Financing facts
Facts about local government financing
Revenue
In 2003-04, local government revenue sources totalled $20.3 billion. Local government has three main sources of revenue. These include:
- Municipal rates
- Fees and user charges
- Grants and subsidies
Other sources of revenue include:
- interest income
- dividends
- interest on grants and subsides
- fines
The following chart (Chart 1) outlines the percentage of total revenue each source represents.
Chart 1: Revenue sources as a % of income
Expenditure
In 2003-04, local government expenditure equated to 18.3 billion. The following chart (Chart 2) outlines the percentage of total expenditure on nine broad categories of expenditure.
Chart 2: Expenditure split by category as a % ot total expenditure
Spending on infrastructure
Roads
According to the 2003-04 Local Government National Report, the best estimate for the value of local government's local roads is about $75 billion and that despite the $300 million contribution Roads to Recovery makes, local government has an annual local road deficit of about $344 million per annum.
The Report also states that, in 2002-03, local government spent $3.8 billion on local roads but needs to spend $4.1 billion per annum to maintain local roads in a fit-for-purpose condition. About one-third of local road spending is on new capital works and about two-thirds are on road renewal.
Of this $3.8 billion spent on local roads, approximately $2.9 billion was own-source revenue on local roads in 2002-03. This is up by 40 per cent since 1997 when the Bureau of Transport and Regional Economics estimated that council own-source spending on local roads was $2.0 billion. From this it is possible to conclude that Roads to Recovery funds have not substituted for council own-source spending and may have accelerated councils' own work to maintain local roads.
Water, sewerage and waste management infrastructure
In 2002-03, local government spent $2.6 billion on environment protection measures and $1.9 billion on natural resource management. Solid waste management ($1.3 billion) and waste water treatment ($1 billion) made up most of local governments environment protection spending, while spending on water supply ($800 million) and land management ($1.1 billion) accounted for most natural resourcing management spending. The ABS statistics also show that capital expenditure on waste water treatment fell from $447 million in 2000-01 to $376 million in 2002-03.
Local government cost recovers monies from its water supply activities. In 2002-03, $1.2 billion was collected and exceeded expenditure of $812 million, generating a surplus of $389 million.
In relation to land management activities (zoning, processing of development applications, management of recreation parks and sporting fields and management of some crown land) remains low. Revenue generated through these activities raise just $304.7 million whilst expenditure was $1.1 billion.
Local government's net worth
With assets of $182 billion and liabilities of $10 billion, local government's net worth as at 2003-04 was $172 billion. The majority of local government's assets are in the form of land and fixed assets. This category is worth $169 billion and accounts for 92% of all local government's assets. In regards to financial assets, local government holds just $11.5 billion. Consequently, local government's net financial worth (total financial assets less total liabilities) in 2003-04 is $1.5 billion.
Functions
Local government undertakes four broad categories of functions. These include:
- planning
- coordination
- service delivery
- regulatory activities
More specifically, functions include:
- infrastructure and property services, including local roads, bridges, footpaths, lighting, drainage, waste collection and management
- provision of recreation facilities, such as parks, sports fields and stadiums, golf courses, swimming pools, sport centres, halls, camping grounds and caravan parks
- health services such as water and food inspection, immunisation services, toilet facilities, noise control, meat inspection and animal control
- community services, such as child care, aged care and accommodation, community care and welfare services
- building services, including inspections, licensing, certification and enforcement
- planning an development approval
- administration of facilities, such as airports and aerodromes, ports and marinas, cemeteries, parking facilities and street parking
- cultural facilities and services such as libraries, art galleries and museums
- water and sewerage services in some states
- other services, such as abattoirs, sale-yards and group purchasing schemes
Local government plays an important role in the delivery of services to the Australian community. As such, it needs to be properly resourced. ALGA is calling for action on both the issue of cost shifting and local government financing.
