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Victoria Grants Commission2015

Rural Councils Victoria: Mayor, Councillor & CEO Forum

14 May 2015

Financial Assistance Grants for Rural Councils

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The Commission

• Commission members:

- John Watson (Chair)

- Michael Ulbrick

- Julie Eisenbise

• The Commission allocates Commonwealth financial assistance grants to local government (comprising general purpose grants and local roads grants).

• Funding is allocated between councils on the basis of agreed national principles, the most important of which is consideration of each council’s relative needs to receive funding.

• The funding is not tied to specific purposes.

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Indexation “Pause”

• The national funding pool is usually indexed annually in line with population growth and inflation forecasts.

• In the May 2014 Budget, the Commonwealth Government announced that indexation would be “paused” for 2014-15 and the following two years.

• The Commission estimates that this will reduce financial assistance grants to Victorian councils by $200 million over the four years to 2017-18.

• If indexation resumes as planned in 2017-18, it will be from a base that is about $64m below what would otherwise be the case – and this gap will continue to grow.

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Growth in Financial Assistance Grants

-

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

$ m

illio

n

Grants - previous yearsGrants - 2014 Budget forecastsGrants - projected from 2018-19Grants - if maintained at 4%

Financial Assistance Grants

$64.1m

$87.7m

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2015-16 Estimated Allocations - Victoria

General Purpose Grants $ 394.575 M (+0.2%)

Local Roads Grants $ 145.022 M (+0.0%)

Total Victorian Allocation $ 539.597 M

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Mildura

West Wimmera

Warrnambool Corangamite

Moyne

ColacOtway

Surf Coast

Greater Geelong

Golden Plains

South Gippsland

Bass Coast

Latrobe

Cardinia

Baw Baw

WellingtonYarra Ranges

Indigo

Wangaratta

Wodonga

Greater Bendigo

Central Goldfields

Mount Alexander

Buloke

Gannawarra

Ballarat

Moorabool

Pyrenees Hepburn

Mitchell

Strathbogie

Greater Shepparton

Mansfield

MoiraCampaspe

Northern Grampians

Loddon

Swan Hill

Yarriambiack

Hindmarsh

Southern Grampians

Ararat

Macedon Ranges

Murrindindi

Horsham

Glenelg

Alpine

Towong

East Gippsland

Benalla

Data for 2013-14 financial year.

Financial Assistance Grants

Financial assistance grants account for more than 10% of the recurrent revenue base of most

rural councils. A number of small rural councils receive 20% or more of their revenue from these grants.

Greater Geelong

Queenscliffe

Mornington Peninsula

CaseyFrankston

Greater Dandenong

Knox

Yarra Ranges

Nillumbik

Whittlesea

Hume

Brimbank

Melton

Wyndham

Yarra

Port Phillip

MelbourneHobsons

Bay

Maribyrnong

Moonee Valley

MorelandDarebin

Banyule

Maroondah

Whitehorse

Manningham

Boroondara

Stonnington

Glen Eira

Bayside

Monash

Kingston

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Variable Capping

• As a response to the indexation “pause” (and the timing of the announcement), the Commission adopted a variable capping arrangement for the 2014-15 allocations to minimise the impact on the Victorian councils most reliant on financial assistance grants.

2014-15 General Purpose Grants Local Roads GrantsMax. Increase Max. Decrease Max. Increase Max. Decrease

Min. Grant Councils N.A. N.A. 0.0% -2.0%

Metro/Regional Centres +3.0% -2.0% +3.0% -2.0%

Rural Councils +3.0% -1.0% +3.0% -1.0%

• Capping parameters for 2015-16 grants are still being finalised

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Grants to Rural Councils

The proportion of funding directed to rural councils is significantly greater than those councils’ share of Victoria’s population.

28.5%

21.8%

24.4%

11.9%

10.3%

3.1%

7.9%

11.9%

19.1%

16.8%

28.5%

15.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Metro Inner Metro Other Interface Regional Centres Large Rural Small Rural

Population

General Revenue Assistance

Rural councils comprise 14.4% of Victoria’s population but receive 44.2% of the financial assistance grants pool.

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Grants to Rural Councils

• This outcome reflects the Commission’s assessment that the relative needs of rural councils are higher than those of other councils – and that those relative needs are increasing over time.

• Changes to the allocation formula since 2000-01 have resulted in an ongoing transfer of funding from urban to rural councils.

• These changes include:

- altering the local roads model to give greater weighting to rural roads;

- introducing ‘minimum’ or ‘base’ populations for some functional areas; and

- increasing the use of factors such as population dispersion.

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General Purpose Grants

Bass Coast

Murrindindi

Horsham

Towong

Alpine

Greater Shepparton

Campaspe

Strathbogie

Indigo

Wangaratta

Wodonga

Mansfield

Latrobe

South Gippsland

CardiniaBaw Baw

Yarra Ranges

Mitchell

Macedon Ranges

MooraboolBallarat

Golden Plains

Hepburn

Mount Alexander

Central Goldfields

Greater Bendigo

Northern Grampians

PyreneesArarat

Greater Geelong

Surf CoastCorangamite

WarrnamboolColac Otway

Moyne

Southern Grampians

West Wimmera

Gannawarra

Swan Hill

Wellington

Moira

Loddon

Glenelg

Hindmarsh

Yarriambiack

Buloke

Mildura

East Gippsland

Benalla

2014-15 grant outcomes:On a per capita basis, general purpose grants to regional and rural councils are higher than

the State average ($68.60)

Minimum (20.83)

21-50

50-75

75-100

100-125

125-150

150-175

175-200

200-300

Per Capita ($head)

300+

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Trends – Total Grants Per Capita

Rural councils receive higher per capita grants than councils in other groups, and this trend has been accelerating over time.

$0

$100

$200

$300

$400

$500

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15*

Victoria Grants Commission - Total Grants Per Capita by Group

Small Rural

Large Rural

Regional Centres

Interface

Metro Other

Inner Metro

* Estimate data.(May 2014)

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Movement in Grant Outcomes

… in aggregate, rural councils received approximately $123m more in 2014-15 than they did in 2000-01.

Of that, approximately $57m is due to changes in the Commission’s methodology over that period (i.e. a shift in funds from urban councils to rural councils).

0

20

40

60

80

100

120

140

160

Metro Inner Metro Other Interface Regional Centres Large Rural Small Rural

$M

2000-01 Actual Grants

2014-15 Grants - Based on 2000-01 Relativities

2014-15 Actual Grants

$16.5M

$27.0M

$10.0M

$4.0M

$27.7M

$29.7M