VICTORIA GRANTS COMMISSION

ANNUAL REPORT

1980

1980

VICTORIA GRANTS COMMISSION

ANNUAL REPORT

1980

Ordered by the Legislative Assembly to be printed

By Authority: F. D. Atkinson, Government Printer No. 18

VICTORIA GRANTS COMMISSION

MEMBERS

D. V. Moye B.Ec., H.D.A. (Hons), Chairman

F. S. Bales F.I.M.A., J.P.

S. L. Cooper J.P.

SECRETARY

F. M. Thomas B.Ec. (Hons).

VICTORIA GRANTS COMMISSION

ANNUAL REPORT

1980

The Hon. Digby Crozier, M.L.C., Minister for Local Government, 480 Coiiins Street, MELBOURNE. V/C. 3000.

As Members appointed under section 3 of the Victoria Grants Commission Act 1976, we have the honour to present the fourth Annual Report of the Victoria Grants Commission, in accordance with section 17 of that Act.

D. V. MOYE, Chairman

F. S. BALES, Member

S. L. COOPER, Member

F. M. THOMAS Secretary

October, 1980.

TABLE OF CONTENTS

INTRODUCTION ...... 9 CHAPTER I. THE YEAR'S ACTIVITIES ...... 11 Inspections...... 11 Annual Return of Information. : ...... 11 Comparisons between Years...... 12 Conference of State Grants Commissions ...... 13

2. THE BASES OF THE DETERMINATIONS ...... 14 As-of-Right Entitlement ...... 14 Equalisation ...... IS Revenue Raising Needs ...... 15 Expenditure Needs and Disabilities ...... 16 Standards...... 17 Determining the Individual Allocations ...... 18 Acknowledgements ...... 19

APPENDICES I Transmittal Memorandum and Determinations ...... 20 11 Municipalities Inspected 1979-80 ...... 26 Ill Categories of Municipalities ...... 28 IV Formulae ...... ', ...... 30 V Distribution of Rateable Property, Rate Income, Rating and Population 1975-76 to 1978-79 ...... 34 VI Tax Sharing Funds for Local Government Authorities 1974-75 to 1980-81 ...... 36

INTRODUCTION The primary role of the Commission is to determine the allocation between municipalities in Victoria of grants from the Commonwealth to the State for local government authorities under the provisions of the Commonwealth's Local Government (Personal Income Tax Sharing) Act 1976. The Victoria Grants Commission Act 1976 was proclaimed on 9 February 1977 and the Commission consisting of a full-time Chairman and two part-time Members, was formally constituted on 24 May 1977. By notification in the Commonwealth Gazette of 30 June 1978, the Victoria Grants Commission was formally declared the body to be the Local Government Grants Commission of the State of Victoria, in accordance with section 4 of the Local Government (Personal Income Tax Sharing) Act 1976. During the current year Mr. F. S. Bales and Mr. S. L. Cooper were re-appointed as Members of the Commission. The initial terms of office for the two Members expired on 24 May 1980, and the extended terms will expire in Mr. Bales' case on 31 October 1981, and in the case of Mr. Cooper on 31 October 1982. Section 12 of the Victoria Grants Commission Act 1976 requires the Commission, on or before 31 August each year, to determine the amount to be allocated to each municipality in that year. The Commission's determination for the 1980-81 financial year was transmitted to the Minister for Local Government on 29 August 1980. A copy of the transmittal memorandum and of the determination are included in Appendix 1 to this Report. Section 17 of the Act requires the Commission to report to the Minister by 30 November each year on the activities of the Commission during the preceding year ended 31 August. This Report is in compliance with that requirement.

9

Chapter 1 THE YEAR'S ACTIVITIES 1.1 The primary role of the Victoria Grants Commission is to determine, on or before 31 August each year, the allocation among municipalities in Victoria of general revenue grants from the Commonwealth to the State for local government authorities under the provisions of the Commonwealth's Local Government (Personal Income Tax Sharing) Act 1976 and under the Victoria Grants Commission Act 1976 which complements it. To assist the Commission in this role the Victoria Grants Commission Act provides that: "10 (l) Each municipality shall supply the prescribed information to the Commission­ ( a) on or before the day fixed by the Commission by notice published in the Government Gazette; or (b) in the case of a particular municipality, on or before such later date as is fixed by the Commission for that municipality. (2) Where a municipality has not complied with sub-section (1) the Commission shall nevertheless allocate to the municipality its 'As-of-Right Entitlement'.'' The Act also provides that "13 The Commission or any member thereof may carry out such inspection, conduct such hearings, take such evidence and generally make such investigations as the Commission thinks necessary for the purpose of properly carrying out its functions under this Act." In relation to proceedings before the Commission the Act stipulates that: "15 A municipality may be represented in proceedings before the Commission by Councillors or the municipal clerk or the municipal engineer or full-time officers or the municipality and not otherwise." 1.2 Provision is also made enabling the Minister for Local Government to "on his own motion or at the request of the Commission make written submissions to the Commission as to any factors which appear to the Minister to be of special significance in relation to all or any municipalities in the relevant financial year" (section 14). The Minister is required to publish notice of a submission in the Government Gazette, to lay copies of the submissions before both Houses of Parliament and make copies of it available to the public. 1.3 In addition, pursuant to section 16 of the Victoria Grants Commission Act 1976, the Commission is required to "enquire into and report upon any other matter relating to local government finances which is referred to it by the Minister". No such matter was referred to the Commission during the year ended 31 August 1980. 1.4 The Commission was formally convened on one hundred and thirty-six days during the year ended 31 August 1980 in order to undertake inspections and confer with Council representatives and to consider written submissions and other evidence relevant to the determination of allocations for the 1980-81 financial year.

Inspections 1.5 During the year visits were made to 74 municipalities throughout the State; for the most part a full day was spent in each. This enabled the Commission to undertake a detailed inspection of each municipality and to set aside time for discussion with Councillors and their officers about the Commission's role and the municipality's submissions (see Appendix 11 for list of municipalities visited). This was the second year of a three-year programme of inspecting all municipalities in the State, which the Commission expects to complete during 1980-81. 1.6 The Commission has continued to develop the methodologies used in the analyses of the data which form the bases for determining each municipality's share of the funds, with a view to extending the use of objective measures and reducing the reliance on the judgment of its Members. In particular, various methods for measuring capacity to raise revenue, an important determinant of the allocations, are being examined with the aim of improving the equity of the allocations. However the work in this area was not sufficiently advanced for the results to be applied in a definitive way in determining the allocations for 1980-81.

Annual Return of Information 1. 7 Central to the development of methodology is the availability of good quality data. As indicated in paragraph 1.1, section 10 of the Victoria Grants Commission Act 1976 authorises the Commission to require each municipality to provide prescribed information on or before a date fixed by the Commission. In conformity with that section, 3 December 1979

