Queensland Methodology

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• Queensland Methodology
• www.qlggc.qld.gov.au
• Shannon Murphy
• A/Executive Officer

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• Three Sections to the Presentation
• Financial Assistance Grant 2005/06
• National Principles and Queensland Methodology
• Cost Adjustors

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• Financial Assistance Grant
• Two components
• Identified Road Grant
• 93M in 2005-06 (89M in 2004-05)
• Fiscal Equalisation Grant (General Purpose)
• 217M in 2005-06 (205M in 2004-05)

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• Commonwealths National Principles
• Horizontal fiscal equalisation
• Effort neutrality
• Minimum grant
• Other grant support
• Aboriginal peoples and Torres Strait Islanders
• Identified road component

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• Commonwealths National Principles
• Identified Road Component
• The Identified Road Component of the financial
  assistance grants should be allocated to
  local governing bodies as far as practicable on
  the basis of the relative needs of each local
  governing body for roads expenditure and to
  preserve its road assets.
• In assessing roads needs relevant
  considerations include length, type and usage of
  roads in each local governing area.

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• Identified Road Component
• Currently distributed on the basis of-
• 62.85 in proportion to road length
• 37.15 in proportion to population

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• General Purpose Grant
• Governed by the National Principles as set by
  the Commonwealth Minister for Local Government
• Main purpose of the grant is horizontal fiscal
  equalisation
• Every council is entitled to a Minimum Grant
• Funds are untied (general) revenue

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Horizontal Fiscal Equalisation

• The Local Government (Financial Assistance) Act
  1995 (Cmwth) states the allocation of funds for
  local government purposes on a full horizontal
  equalisation basis is a reference to an
  allocation of funds that

Ensures that each local governing body in a State
is able to function, by reasonable effort, at a
standard not lower than the average standard of
other local governing bodies in the State and
Takes account of differences in the expenditure
required to be incurred by local governing
bodies in the performance of their functions and
in their capacity to raise revenue.
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• HFE explained
• To determine the State average and rank councils
  with this average

Councils
Average
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• Commonwealths National Principles
• Effort Neutrality
• An effort or policy neutral approach will be
  used in assessing expenditure requirements and
  revenue raising capacity of each local governing
  body. This means as far as practicable, policies
  of individual local governing bodies in terms of
  expenditure and revenue effort will not affect
  the grant determination.

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• Example of Effort Neutrality Rates
• Council
• sets own cent in dollar and minimum rate
• Commission
• assesses State average cent in dollar and state
  average minimum rate
• If actual rates gt average revenue assessment lt
  actuals
• If actual rates lt average revenue assessment gt
  actuals

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• Commonwealths National Principles
• Minimum Grant
• The minimum general purpose grant allocation for
  a local governing body will not be less than the
  amount to which the local governing body would be
  entitled if 30 of the total amount of general
  purpose grants were allocated among local
  governing bodies on a per capita basis.

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• General Purpose Grant
• The Commission calculates what each council
  would raise in revenue and expend as if the
  council operated at average.
• BASIC FORMULA
• Average Expenditure - Average Revenue
• Grant
• This model is used for the purpose of allocating
  the grant and is not a financial model for
  councils

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• General Purpose Grant Allocation
• There are six stages to allocating the general
  purpose grant
• Determine State Averages
• Assess council revenue and expenditure
• Apply Cost Adjustors
• Determine Relative Need
• Allocate Funds
• Average Allocation

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• Obtain totals in each category for State
• Determine cost driver for each category
• Determine a unit amount

Total cost of Recreation for Qld is Driver is
population Unit amount of Recreation per
capita is
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• Obtain cost driver data for each council eg,
  population
• Apply unit amount to each council

Unit amount of Recreation per capita is
population is x Assessed Recreation
expenditure is
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• Identify cost adjustors for category
• Apply cost adjustors to expenditure and
  revenue assessments

Assessed Recreation expenditure Cost
adjustor for Demography x Adjusted
Recreation expenditure is
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• Cost adjustors all gt 1
• Reduce adjusted expenditure to State total

State assessed expenditure State actual
expenditure Reduction required
Councils reduced assessed expenditure
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• Local Roads
• What is an Average Standard?
• Maintenance standard only
• Not actual condition of road
• Not councils road priorities
• Not actual road surface (paved or gravel)
• Not upgrade
• Average road for traffic volume with local
  conditions

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• Local Roads
• State Average is Traffic volume ranges ( per km)
• Rural Sealed Surface (40-150 AADT) 2,300 per km
• km roads in this range is
• Roads needs assessed before adjustors is
• Adjusted for
• Climate
• Soil Subgrade
• Locality and
• Terrain.

