one and that the impact of water reform is closely monitored across regions and communities.
We need a genuine commitment to work with Indigenous communities to ensure they are fully able to participate and benefit from the water reform process.
We need to see better regional governance arrangements in place that better acknowledge and utilise local government's role as a key stakeholder in natural resource management.
We need to ensure that water supply for communities remains the highest priority in the process of water allocation.
And we need to see new forms of financial assistance to ensure local government can address its growing infrastructure crisis, meet community demand and engage in innovative and sustainable solutions to water challenges.
In the time available to me today, I haven't been able to cover the full range of issues facing local government in the search for sustainable solutions to our water problems. But I hope I have been able to raise a number of issues - and more importantly - suggest some solutions to the water challenges facing our communities. Thank you.
Councillor Paul Bell AM
President, Australian Local Government Association
30 March 2005
Sydney