11 was the date fixed by notice in the Victoria Government Gazette No. 86 of 17 October 1979, as the date by which the prescribed information for the financial year ended 30 September 1979 should be returned to the Commission. 1.8 The Commission has continued to work closely with the Victorian office of the Australian Bureau of Statistics on the development of a joint return of statistical information to serve the needs of the Commission and the Bureau. The benefits of the joint returns in terms of time-savings and quality of data have accrued not only to the Commission and the Bureau but also to local government and other users. The publication in February 1980 by the Bureau of a new issue entitled "Local Government Finance Victoria (preliminary) 1977- 78" is the forerunner of a revised format which will make available to interested parties detailed and timely financial statistics for the 211 municipalities in the State. The publication contains details of functional income and expenditure by local government authority, derived from the joint return of information. 1.9 The importance to the Commission of the timely receipt of accurate statistical information cannot be over-emphasised. Nearly two-thirds of the municipalities in the State met the deadline set by the Commission for lodgement of Returns, with most of the remainder submitting Returns shortly thereafter. This year again a disappointing number of municipalities ignored repeated requests for the Returns to be completed and their eventual late lodgement, coupled with the late lodgement of supporting financial statements, seriously delayed the verification of the Returns and the preparation of data for analysis. Local government should appreciate that prompt attention to the data requirements of the Commission would enhance the opportunity for the Commission to finalise its determination at an earlier date than has hitherto been possible. As the date of payment of the grants is dependent upon the date by which the determination is finalised, the advantage of reducing any delay in the processing of essential information should be obvious to all. 1.10 Attention is again drawn to section 10, sub-section (2) of the Victoria Grants Commission Act 1976 which provides that where a municipality has not complied with sub­ section (I) of section 10 (i.e. has not supplied the prescribed information by the due date), the Commission "shall nevertheless allocate to the municipality its 'As-of-Right Entitlement'." The Commission believes that the majority of municipalities should not be penalised by the late lodgement of information by a few and proposes to invoke this provision when its requests to the Councils of those municipalities which have not forwarded the Return and accounts to the Commission by the due date are persistently ignored.

Comparisons between Years 1.11 The Commission has, on many occasions, cautioned that no necessary conclusions can be drawn about the allocation to a municipality for a year from the allocations determined in prior years. This is because of the still imperfect nature of the data and general information available to the Commission about all aspects of each of the two hundred and eleven municipalities in the State. Consequently, as improvements are made to the data and the Commission's knowledge and understanding of the circumstances of each municipality is extended, adjustments will be effected to the assessments of the relative fiscal needs and disabilities of individual municipalities which will be reflected in rates of increase in allocations for some municipalities that may differ significantly from the overall rate of increase for the State as a whole. 1.12 In addition, there are several areas of expenditure which contain elements which may vary markedly from year to year and, therefore, may affect the relative size of allocations. This is especially relevant for road construction and reconstruction works where the unit costs may be strongly influenced from year to year by factors such as land acquisition, relocation of services, earthworks required, etc. Clearly, high costs applicable to projects in one year, which will influence the size of allocations to the relevant municipalities in that year, cannot influence the size of allocations for another year when the works undertaken may have quite different unit costs characteristics. Also, allowances for the costs associated with high rates of population growth are phased out as growth tapers off. The removal of such allowances will mean that allocations for the relevant municipalities increase at a somewhat slower rate than the increase in the allocations for the State as a whole. 1.13 In some instances Councils have failed to take into account allowances for special factors which are listed in the Attachment to the Determination, copies of which have been circulated to every municipality, when calculating percentage increases from year to year. As pointed out in the Attachment, special factors allowances, which mainly relate to natural disaster expenditures, apply to the year in question only. Therefore in making comparisons of

12 allocations between municipalities, or of individual municipalities, from year to year, the amounts shown in the schedule of the Attachment, should first be deducted from the total allocations determined for the relevant municipalities. 1.14 lt should also be appreciated that with the limitation on the overall allocation of funds for general revenue grants, the allocations can only reflect a partial recognition of the needs and disabilities of individual local government authorities throughout the State. 1.15 It is apparent that some of the criticism of the allocations arises from a lack of understanding of the Commission's role and the principles and methods it has adopted in determining the allocations. The Commission has again outlined its priniciples and methods in this Report and has reproduced the basic formulae in Appendix IV. It is important that local government officers appreciate the significance of this information and that Councillors who will be involved in discussions with the Commission are familiar with the principles and methods underlying the allocations.

Conference of State Grants Commissions 1.16 Representatives of the Grants Commissions of the six States met in Sydney on 17- 18 September 1979 for discussions on aspects of the various approaches to the distribution of general revenue grants being followed in each of the States. The conference provided a valuable insight into the problems being experienced by the Commissions and the way in which these were being resolved. This meeting, in conjunction with previous meetings, has furthered the understanding and improvement of methods of inquiry, data collection and handling of fiscal equalisation methodology. These meetings, which have the support of the Local Government Ministers' Conference, are held annually in each State on a rotational basis. (The 1980 Conference was held in Mackay, Queensland, on 6-7 October 1980).

13 Chapter 2

THE BASES OF THE DETERMINA TIONS

2.1 The Commonwealth Local Government (Personal Income Tax Sharing) Act 1976 provides for the payment to the States, for allocation to local government authorities, of an amount determined by the total personal income tax collections for the financial year immediately prior to the year to which the payments apply. In 1976-77 payments totalling $140 million were made to the States for allocation to municipalities. This was equivalent to 1.52 per cent of the personal income tax collected during 1975-76 and the same proportion was used to determine the total allocations for 1977-78 and 1978-79. In 1979-80 local government's share of income tax revenue was increased to 1.75 per cent with a total of $221.7 million being made available to the States in that year for allocation to municipal councils. The share was further increased to 2 per cent, effective for the 1980-81 allocations, fulfilling an undertaking given in 1977 to raise local government's share of income tax revenue to this level during the life of the Parliament. 2.2 The total amount available to all six States for allocation to local government authorities in 1980-81 is $300,785,900, an increase of 35.65 per cent over the amount for 1979- 80. The apportionment between the six States is set out in the Commonwealth Act and is based on recommendations by the Commonwealth Grants Commission (see Commonwealth Grants Commission Special Report 1977 on Financial Assistance for Local Government). The relative State percentages and amounts for 1980-81 are shown below: Percentage Amount($) New South Wales 36.4977 109,779,935 Victoria 25.4513 76,553,922 Queensland 16.8606 50,714,307 South 8.6010 25,870,595 Western Australia 9.3897 28,242.894 Tasmania 3.1997 9,624,247 100.0000 300,785,900 2.3 The total of general revenue funds made available by the Commonwealth to local government since the first general revenue grants were made in 1974-75 is $1.144m.; of this total amount Victoria has received $29lm. (see Appendix VI for further details). 2.4 The Commonwealth Act stipulates that two basic conditions be observed: (i) not less than 30 per cent of the total amount for a State for a year shall be allocated on a population basis which may also take into account size, population densities and other agreed matters; and (ii) the remainder of the amount shall be allocated on a general equalisation basis to ensure, as far as practicable, that each local government authority is able to function, by reasonable effort, at a standard not appreciably below the standards of other local government authorities in the State, taking into account differences in the capacities of local authorities to raise revenue and differences in the cost of performing local government functions. 2.5 The above requirements are embodied in section 12 of the Victoria Grants Commission Act 1976 which provides that each municipality in the State shall receive an entitlement "as-of-right" in accordance with (i) above and that no municipality shall receive an amount that is less than its as-of-right entitlement. Further, section 12 (3) of the Act requires the Commission to consider: "(a) the special needs and disabilities of the particular municipality; (b) the effort made by the municipality to function effectively and provide reasonable services; and (c) any other matters which in the opinion of the Commission, are of special significance in relation to the municipality.'' As-of-right Entitlement 2.6 For the 1976-77 allocations the Interim State Grants Committee, following extensive research by the Working Party on Local Government Finance recommended that the as-of-right component be 40 per cent of the State's total allocation and that each municipality's entitlement be determined on the basis of: Population ...... 85 per cent A rea ...... 15 per cent

14 (The population and area figures used are taken from the publication of the Australian Bureau of Statistics, "Estimated Population in Local Government Areas" for the relevant period). The same basis has been used for determining the as-of-right entitlements for all allocations since that time and because the Commission can see no justification for any change at this stage it has not sought to have this basis changed for the 1980-81 allocations. Only one municipality, the Shire of Pyalong received the minimum as-of-right entitlement in the I 980-81 allocations. 2. 7 The as-of-right entitlement is a means of ensuring that each municipality receives a minimum grant and the basis upon which it is calculated ensures that recognition is given to some of the population and area effects on the relative costs of local government services for any municipality that does not qualify for a larger allocation. However, a common misunderstanding is that the as-of-right entitlement stands apart from the equalisation element, that is, that the equalisation element is calculated without any regard to the as-of­ right entitlement. To do this would be to ignore the equalisation effects of the as-of-right entitlement and would result in double counting. As indicated in the 1977 Annual Report (see paragraphs 2.6 and 2.7) the Commission's approach is, first, to determine the allocations for each municipality solely upon equalisation principles and, as a second step, to make appropriate adjustments to the allocation for any municipality for which the equalisation allocation falls short of the as-of-right entitlement. it follows that the equalisation allowance for a municipality is its total allocation, not simply the difference between the as-of-right amount and the total allocation.