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• Calculate
• Revenue and expenditure assessments
• Roads assessment
• Add in effort positive
• Net result of either surplus or deficit
• Surplus councils get minimum grant
• Deficit councils get minimum and general purpose
  grant

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• Total shortfall across councils is 400M
• Total grant funds 200M
• Apportion funds or scale back
• Proportional method 50 assessed result
• Equalisation method assessed revenue plus
  grant equals same proportion of assessed
  expenditure

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Scaling
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• Each council entitlement is
• Averaged against population and road length
• Goal to have more consistency across
  councils

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• Revenue
• Categories are
• Rates
• Garbage Charges
• Other Fees and Charges
• Other Included Grants
• Standard Budget Result

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• Rate Raising Capacity
• Two Components
• Minimum Rate applied to property numbers
• cents in for UCV in three categories
• Residential
• Commercial/Industrial
• Rural
• Result is adjusted by councils SEIFA index

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Aboriginal and Island Councils Rate Raising
Capacity
Because Aboriginal and Island Councils do not
have rateable land, the Commission assumes a nil
rate raising capacity for these councils. As a
proxy for rates the Commission includes a portion
of their Operating Grants.
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• Garbage
• A per urban property assessment
• Urban properties are the sum of residential,
  commercial and industrial properties less vacant
  properties
• Other Fees and Charges
• A per capita assessment

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• Commonwealth National Principles
• Other Grant Support
• Other relevant grant support provided to local
  governing bodies to meet any of the expenditure
  needs assessed should be taken into account using
  an inclusion approach.

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• Other Grant Support
• 50 of Aboriginal and Island Council
  Operating Grant (in lieu of rates)
• 100 of Identified Road Grant
• 100 of Library Book Subsidy
• 100 of Minimum General Purpose Grant
• 50 of Road and Drainage Grant
• 50 of Roads to Recovery

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• Expenditure Categories
• Services (non-roads expenditure)
• Administration
• Public Order and Safety
• Education, Health, Welfare and Housing
• Garbage
• Street Lighting
• Community Amenities, Recreation and Sport
• Building Control and Town Planning
• Business and Industry Development
• Roads
• Environmental Protection and Transport

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• Administration
• Economy of scale constant (313,615)
• Amount per sq km area (5)
• Unit average 75 per capita
• Unit average 25 per property
• Cost Adjustors
• Scale
• Location
• Dispersion
• Growth
• Non-Resident Service Expenditure

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• Building Control Town Planning
• Unit average Per residential property
• Cost Adjustors
• Location
• Scale
• Growth
• Non-Resident Service Expenditure

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• Environment and Transport
• State averages not used
• Actual council expenditure from financial
  statements (ABS) used
• Aerodrome and environmental protection functions
  are too diversified across councils for averages
  to be established and applied
• Your councils effort positive in 2005-06

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• Roads and Bridges - Engineering Model
• Roads
• Set amount per km of road dependent on Rural or
  Urban and
• Traffic volume (AADT) with
• Cost Adjustors
• Climate, Soil Subgrade, Locality, Terrain
• Bridges, Culverts and Floodways
• Set amount per area of bridges
• Set amount per metre of culverts and floodways

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• Cost Adjustors
• Scale size of council?
• Location where is council?
• Dispersion number of towns?
• Demography who lives there?
• N-RSE who council provides for?
• Tourism who else goes there?
• Growth council growing/shrinking?
• Urban Density use of facilities?

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• Scale
• Recognises that larger communities gain from
  economies of scale
• 1. Constant
• 313,615 for administration
• 20,908 for recreation
• 5 per km2
• 2. Adjustment to population
• Up to 50 for smallest community on a sliding
  scale

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Location Different costs due to location and
remoteness

• Construction Cost Index (50)
• increased cost to construct assets depending on
  location
• Accessibility/Remoteness Index of Australia
  (50)
• geographical isolation distance to service
  centres

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• Dispersion
• Additional costs due to number of smaller
  townships rather than one large township
• Component of population density
• 0.5 given for every additional township with
  population over 50 residents

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• Demography
• Additional costs due to makeup of community
• additional ½ person weighting for gt65 or lt19
  years
• additional ½ person weighting for Indigenous
  persons
• Commonwealths National Principles
• Aboriginal Peoples and Torres Strait Islanders
  Financial assistance shall be allocated to
  councils in a way that recognises the needs of
  Aboriginal peoples and Torres Strait Islanders
  within their boundaries.

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• Regional Role / Non-Resident Service Expenditure
• Regional centres face higher costs due to use
  of services and facilities by non residents
• Currently determined by employment
  characteristics in all industries using
  ABS Journey to Work and Labour Force data

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• Tourism
• Additional costs for services and amenities for
  tourists
• Previously included tourists from surveys and
  day trippers
• From 2005/06 based on employment in
  tourism- related industries
• Growth
• Above state average or negative population
  growth
• Difference from state average if positive
• Total if negative

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• Urban Density
• Increased costs in providing services in
  densely populated areas
• Increase wear and tear of facilities
• Increase costs in security
• Thresholds
• 20,000 population
• 90 residential properties