Felicity-ann Lewis

27 May 2014 — The local government sector is reeling over the bottom-line implications of the federal budget. President of the Australian Local Government Association Dr Felicity-Ann Lewis and chief executive of the NSW Division of the Institute of Public Works Engineers John Roydhouse say pressures are already intense. In this interview they explain some of the impacts.

According to president of the Australian Local Government Association Felicity-Ann Lewis cuts to funding will affect everything from infrastructure and maintenance, to libraries, playgrounds and preventative health initiatives. In some cases it will threaten the survival of entire councils.

Dr Lewis told The Fifth Estate environmental programs, climate change adaptation, mitigation and renewable energy will be hit hard.

“Councils are the last bastion of people still trying to hold onto maintaining work on environmental efforts, such as low energy projects,” she said.

Dr Lewis, who is also mayor of the City of Marion in South Australia, said the only bright spot for local government in the budget was a promise of $350 million a year continued funding for the Roads to Recovery program, and a possible additional $350 million in 2015-16 from the selloff of state assets, under the Asset Recycling program.

A new $300 million program for the renewal of bridges, to be spread over five years, will also begin in 2014-15. However, these grants will not compensate for what is being lost, with councils responsible for maintaining 80 per cent of the nation’s roads by length.

The budget announced a three-year freeze of the Financial Assistance Grants, the federal government contribution to local government budgets, which means the amount distributed to councils will be reduced annually in real terms and remain at $2.28 billion a year until 2017-18.

In the first year this means councils will miss out on an expected $96 million increase in FAGs for the provision of essential local services and infrastructure in local communities; $200 million in in 2015-16 and $321 million in 2017-18 – total of $925 million lost in FAGs over the next four years.

Dr Lewis said FAG funds had already dropped from one per cent of total federal tax revenue to 0.7 per cent, and that by ALGA’s calculations, by the end of the three-year freeze it will have slipped down to just 0.53 per cent of tax revenue.

FAG funds are critical

Dr Lewis said one of the benefits of the FAG funds was that they are untied. In other words, councils can allocate the funds according to local priorities. They are also allocated in a manner that sees councils with smaller ratepayer bases given a larger share of the funds.

Overall, councils have been facing an increased financial burden, with issues including the ageing out of infrastructure, and the obligation to upgrade facilities where required to meet the specifications of the Disability Discrimination Act.

Where key infrastructure has been due for renewal, sometimes improved sustainability outcomes have been sought, such as the installation of energy-efficient street lighting, though Dr Lewis said generally councils seek other sources of funding for these, and for other energy-efficiency innovations such as solar panels for playground lighting.

Environmental cuts

“Coastal councils like [the City of Marion] are doing [climate change-related] work on issues such as storm surges and higher tides, and have accepted development cannot happen in those [affected] areas,” Dr Lewis said. “A number of councils are trying to be as effective as they can with environmental initiatives.

“But Caring for Country [grants] are gone, and while there is talk the [proposed] Green Army may pair up with local councils for local projects such as restoration and woody weed control, we don’t want to be given so many projects we don’t have the resources to manage the people and the work. Projects don’t get done just by labour, you have to provide in the budget for the materials and equipment.”

Green projects can work but they need support and planning

Dr Lewis gave the example of a recent City of Marion project, where the state government handed over the land from a former driver training facility, and council constructed Oaklands wetlands, which acts as a stormwater catchment and purification system via a series of linked ponds that eventually discharge cleaner stormwater to the sea.

Some of the water is harvested within the wetlands and stored in the aquifer, with a purple pipe system then reticulating it to 30 council-managed reserves and sports grounds. This, she said, drought-proofs these areas, and gives a bottom-line benefit in terms of water costs in addition to the environmental benefits.

“This is the kind of project which couldn’t happen now, thanks to the budget cuts,” she said.

Dr Lewis said the messages on landfills and carbon credits were “mixed and confused”. While a number of councils that operate landfills hold carbon credits, how these might be used is “still a bit up in the air”.

A great big pothole in council budgets

Dr Lewis said the cuts would not only reduce councils’ ability to maintain infrastructure but also impact on libraries, sports grounds and community health centres, which are “an essential part of the social fabric” promote health and “give a community its heart”.

The budget has already impacted local government jobs in preventative community health programs in communities and schools. Dr Lewis said these funds literally vanished overnight, and the states are telling ALGA they will not be picking up the tab.

This damages trust, she said, as councils had signed five-year funding agreements.