EQCALISATION 2.8 The main thrust of the legislation is the achievement of fiscal equalisation, within the limit of the funds available, having regard to special needs and disabilities, the effort made to function effectively and provide reasonable services, and any other matters of special significance. A fundamental principle of fiscal equalisation is that of effort or policy neutrality, which means that no Council should be able to influence its municipality's share of the funds by any conscious effort, or policy decision. When calculating allowances for capacity to raise revenue (or revenue needs) effort neutrality is achieved by using a standard rate in the dollar applied to the difference between standard unit value of property and a municipality's unit value of property. Thus, as a Council's own rate is not used in the calculations. each Council is free to determine its own rating policy in the knowledge that its decision will not adversely affect its allocation. At the same time it cannot expect to profit from the allocation as a result of its decisions about the level of rates. 2.9 A similar "effort neutral" effect is achieved in relation to expenditure needs and disabiliues by using standard leveb of expenditure for the various functions and applying objective measures wherever practicable to determine what allowances should be made for differences in costs of functions. Again, this effort or policy neutral approach leaves each Council free to pursue its own expenditure policies in the perceived interests of its ratepayers, without any risk of jeopardising its share of the general revenue grants allocation. But neither should it expect any special benefit or reward as a result of any decisions it might take about expenditure on any function.

Revenue Raising Needs 2.10 As indicated above, the method for assessing needs in relation to revenue-raising is to compare the capacity of each municipality to raise revenue against a standard. To the extent that the capacity of a municipality to raise revenue is greater than the standard then that municipality is said to have negative revenue needs, or an advantage in raising revenue. Conversely, if a municipality's capacity to raise revenue is less than the -,tandard, the municipality is said to have positive revenue needs, or a disability in raising revenue. 2.11 A municipality with negative revenue needs, that is an advantage in raising revenue, is in a relatively better position to meet the costs of services than municipalities with positive revenue needs. Thus, the situation can arise where a municipality may have high costs of municipal services because of the characteristics of the municipality but, at the same time, have a relative advantage in raising revenue and therefore be able to meet a large part of the additional costs from its own resources. It follows that relatively high costs of services within a municipality do not necessarily mean that the municipality should receive a large general revenue grant allocation. 2.12 A municipality's capacity to raise revenue is a reflection of the relative value of its

15 rateable property, as this is the only tax base open to local government. As property revaluations take place at different points in time for the 211 municipalities in the State, the first step in making comparisons between municipalities is to adjust the valuations for each municipality to a common date, which is taken as the beginning of the financial year under consideration. This adjustment of the valuations is undertaken by the Valuer-General for the Commission on a confidential basis. The second step is to convert the valuations for each municipality to a common unit. 2.13 The Commission's view that relating the tax base of each municipality (the value of its rateable property) to the number of properties or assessments (instead of to population as was used initially) is a more realistic basis for comparing capacity to raise revenue, was discussed in some detail in last year's Report. It was argued that the capacity of a municipality to levy a quantum of rates is not dependent upon the estimated number of persons in the area at a given time but upon the total value of the number of assessable properties within the municipality. 2.14 Discussion papers concerning proposed changes to the methodology for measuring revenue-raising capacity have been circulated to Councils for comment. These proposals, which involve measuring capacity to raise revenue from different classes of property separately and weighting the measurements for the contribution that each class of property makes to the total value of property within each municipality, were generally supported. The main problem foreseen was that of obtaining uniform counts of property numbers, because of the difficulty of defining what constitutes a property. The Commission has surveyed a cross-section of municipalities to obtain numbers of properties on two bases: (i) the number of rating assessments as defined in the Local Government Act; and (ii) the number of properties as defined by the Commission. It is currently evaluating the information from this survey. 2.15 Pending the resolution of these problems, for the 1980-81 allocations allowances for capacity to raise revenue were made having regard to the average of measurements of revenue-raising based on relative per head values of rateable property and relative values per assessed property, differentiated by class of property. This was similar to the basis used for allowances for revenue-raising capacity for the 1979-80 allocations. As for the 1979-80 allocations, adjustments were made to residential property values for Category 2 municipalities to take account of differences in values which can be related to differences in market pressures rather than to differences in financial capacity. (see paragraphs 2.23-2.24 of the Commission's 1979 Report for further details). 2.16 In the measurements of revenue-raising capacity based on assessed property numbers it has also been necessary for the Commission to make adjustments to residential property numbers where these numbers have been inflated by large numbers of undeveloped properties. The proportions of residential dwellings to total residential properties were calculated and adjustments made to the numbers of residential properties where the proportions for individual municipalities were lower than those commonly applying.

Expenditure Needs and Disabilities 2.17 The statistical measurement of needs and disabilities in relation to the cost of services has undergone considerable refinement in recent years, with the availability of more detailed and comprehensive data from the Annual Return of Accounting and General Information. The much-improved data base has permitted more objective measurements to be made of allowances for differences in costs of services and has provided a more reliable basis for examining the possibility of further expanding the use of objective measures. Nevertheless the Commission is still required to exercise judgment in the evaluation of the data and its relevance to the circumstances of each municipality. This highlights the importance that the Commission attaches to the detailed inspections of each municipality which are being carried out. 2.1 R The expenditure component of the allocations is the summation of assessments of relative needs and disabilities over the range of municipal functions, generally following the functional classification of expenditure adopted by the Australian Bureau of Statistics. The broad classifications are given below, along with the subdivisions for each classification that were considered in detail: General Administration Growth and Planning, Isolation, Sparsity

16 • Health Infants and Mothers, Preventative Services, Others. Welfare Families and Children, Aged and Disabled, Other. Housing and Community Amenities Street Cleaning, Urban Drainage, Household Garbage Collection and Disposal, Other. Recreation and Culture Public Halls, etc., Swimming Pools, Beaches, etc., Other Recreation and Sport, Libraries, Other Culture (Art Centres, etc.). Roads, Streets and Bridges Construction and Reconstruction of Roads, Construction and Reconstruction of Bridges, Maintenance of Roads, Streets and Bridges. Economic Services Traffic Control, Street Lighting, Other. Duplication Recreation, Health and Welfare, Other. Regional Facilities Recreation and Culture, Health and Welfare, Resort Areas, Historic Buildings and Aerodromes. Special Factors Natural Disasters. 2.19 Unit costs were established for most of the functions shown under the sub­ headings, except for Special Factors. Where unit costs could not be satisfactorily derived from the data, the Commission exercised its judgment about the allowance to be made. For Special Factors, the allowance was the net cost to the municipality of expenditure approved under Commonwealth/State arrangements for natural disaster repair and restoration work.

