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February 06, 2006
We know that more services are being increasingly being dumped on local councils by state governemtns without adequate funding from the state or commonwealth. So how are they coping.? We see the infrastructure being run down, we read about them being captured by developers, we experience constant rate increases and we suspect they are not coping very well.
Ross Gittins in the Sydney Morning Herald makes sense of what we observe with local councils in tersm of the way they conduct their finances. He says:
The councils are in chronic operating deficit but are avoiding borrowing to cover those deficits. Rather, the deficits are being funded largely by running surpluses on their capital accounts.This means capital grants, capital contributions and the proceeds of asset sales are used mainly to prop up operating costs rather than to finance capital renewals and enhancements.
Gittins says the implication is that:
...councils are failing to raise sufficient revenue to cover their expenses but are concealing the deficiency by running down the quality of public infrastructure. One way or another, part of the funding of services consumed by current ratepayers is being shifted on to future ratepayers.(The "infrastructure" we're talking about, by the way, includes local roads, bridges, kerbing, paths, traffic facilities, stormwater drains, plant and equipment, buildings, parks, libraries, swimming pools, etc.)
The inference is an emerging infrastructure crisis. So the way local councils are currently financed needs to be addressed.
That is not on the policy agenda is it? There are sounds of silence when local government raises the funding issue.
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Our tax system is screwed. Each level of government above pilfers tax revenue from the one below. There is a vertical fiscal imbalance that needs to be rectified.