“We are reeling a bit over what this might mean, because any agreement we had with previous governments have been abandoned.”

For Dr Lewis, this raises questions such as, “At what point is an agreement a contract?”

“And when the federal government wants us to partner with them for the next project, we will be wondering, ‘Why would we want to partner with you?’ When the government changes, we risk finding the agreement gone, as we just have.”

Some councils risk fiscal collapse

The biggest risk, however, is that some councils may find themselves unable to function. Dr Lewis said this is one ALGA’s biggest fears, with a recent review of the sustainability of local councils showing some rural and regional local governments are in a perilous situation.

“[For these councils] the ratepayer base is small and they have thousands of kilometres of roads to maintain. These councils are highly reliant on FAG budgets,” she said. Some had been hit hard hit with natural disasters.

Productivity Commission

ALGA has made a submission to the current Productivity Commission inquiry into natural disaster funding, and is concerned there will be more cuts recommended.

“We don’t want to see more money taken off the table [as a result of the inquiry]. It gets to a point where you can’t push down any further, as there’s just no fat to absorb the push.

“We know we can’t absorb it by putting up rates, as we’ll have the same people struggling with all these other [budget-related] imposts [such as welfare cuts and fuel price increases].”

Dr Lewis that services that community has said it wants – waste water treatment, waste reduction and water management – may not be able to be delivered.

“You can see [the funding model] is broken. The state budgets, which have already been released, will probably [also] now need to go back to the drawing board.

“Even premiers and chief ministers have seen it will be difficult, and if they see [certain] councils are non-viable they will have to think about how they manage those areas. For example, in South Australia in the north of the state there are already non-incorporated lands where it was not viable to have local government [due to lack of population].

“This will make us dig deep and really think about innovation and collaboration. Maybe councils can share some things.

“I really worry for our small regional centres and rural communities. I hope people [in these communities] ring their National Party member or Liberal Party members and let them know about the pain they are feeling and the services that are being cut.”

The view from the public works frontlines

Chief executive of the NSW division of the Institute of Public Works Engineers John Roydhouse shared his concerns about the viability of regional and rural councils.

“[In terms of our members] there is good and bad in the federal budget,” Mr Roydhouse told The Fifth Estate.

“The good is the Roads to Recovery funding is being maintained, and the additional funding for bridge projects. The bad is the FAG reduction.

“FAG was in part designed to help communities with the least ability to afford projects, so [reducing funds] will have a larger impact on the smaller communities who can least afford it. This is a concern.”

Mr Roydhouse said this will worsen the existing $7.4 billion backlog in local government infrastructure that was identified by a recent Treasury report.

“In NSW, 85 per cent of the road network in length is maintained by local government, so we will now a road safety issue,” he warned.

“The federal government don’t have roads, they fund state roads such as the Pacific Highway, but that is only 15 per cent of the state road network.”

Education

IPWEA is also concerned that the cuts to education will make engineering a less attractive course for universities to offer, in addition to reducing the number of courses related to the discipline available through the TAFE sector.

“We do have a recognised skills shortage for engineering,” Mr Roydhouse said.

“Because engineering is not seen as the latest, greatest thing. It is not seen as competitive.”

Doing more with less

IPWEA has a substantial membership employed within the local government sector. Mr Roydhouse said one of the key differences for these engineers, compared with those in the mining sector, was the sense of contributing to their local community gained from public works projects.

Assisting councils to manage both the financial and broader sustainability challenges is firmly on IPWEA’s agenda.

“Our asset management techniques have made a difference [to financial viability], and enabled councils to do more with less,” Mr Roydhouse said.

“We also work on educating our members about new technologies. Working out how to achieve more with less [resources] is something local government has to do every day.”

No longer discussing the science, it’s time to start work on climate change

At the upcoming IPWEA Sustainable Communities conference, climate change adaption and mitigation will be firmly on the agenda.

“[IPWEA and local councils] are taking a leadership role,” Mr Roydhouse said.

“Local governments are doing their own research and implementing their own strategies. We have seen case after case of innovative stormwater harvesting strategies, as well as improving emergency management and warning systems. It’s always about betterment.

“Local governments are out there doing [climate change adaptation]. It’s about good asset management, and protecting what they’ve got and planning for the future.

“We’re past the stage of talking about the science, we’re at the stage of implementing it.

“And the big thing is – local government is doing more with less. And as engineers, that is one of our areas of expertise; it is what we do.”

Mr Roydhouse said it was important for people to appreciate all the services and facilities local government provides.

“Love your local government,” he said.