STANDARDS Revenue Needs 2.20 As indicated earlier, revenue needs were assessed in relation to the average of allowances for capacity to raise revenue calculated using per head values of rateable property and values per assessed property. In the calculations using per head values of rateable property, the standard adopted for the rate base was the weighted average value for the top 25 per cent of municipalities in the State, which was determined by ranking each municipality according to its average value of rateable property per head. The standard tax rate was the weighted average rate in the dollar imposed by the top 25 per cent of municipalities. Where the calculations were made using per assessed property values, separate calculations were made for each of the two classes of property - residential property and all other property, which comprised commercial, industrial, rural and other property. For the latter calculations the standard values of rateable property per assessed property were the weighted mean of the values for the top 25 per cent of the State, for each property class. The standard rates for each property class were similarly the weighted means of rates derived from each property class by the top 25 per cent of municipalities (see Appendix IV for further details).

Expenditure Needs and Disabilities 2.21 The standard costs used for assessing allowances for expenditure needs and disabilities were based on the gross cost of the respective functions. The gross disability so assessed for a function was discounted by the proportion that expenditure on the function by a muncipality from its own resources bears to its total expenditure on the function from all sources. This approach is predicated on the basis that government programs of assistance have the general aim of setting standards of service and the incidence of such assistance is restricted by the availability of funds. Therefore it is reasonable to include expenditure from all sources when determining standard levels of expenditure; hence this approach is commonly referred to as the inclusion method. The discounting of the gross allowances described above ensures that needs and disability allowances are related to ratepayers' contributions to expenditures and avoids double counting in relation to government grants for particular services.

17 2.22 In calculating allowances for expenditure needs and disabilities the Commission derived unit costs from the expenditure data supplied in the Return of Accounting and Genera/Information for the financial year ended 30 September 1979. Where practicable, a standard unit cost was then calculated for each of the sub-functions listed above by taking the mean of the modal, or most commonly occurring, group of unit costs for the State as a whole. The following parameters were used: General Administration Growth and planning - average rate of population growth over past five years. Health Infants and mothers- proportion of population aged less than five years. Welfare Families and children - proportion of population aged less than five years. Aged and disabled- proportion of persons receiving pensions and supplements. Housing and Community Amentities Household garbage - population density in residential areas in excess of 5,000 persons per square kilometre. Recreation and Culture Other Recreation and Sport - proportion of population aged between five years and less than 35 years. Roads, Streets and Bridges Maintenance - length of sealed, formed and surfaced, formed only, unformed roads and lanes per assessment. Construction - main cost components such as earthworks, pavements and sealing; per kilometre; other components actual expenditure (land acquisition and fencing, relocation of services, drainage and erosion control). Duplication Number of population centres. 2.23 For the most part, needs allowances were calculated on a per head basis. For example in relation to Health Services for Infants and Mothers, the proportion of persons under five years of age in a municipality was compared with the State average proportion. If the proportion in the municipality was greater than the State average proportion (the standard), a needs allowance would be made in relation to the above standard proportion, based on the standard per head cost of services related to infants and mothers. 2.24 Expenditure needs allowances can be negative as well as positive in the same way as are revenue needs. For example, developing municipalities have a high proportion of their population in the younger age groups and generally a low proportion receiving pensions. In this instance there would be positive needs allowances for functions related to the younger age groups and negative needs allowances for functions related to persons receiving pensions. 2.25 Expenditure disability allowances are made where the unit cost of a service is higher because of special difficulties associated with the provision of the service. In rural areas, for example, administration costs and costs of some services can be higher because of isolation and population sparsity. Road costs may be higher because of the type and intensity of traffic, the terrain and climatic conditions that prevail, availability of road-making materials, number of bridges and similar factors. Recognition is also given to the ethnic charactersistics of the population in different areas, which can involve Councils in higher administration costs because of the need to communicate to ratepayers and residents in a number of languages. Library costs may also be higher because of the need to carry multi­ lingual book stocks in areas with high concentrations of non-English-speaking people or to provide a larger range of large print books where the proportion of elderly in the population is high.

Determining the Individual Allocations 2.26 The total expenditure allowance for a municipality is the sum of the needs and disabilities allowances for each of its functions. To this is added the allowance for revenue needs, bearing in mind that these can be positive or negative, as can be expenditure allowances for various functions. The total fiscal equalisation requirement for a municipality is then the sum of the two components the revenue needs and the expenditure needs and disabilities. If budget constraims are ignored, the total sum required to achieve full fiscal equalisation for the 211 municipalities in the State will exceed the amount available for distribution by a substantial margin. Thus the next step is to apportion the amount available for distribution

18 among the 211 municipalities according to the relative fiscal equalisation needs of each. This is achieved by discounting each municipality's total fiscal equalisation requirement by the proportion that the amount available bears to the total sum required for the 211 municipalities. 2.27 Technical details of the various methodologies used for calculating revenue and expenditure needs and disabilities are given in Appendix IV. The changes made this year to the method of calculating the various components that make up the assessments of fiscal needs for each municipality, and those foreshadowed for the future, are designed to enhance the equity and predictability of the allocations. As these changes take effect, along with other changes as a result of better data and a better understanding of the features of each municipality, there may be some significant changes to the fiscal relativities that have been established between municipalities to date. Such changes will affect the relative shares for each municipality of the amount available for distribution each year. In the longer-run, changes to the underlying fiscal relativities should be minimal and most Councils should then be able to predict with reasonable certainty, their municipality's share of the amount available for distribution. 2.28 The Commission would welcome constructive comments and suggestions relevant to any of the matters outlined in this Report.

ACKNOWLEDGEMENTS 2.29 The Commission acknowledges the assistance of the Councils and their staff throughout the year, particularly those that were involved with the arrangements for the inspections organised for the Commission and expresses its appreciation for the use of facilities and for the many courtesies shown to its members and staff. 2.30 The quality of the data available to the Commission owes much to the efforts of the Finance and Distribution Branch of the Victorian office of the Australian Bureau of Statistics in the design of Commission's Returns and in verifying and collating the data. Their assistance is gratefully acknowledged. 2.31 We wish also to record our appreciation for the help that the staff of the Commission and the Department of Local Government have given us over the past year, particularly the Valuer-General's office. The processing of the voluminous data would not have been practicable without the co-operation of the Government Computing Service. This assistance is gratefully acknowledged.

19 APPENDIX I VICTORIA GRANTS COMMISSION

The Hon. D. G. Crozier, M.L.C., Minister for Local Government, 480 Collins Street, MELBOURNE. VIC. 3000.

Determination of Allocations of General Revenue Assistance to Municipal Councils in 1980-81 We have pleasure in submitting to you the Determination of Allocations of general revenue grants to Municipal Councils in Victoria for the 1980-81 financial year. Victoria's share of general revenue grants for local government for 1980-81, being made available under the Commonwealth Local Government (Personal Income Tax Sharing) Act 1976, is $76,553,922, an increase of 35.65 per cent over the State's share for 1979-80. This increase of some $20 million was due, about equally, to the increase in personal income tax collections in 1978-79 and the increase in local government's share of this from I. 75 per cent to 2.00 per cent. The total amount has been distributed between the 211 municipalities in the State in accordance with the bases laid down in section 12 of the Victoria Grants Commission Act 1976. In determining the grant for each municipality, the Commission has followed broad equalisation principles; it has considered the special needs and disabilities of each municipality and the effort made to function effectively and provide reasonable services. We have also had regard to special factors, such as natural disasters, which affected the expenditures of individual municipalities in the 1978-79 financial year. We have attached a table showing the amount of such allowances included in the 1979-80 allocations and in the allocations now determined for 1980-81. In the allocations for 1980-81 the grant determined for each municipality is not less than its entitlement as-of-right. This entitlement has been calculated on the basis of 40 per cent of the total amount for the State, allocated on the basis of: Population ...... 85 per cent Area...... 15 per cent We have not altered this basis for calculating the as-of-right entitlement which has applied since the State became responsible for the distribution. During the year, inspections were undertaken of seventy-four municipalities throughout the State in order to extend the knowledge of Members of the Commission of the municipalities and to provide the opportunity for discussion with the respective councils and their officers about the Commission's work. This was the second year of a three-year programme of inspecting each municipality, which the Commission expects to complete during 1980-81. The Commission has continued to review the methodologies used to determine the allocations, with a view to extending the use of objective measures and reducing the heavy reliance on the judgment of its members. A number of methods for measuring capacity to raise revenue are being examined with the aim of improving the equity of the allocations. However the work was not sufficiently advanced for the results to be applied in a definitive way in determining the allocations for 1980-81. One important change was made in the method used to determine each municipality's share of the amount available for distribution which has significantly affected the allocations for some municipalities. This was to calculate for each municipality the amount required to achieve full equalisation against the standards adopted, without any regard to the amount available for distribution. Each municipality's allocation was then determined by reference to relationship between the amount available for distribution and the total amount required to achieve full equalisation for the 211 municipalities. The effect of this change was to apply equal discounts to the allowances for differences in capacity to raise revenue (the revenue component) allowances and for differences in the cost of services (the expenditure component). In previous years an arbitrary discount was applied to the revenue component and the parameters used in assessing the expenditure component were then adjusted to exhaust the amount available. The Commission has consistently warned against making judgments about the size of allocations for individual municipalities by reference to allocations for the previous year. This

20 APPENDIX I.- continued is partly because the Commission still has much to learn about the physical characteristics of the 211 municipalities in the State which influence the costs of services, partly because of the lack of a definitive basis for measuring capacity to raise revenue and partly because there are a number of volatile elements in the expenditure component which may cause significant variations to allocations. Of particular importance to the latter is the variation that can occur in the cost of road construction and reconstruction projects from year to year. Also, allowances for the higher costs experienced by municipalities undergoing a rapid development phase cannot be expected to be incorporated in allocations in the longer run and their phasing out will result in relatively small proportional increases in allocations for the relevant municipalities. A more complete outline of the Commission's activities during the past twelve months will be given in our Annual Report to you. In the meantime we wish to express our appreciation to the Councillors and Staff of all municipalities for the assistance given to the Commission in the performance of its statutory responsibilities. We also wish to especially acknowledge the assistance of the officers of the Finance and Distribution Branch of the Victorian Office of the Australian Bureau of Statistics, for their part in the design of the Commission's 1979 Statistical Return and for the detailed verification and collation of the data. Their efforts have again contributed much to the high quality of the data available to the Commission for the examination of the fiscal needs of municipalities throughout the State. We also acknowledge the assistance of the Government Computing Service for programming and processing the Commission's data and the help freely given to the Commission by officers of various government departments, particularly the Local Government Department.

D. V. MOYE, Chairman

F. S. BALES, Member

S. L. COOPER, Member

F. M. THOMAS Secretary

29 August 1980.

21 APPENDJX I. continued

VICTORIA GRANTS COMMISSION

DETERMINATION OF ALLOCATIONS OF GENERAL REVENUE GRANTS TO MlJNICIPAL COIJNCILS IN VICTORIA 1980-81 FINANCIAL YEAR

Municipality $ Municipality $ ·------Alberton (S) ...... 312,000 Dandenong !C) ...... 825,000 Alexandra (S)...... 206,000 Daylesford & Glenlyon (S) ...... 225,000 Altona {C) ...... 475,000 Deakin IS) ...... 410,000 Arapiles (S) ...... 87,000 Diamond Valley (S) ...... 800,000 Ararat (C) ...... 310,000 Dimboola (S) ...... 252,000 Ararat (S) ...... 312,000 Donald (S) ...... 118,000 Avoca (S) ...... 150,000 Doncaster & Templestowe (C) ...... 965,000 Avon IS) ...... 177,000 Dundas (S) ...... 189,000 Bacchus Marsh IS)...... 178,000 Dunmunkle (S} ...... 185,000 Bairnsdale (T) ...... 322.000 Eaglehawk (B) ...... 203,000 Bairnsdale (S) ...... 238.000 East Loddon IS) ...... 138,000 Ballaarat !C) ...... 906,000 (C) ...... 258,000 Ballan (S} ...... 90,000 Eltham (S) ...... 558,000 Ballarat IS) ...... 525,000 Essendon (C) ...... 750,000 Bannockburn(S) ...... 100,000 (S) ...... 167,000 Barrabool (S)...... 106,000 Fitzroy (C} ...... 500,000 Bass !S)...... I 86,000 Flinders (S) ...... 360,000 Beechworth !S) ...... 203,000 footscray tC) ...... 1,120,000 Belfast (S)...... 115,000 Frankston (C) ...... 990,000 Bellarine (S) ...... 600,000 (C) ...... 358,000 Benalla (C) ...... 260,000 Geebng West (C} ...... 272,000 Benalla IS) ...... 80,000 Gisborne (S) ...... 145,000 Bendigo (C) ...... 830.000 Glenelg IS) ...... 270,000 Berwick (C) ...... 610,000 Gordon (S) ...... 180,000 Bet Bet IS) ...... 115,000 Goulburn !S) ...... 92,000 Birchip (S) ...... !!l6.000 Grenville (S) ...... 146,000 Box Hill (C) ...... 560,000 Hamilton (C) ...... 328,000 Bright :S) ...... 258,000 Hampden (S) ...... 297,000 Brighton (C)...... 312.000 Hastings (S) ...... 157,000 Broadford (S)...... 80,000 Hawthorn (C) ...... 290,000 Broad meadows !CJ ...... I. 740,000 Healesv!lle (S) ...... 295.000 Brunswick (C) ...... 726.000 Heidelberg tC) ...... 930,000 Bulla !S) ...... 297.000 Heytesbury (S) ...... 450,000 Buln Buln (SJ ...... 345,000 Horsham (C) ...... 425,000 Bungct.<;:t (S) ...... 130,000 Huntly IS) ...... 109,000 Buninv(•ng !S) ...... 2':10,000 Kaniva !S)...... 153,000 Cambcrwel! (Cl ...... '770,000 Kara Kara (S)...... 62,000 Campcrc'o\\ n (TI...... 127,000 Karkarooc IS) ...... 290,000 Castlema: '"', ,.i . . ... 308,000 Keilor(C} ...... 1,315,000 Cau1field (C') ...... 700,000 Kerang (B) ...... 140,000 Charlton IS) ...... 97,000 Kerang (S) ...... 290,000 Chelsea 1C) ...... 564,000 Kew (C)...... 276,000 Chtltern IS)...... 70,000 Kilmore(S) ...... 135,000 Cobra m (S)...... 283,000 Knox (C) ...... !,100,000 Coburg (C) ...... 885,000 (B) ...... 50,000 Cohuna (S) ...... 198,000 Korong (S) ...... 239,000 Co1ac (C) ...... 275,000 Korumburra (S) ...... 333,000 Colac (S) ...... 285,000 Kowree (Sl ...... 218,000 Collingwood (C) ...... 105,000 Kyabram (T) ...... 175,000 Corio (S) ...... 8.!4,000 Kyneton (S) ...... 249,000 Cranbourne (Sl ...... 485,000 Leigh (S) ...... 91,000 Creswick (S)...... 165,000 Lexton (S)...... 48,000 Croydon (C) ...... 600,000 Lillydale (S) ...... 845,000

22 APPENDIX I.- continued

Municipality $ Municipality $

~~~~~- Lowan (S) ...... 163,000 Sebastapol (B) ...... 202,000 Mclvor (S) ...... 85,000 Seymour (S) ...... 320,000 Maffra (S) ...... 351,000 (C) ...... 530,000 Maldon (S) ...... 95,000 Shepparton(S) ...... 360,000 Malvern (C) ...... 418,000 Sherbrooke(S) ...... 630,000 Mansfield (S) ...... 235,000 South Barwon (C) ...... 622,000 Marong (S) ...... 272,000 South Gippsland (S) ...... 263,000 Maryborough (C) ...... 265,000 South Melbourne (C) ...... 265,000 Melbourne (C) ...... l ,375,000 Springvale (C) ...... 930,000 Melton (S) ...... 365,000 Stawell (T) ...... 238,000 Metcalfe (S) ...... 85,000 Stawell (S) ...... 160,000 (C) ...... 440,000 Strathfieldsaye (S) ...... 247,000 Mildura (S)...... 670,000 Sunshine (C) ...... l ,575,000 Minhamite (S) ...... 172,000 Swan Hill (C) ...... 265,000 Mirboo (S) ...... 90,000 Swan Hill (S) ...... 560,000 Moe (C) ...... 500,000 Talbot & Clunes (S) ...... 112,000 Moorabbin (C)...... 730,000 Tallangatta (S) ...... 263,000 Mordialloc (C)...... 355,000 Tambo (S) ...... 326,000 Mornington (S) ...... 255,000 Traralgon (C) ...... 495,000 Mortlake (S)...... 160,922 Traralgon (S) ...... 59,000 Morwell (S) ...... 738,000 Tullaroop (S)...... 75,000 Mount Rouse (S}...... 100.000 (S) ...... 174,000 Myrtleford (S) ...... 195.000 Upper Murray (S) ...... 183,000 Narracan (S)...... 425,000 Upper Yarra (S) ...... 238,000 Nathalia (S) ...... 196,000 Violet Town (S) ...... 72,000 Newham & Woodend (S) ...... 118,000 (S) ...... 263,000 Newstead (S) ...... 84,000 Wangaratta (C) ...... 475,000 Newtown (C)...... 163,000 Wan.'!aratta(S) ...... 71,000 Northcote (C)...... 935,000 Wannon (Sl ...... 220,000 (S) ...... 308,000 Waranga (S}...... 308,000 Nunawading (C! ...... Q()Q,OOO Warracknabeal (S} ...... 145.000 Oakleigh (C)...... 675,000 Warragul (S) ...... 255,000 (S) ...... 166,000 Warrnamboo! (C) ...... 600,000 Orbost (S)...... 374,000 (S) ...... 318,000 Otway (S) ...... 293,000 Waverlev (C)...... 1,036,000 Oxley

23 APPENDIX I.- continued

VICTORIA GRANTS COMMISSION

GENERAL REVENUE GRANTS TO MUNICIPALITIES IN VICTORIA

AMOUNTS INCLUDED IN ALLOCATIONS FOR SPECIAL FACTORS 1979-80 AND 1980-81

The Commission has made allowances for the cost of special factors for a number of municipalities. These mainly relate to the net cost of repairing and restoring municipal assets damaged as a result of natural disasters, where such costs are recognised under intergovernment natural disaster assistance arrangements. These special allowances apply for the year in question only. Therefore in making comparisons of allocations between municipalities, or of individual municipalities from year to year, the relevant amounts shown below should be deducted from the allocations for the respective municipalities.

Amount Included for Special Factors Municipality $000 $000 Natural Disasters Natural Disasters 1979-80 1980-81

······--~------Alberton Shire ...... 25 Nil Ararat Shire ...... 2 Nil A voca Shire ...... I Nil Avon Shire ...... 3 4

Bairnsdale Town ...... 5 Nil Bairnsdale Shire ...... 17 26 Bannockburn Shire ...... Nil 7 Barrabool Shire ...... 4 I! Bellarine Shire ...... Nil 15

Colac Shire ...... 6 Nil Corio Shire ...... Nil 2

Dundas Shire ...... Nil 3

East Loddon Shire ...... 6 5

Gordon Shire ...... 9 Nil

Hampden Shire ...... Nil 2

Kara Kara Shire ...... l Nil Korong Shire ...... 2 Nil Kyneton Shire ...... Nil l

Leigh Shire ...... Nil 4

Mclvor Shire ...... Nil

Maffra Shire ...... 8 17 Mansfield Shire ...... 1 Nil Minhamite Shire ...... 1 Nil Mirboo Shire ...... 4 Nil Mortlake Shire ...... Nil 0.922 Morwell Shire ...... 25 Nil

Narracan Shire ...... Nil 25

24 APPENDIX I.- continued

Amount Included for Special Factors $000 $000 Municipality Natural Disasters Natural Disasters 1979-80 1980-81

Nathalia Shire ...... Nil Newstead Shire ...... Nil Newtown City ...... Nil

Omeo Shire ...... 19 I Orbost Shire ...... Nil 18 Otway Shire ...... 23 Nil Oxley Shire ...... I 3

Portland Shire ...... Nil 2 Pyalong Shire ...... 5 3

Rodney Shire ...... 0.54 Nil Rosedale Shire ...... 31 Nil

Seymour Shire ...... 4 Nil South Barwon City ...... Nil 14 South Gippsland Shire ...... 5 3 Stawell Shire ...... I Nil Swan Hill Shire ...... 3 Nil

Tallangatta Shire ...... Nil 3 Tambo Shire ...... 25 Nil Traralgon City ...... 9 Nil Traralgon Shire ...... Nil 25

Upper ...... Nil 5

Winchelsea Shire ...... 3 3 Woorayl Shire ...... 12 Nil

25 APPENDIX II

MUNICIP ALl TIES INSPECTED 1979-80

Date Municipality 1979 23 October ...... 24 October ...... 25 October ...... Shire of Broadford 30 October ...... 31 October ...... I November ...... 13 November ...... 14 November ...... City of Northcote 15 November ...... 20 November ...... 21 November ...... Town of Portland 22 November ...... Shire of Portland 27 November ...... 28 November ...... Shire of Bellarine 29 November ...... 4 December ...... 5 December...... 6 December...... Shire of Daylesford & Glenlyon 11 December...... 12 December...... 13 December......

1980 5 February ...... Shire of Flinders 6 February ...... Shire of Mornington 7 February ...... 12 February ...... 13 February ...... 14 February ...... 26 February ...... 27 February ...... 27 February ...... 28 February ...... 11 March ...... 12 March ...... City of Brighton 13 March ...... City of St. Kilda 17 March ...... 18 March ...... 19 March ...... Shire of Tambo 20 March ...... 25 March ...... 26 March ...... 27 March ...... City of Knox I April...... 2 April...... Shire of Violet Town 3 April ...... 15 April ...... 16 April...... Shire of Dundas 17 April ...... Shire of Minhamite 29 April...... 30 April...... I May ...... Shire of Karkarooc 6 May ...... 7 May ...... 8 May ...... Shire of Kaniva 20 May ...... Shire of Cobram

26 APPENDIX Il. - continued

Date 1980 21 May ...... 22 May ...... 27 !\1ay ...... 28 May ...... City of Maryborough 29 May ...... 3 June ...... 4 June ...... 5 June ...... CityofBenalla 10 June ...... 11 June ...... 12 June ...... 17 June ...... 18 June...... 19 June ...... 24 June ...... 25 June ...... Shire of Nathalia 26 June ...... I July ...... 2 July ...... City of Werribee 3 July ......

27 APPENDIX Ill

CATEGORIES OF MUNICIPALITIES (As Revised 1979)

CATEGORY I (42 Councils)

Altona City Dandenong City Knox City Preston City Box Hill City Diamond Valley Shire Malvern City Richmond City Brighton City Doncaster & Templestowe City Melbourne City Ringwood City Broadmeadows City Essendon City Moorabbin City St. Kilda City Brunswick City Fitzroy City Mordialloc City Sandringham City Camberwell City Footscray City Northcote City South Melbourne City Caul field City Frankston City Nunawading City Springvale City Chelsea City Hawthorn City Oakleigh City Sunshine City Coburg City Heidelberg City Port Melbourne City Waverley City Collingwood City Keilor City Prahran City Williamstown City Croydon Cit) KewCity

CATEGORY 2 (34 Councils)

Ararat City Echuca City MoeCity Shepparton City Bairnsdale Town Geelong City Newtown City Stawell Town Ballaarat City Geelong West City Port Fairy Borough Swan Hill City Benalla Cilv Hamilton City Portland Town Traralgon Cit} Bendigo City Horsham City Queenscliffe Borough Wangaratta City Camperdown Town Kerang Borough St. Arnaud Town Warrnambool City Castlemaine City Kyabram Town Sale City Wodonga City Colac City Maryborough City Sebastopol Borough Wonthaggi Borough Eaglehawk Borough Mildura. City

CATEGORY 3 (23 Councils)

Ballarat Shire Eltham Shire Mornington Shire South Barwon City Bellarine Shire Flinders Shire Morwell Shire Strathfieldsaye Shire Berwick City Hastings Shire Pakenham Shire Warragul Shire Bulla Shire Lillydale Shire Rodney Shire Werribee Shire Corio Shire Melt on Shire Seymour Shire Whittlesea Shire Cranbourne Shire Mildura Shire Sherbrooke Shire

CATEGORY 4 ( 112 Councils)

Alberton Shire Bet Bet Shire Dim boo la Shire Kaniva Shire Alexandra Shire Birchip Shire Donald Shire Kara Kara Shire Arapiles Shire Bright Shire Dundas Shire Karkarooc Shire Ararat Shire Broad ford Shire Dunmunkle Shire Kerang Shire Avoca Shire Buln Buln Shire East Loddon Shire Kilmore Shire Avon Shire Bungaree Shire Euroa Shire Koroit Borough Bacchus Marsh Shire Buninyong Shire Gisborne Shire Korong Shire Bairnsdale Shire Charllon Shire Glenelg Shire Korumburra Shire Ballan Shire Chiltern Shire Gordon Shire Kowree Shire Bannockburn Shire Cobram Shire Goulburn Shire Kyneton Shire Barrabool Shire Cohuna Shire Grenville Shire Leigh Shire Bass Shire Colac Shire Hampden Shire Lexton Shire Beechworth Shire Creswick Shire Healesville Shire Lowan Shire Belfast Shire Daylesford & Glenlyon Shire Heytesbury Shire Melvor Shire Benalla Shire Deakin Shire Huntly Shire Maffra Shire

28 APPENDIX Ill. continued

CATEGORY 4 (I 12 Councils)

Maldon Shire Numurkah Shire Shepparton Shire Walpeup Shire Mansfield Shire Omeo Shire South Gippsland Shire Wangaratta Shire Marong Shire Orbost Shire Stawell Shire Wannon Shire Metcalfe Shire Otway Shire Swan Hill Shire Waranga Shire Minhamite Shire Oxley Shire Tal bot & Clunes Shire Warracknabeal Shire Mirboo Shire Phillip Island Shire Tallangatta Shire Warrnambool Shire Mortlake Shire Portland Shire TamboShire Wimmera Shire Mount Rouse Shire Pyalong Shire Traralgon Shire Winchelsea Shire Myrtleford Shire Ripon Shire Tullaroop Shire Woorayl Shire Narracan Shire Rochester Shire Tungamah Shire Wycheproof Shire Nathalia Shire Romsey Shire Upper Murray Shire Yackandandah Shire Newham & Woodend Shire Rosedale Shire Upper Yarra Shire Yarrawonga Shire Newstead Shire Rutherglen Shire Violet Town Shire Yea Shire

29 APPENDIX IV

FORMULAE

GENERAL FORMULA

Where G grant relevant municipality (claimant) standard P population, or other parameter as may be relevant t rate in$ (tax rate) T revenue base (value of rateable property) per head, or per other parameter as may be relevant E expenditure g needs or disability factor applicable to the relevant municipality's cost of providing services. This formula combines allowances for differences in capacity to raise revenue with allowances for differences in costs of services.

REVENUE COMPONENT (R) R, P,.t,(T,-T,) Where t, standard tax rate T, standard value of rateable property per head or per assessment T, individual municipality's value of rateable property per head or per assessment This is the basic formula used by the Commission. As noted in the body of the Report the Commission used the simple mean of a calculation using population as the parameter and a second calculation using number of assessments, to calculate each municipality's revenue component. The basic formula remains unchanged regardless of the parameter used, only the definition of the variables alters. T, was the weighted average of the top 25 per cent of municipalities in the State derived for each of the parameters as follows: POPULATION total value of rateable property of top 25 per cent ; and total population of top 25 per cent total rates collected by top 25 per cent total value of rateable property of top 25 per cent The "top 25 per cent" is obtained by ranking municipalities in order of value of rateable property per head .. PROPERTY total value of rateable property of top 25 per cent ;and total number of propert1es (or assessment) m top 25 per cent total rates collected by top 25 per cent total value of rateable property of top 25 per cent The "top 25 per cent" in this case is obtained by ranking municipalities in order of value of rateable property per property (or assessment). The use of property classified by two types - residential and other - so that adjustments for differences in capacity to raise revenue can be weighted for the contribution of each of the two property types is accommodated in the formula in the following way: RESIDENTIAL T _ total value of residential property of top 25 per cent ; and " - total number of residential properties (or assessments) in top 25 per cent t" = total rates collected from residential property by top 25 per cent total value of rateable property of top 25 per cent (, = residential) Similarly for 'Other Property' (0), substituting the relevant 'Other Property' figures

30 APPENDIX IV. continued for the residential property figures. The total allowance for revenue-raising capacity for each municipality is the sum of the allowances calculated for each of the two property classes for each municipality. To make allowances for the contribution that each class of property makes to the rate base for each municipality, it is necessary to weight the calculation for each municipality accordingly. This can be accomplished by adjusting the property numbers for each municipality according to the standard distribution. The standard distribution of the classes of property is obtained by dividing the number of properties in the top 25 per cent of municipalities for each type of property by the total number of all properties in the top 25 per cent, viz:

~ residential properties in top 25 per cent I other properties in top 25 per cent ----- (=RES) + ,.. ll . . (=OTH) l I all properties in top 25 per cent .:... a properues m top 25 per cent = i.e. RES + OTH = I The standard distribution is then applied to the total number of properties in each local authority to obtain a standardised property distribution for each authority. Adjusted values per property for each class of property are then obtained for each local authority by dividing the standardised property class number into the actual value for that class of property in the local authority. In terms of the basic formula, for each property class calculation, the relevant figure as derived would enter the equation as T,. Adjusted property numbers for i'h municipality = I; property numbers . RES + I; property numbers . OTH Then, ~i value of residential properties ; and I; property numbers .RES ~;value of other properties ~i property numbers .OTH and R, ~;property numbers .RES. t,(T" T") + ~;property numbers. OTH. t,.(Tw- Tm) I;property numbers [RES. tsr(Tsr- Ta) + OTH. tso(Tso- Tm)] EXPENDITURE COMPONENT (E) E,=Es. g, This may be expanded to meet the requirements for the various expenditure functions. Some examples follow: ROADS. Number of assessments was used as the parameter for assessing road needs (i.e. comparing the length of road per assessment against the standard length per assessment) The formula is: A, . C, ( Km, _ Km,) A, A, Where A municipality's number of assessments C, standard cost per kilometre Km, A, municipality's length of road per assessment Km, standard length of road per assessment As Road cost disabilities are calculated by the formula: Km,. C. g, Where Km, municipality's road length in kilometres c, standard cost per kilometre g, municipality's cost disability factor The full allowance for road needs and disabilities is the sum of the two calculations. However, in order to establish the impact on the ratepayer (as some part of roads expenditure is already being met by government grants) a discount factor is applied, the

31 APPENDIX IV.- continued discount factor being the proportion that the municipality's expenditure from its own resources bears to its total expenditure on roads. The final formula is therefore:

GR,= [A,. C, (Km,- Km,) +Km,. C,. g,J D A, A, Where GR, municipality's grant for road needs and disabilities D discount factor The standard cost per assessment may vary according to whether the road is sealed or unsealed. In this situation separate calculations are made for needs and for disabilities by breaking each municipality's road length into length of sealed road and length of unsealed road and using the appropriate unit costs for each in the above formula. HEALTH AND WELFARE. As for Roads, calculations can be made to assess needs and disabilities related to particular Health and Welfare functions. For example, for services to the pensionable group, the formula is: A, A,) ( p, p, Where GA, allowance for expenditure needs and disabilities in relation to services for the pensionable group municipality's population C(A)s standard cost of services for pensionable group per head A, p, proportion of persons in municipality receiving pensions and supplements As standard proportion of pensionable group (e.g. State average proportion} Ps D = discount factor. Similarly, calculations can be made for needs and disabilities in relation to any function where a demographic characteristic is an appropriate parameter by substituting the relevant characteristic for A, the pensionable group. In other areas of local government expenditure, where needs are not a factor, the calculations are simply related to cost disabilities and are based on the general formula: G, = ( E, . g, ) D Where G, allowance for the function Es standard gross cost of the function g, disability factor for the municipality D discount factor This generally applies to specific services such as garbage, traffic control, street lighting, drainage and the like. It is to be noted that using gross costs as the basis for deriving standard costs requires that a discount factor, equal to the proportion that the municipality's expenditure on a function from its own resources bears to total expenditure on that function, be applied to all expenditure functions. DISABILITY FACTORS If a municipality's expenditure on a function reflected no other factor than its cost of providing the function at a level which was no different from the level of service normally provided in other municipalities (i.e. the level of service was standard} then its disability factor could be derived simply by:

Where g, disability factor E, municipality's expenditure per unit on the function Es standard expenditure per unit on the function

(substracting I from~ reduces the factor to a fraction).

32 APPENDIX IV.- continued However, a municipality's expenditure on a function might reflect factors other than cost disabilities, such as priorities set by the Council which may differ from those set by other Councils, or the level of efficiency in providing the function. Neither of these factors should be allowed to influence the size of a grant to a municipality. For this reason, the fixing of disability factors for each municipality is largely a matter of judgment, based on the evidence submitted to the Commission and its knowlege of the circumstances of each municipality.

33 APPENDIX V

DISTRIBUTION OF RATEABLE PROPERTY, RATE INCOME, RATING AND POPULATION

1975-76 to 1978-79

1. The values of rateable property have been derived from Valuer General estimates of rateable property at the beginning of the local government financial year - 1 October. In this respect they differ from the figures used by the Commonwealth Grants Commission which were those applying at the end of the financial year. 2. Statistics for rate income were derived from the "Return of Accounting and General Information" for the relevant financial year. The figures are a revision of the preliminary estimates presented in previous Reports. 3. Population figures have been derived from the revised annual estimates of population published by the Australian Bureau of Statistics in Catalogue Number 3201.2 dated 29 July 1980. These are revised inter-censal estimates of population, based on the results of the 1976 Census .. 4. Due to changes in the categorisation of municipalities the figures presented below differ from the corresponding figures appearing in Reports prior to 1979. 5. Minor discrepancies between figures may occur in some instances due to rounding.

Rateable Property Year N.A.V Rate Income Implied Population (1 October- f----- Rate in$ at 30 September) (cents) JOJune $m $per head $m $per head

METROPOLITAN MUNICIPALITIES 1975-76 ...... 1800.0 769.49 157.5 70.41 9.2 2,339,200 1976-77 ...... 2250.1 963.10 174.7 76.43 7.9 2,336,300 1977-78 .... - .... 2334.0 999.76 197.7 84.73 I 8.5 2,334,500 1978-79 ...... 2361.5 1007.98 214.4 91.51 i 9.1 2,342,800

PROVINCIAL CITIES AND TOWNS

1975-76...... 156 .I 396.34 22.4 61.60 15.5 393,750 1976-77...... 235 .9 594.68 24.8 67.60 11.4 396,630 1977-78...... 272 .3 681.16 29.5 73.57 10.8 399,760 1978-79 .... -.-.. 296 _9 737.00 32.6 81.92 11.1 402,850 I

ALL OTHER MUNICIPALITIES I 1975-76 ...... --.1 698 .7 692.23 77.1 79.30 11.5 I ,009,400 1976-77...... 1011 .5 966.86 85.1 84.53 8.7 1,046,200 1977-78 ...... 1155 .5 1068.47 98.7 94.03 8.8 1,081,410 1978-79...... 1214 .9 1099.05 110.6 102.77 9.4 1,105,410 1

34 APPENDIX V.- continued

~ Rateable Property Rate income Year N.A.V Implied Population (1 October- Rate in$ at 30 September) (cents) 30June $m $per head $m $per head

----- ~-~··--~~

TOTAL FOR STATE 1975-76 ...... 2654.8 709.39 257.0 71.92 10.1 I 3,742, 350 1976-77 ...... 3497.5 925.48 284.6 I 77.75 8.4 3,779, 130 1977-78 ...... 3761.7 985.86 325.9 86.20 8.7 3,815, 670 1978-79 ...... 3873.3 1005.78 357.6 93.74 9.3 3,851'060 I I ---

NOTE: Statistics relating to the functional distribution of municipal expenditure will appear in detail in the Australian Bureau of Statistics local government bulletins.

35 APPENDIX VI

TAX SHARING FUNDS FOR LOCAL GOVERNMENT AUTHORITIES

1974-75 to 1980-81

($'000)

New South Queens- South Western Wales Victoria land Australia Australia Tasmania Total 1974-75 (a) 21,359 14,630 8,954 4,774 4,959 1,669 56,345 1975-76 (a) 29,257 20,242 13,808 6,785 7,524 2,292 79,908 1976-77 (b) 51,289 35,398 24,222 11,925 13,162 4,004 140,000 1977-78 (b) 60,34! 42,078 27,875 14,220 15,524 5,290 165,328 1978-79 (b) 65,487 45,666 30,252 15,433 16,848 5,741 179,427 1979-80 (b) (c) 80,930 56,436 37,387 19,072 20,821 7,095 221,739 1980-81 (b) (d) 109,780 76,554 50,714 25,871 28,243 9,624 300,786

Total 418,443 291,004 107,081 35,715 1,143,533

(a) Amounts recommended by the Commonwealth Grants Commission. (b) Allocation between States based on a percentage distribution recommended by the Commonwealth Grants Commission. (c) Increase in local government share to I. 75 per cent of net personal income tax collections. (d) Increase in local government share to 2.00 per cent of net personal income tax collections. NOTE: Minor discrepancies in the totals may occur in some instances due to rounding. SOURCE: Prior to 1978-79, 'Payments to or for the States, the Northern Territory and Local Government Authorities 1977 -78'. 1978-79 on, 'Payments to or for the States, the Northern Territory and Local Government Authorities 1980-81 '.

F 0 ATKINSON, Government Pnnter, Melbourne, No. 18 27380/80 - Price $UO