VICTORIA GRANTS COMMISSION ANNUAL REPORT 1985 VICTORIA

Annual Report

of the

VICTORIA GRANTS COMMISSION

for the

Year ended 31 August 1985

Ordered by the Legislative Assembly to be printed

MELBOURNE N0.45 F D ATKIN SON GOVERNMENT PRINTER 1985 VICTORIA GRANTS COMMISSION

ANNUAL REPORT 1985

The Hon. J. L. Simmonds, M. P., Minister for Local Government, 480 Col/ins 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 ninth Annual Report of the Victoria Grants Commission, in accordance with section 17 of that Act.

D. V. MOYE, Chairman

L. F. CHEFFERS, Member

W. A. Phillips ~ecretary

November, 1985 VICTORIA GRANTS COMMISSION

MEMBERS

D. V. Moye, B.Ec., H.D.A. (Hons). Chairman L. F. Cheffers, L.G.E., M.I.E.Aust., F.LM.M., M.B.S., O.A.M. Vacant (Hon. J. M. Walton, to 31 January 1985)

STAFF W. A. Phillips,B.Bus,B.Sc(Hons), GradDipl.D.P.,Ph.D., Secretary A. Bashtannyk Assistant Secretary J. Chow, B.Ec. B. C. Paule, B.A. (Hons) C. T. Quinn,B.Sc.,Grad. Dip. DataProc., Computer Systems Officer L.Johnston Confidential Secretary

LOCATION The Commission's offices are on the 15th floor, State Insurance Building, 480 Collins Street, Melbourne (postcode 3000). TABLE OF CONTENTS Page No. ROLEOFTHECOMMISSION ...... IX CHAPTER 1. THEYEAR'SACTIVITIES ...... 1 General Revenue Allocations for 1985-86 ...... 1 Inspections ...... 2 Submissions ...... 2 AnnualReturnofinformation ...... 3 Structure of Local Government ...... 3 National Inquiry into Local Government Finance ...... 5 Conference of State Grants Commissions ...... 5 Members ...... 6 Staff ...... 6 2. THEBASESOFTHEDETERMINATIONS ...... 7 As-of-RightEntitlement ...... 7 General Equalisation ...... 8 Revenue Raising Needs ...... 9 ExpenditureNeedsandDisabilities ...... 11 Determining the Individual Allocations ...... 15 NaturalDisasters ...... 15 Comparisons between Years ...... 16 Acknowledgements ...... 16 APPENDICES I Transmittal Memorandum and Determinations ...... 18 11 Municipalities Inspected ...... 25 III CategoriesofMunicipalities ...... · · ...... · 26 IV Formulae ...... · · · · .. · · · · ...... · · .... · · V Distribution of Rateable Property, Rate Income, 28 Rating and Population 1975-76to 1983-84 ...... 33 VI Tax Sharing Funds for Local Government Authorities 1974-75 to 1985-86 . . . 35 ROLE OF THE VICTORIA GRANTS COMMISSION The Commission consists of a Chairman and two other members, appointed by the Governor in Council for a period of not more than five years. At least two members of the Commission shall have a knowledge and understanding of local government and members are eligible for re-appointment at the expiry of their terms of appointment. The principal role of the Commission is to determine, on or before 31 August each year, the allocation to 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 Commis­ sion Act provides that: "10, (1) 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 Com­ mission 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 inspec­ tions, conduct such hearings, take such evidence and generally make such investigations as the Commission thinks necessary for the pur­ pose 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 Com­ mission by Councillors or the municipal clerk or the municipal engi­ neer or full-time officers of the municipality and not otherwise .. , The Act also provides that the Minister for Local Government may "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 sig­ nificance in relation to all or any municipalities in the relevant financial year" (section 14). In so doing, the Minister is required to publish notice of a submission in the Government Gazette, to lay copies of the submission before both Houses of Parliament and make copies available to the public. No submission has been made under this provision to date. In addition, the Commission is required to ''enquire into and report upon any matter relating to local government finances which is referred to it by the Minister" (section 16). Such a reference was made to the Commission in November 1984; it was concerned with the prospective financial advantages of restructuring local government in Victoria. The Commission reported to the Minister on the matter in July 1985 (see paragraphs 1.18 to 1.21 for further details). The Commission was convened on ninety-six days during the year ended 31 August 1985. 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 31st August. This Report is in compliance with that requirement. Chapter 1 THE YEAR'S ACTIVITIES General Revenue Allocations for 1985-86 1.1 Since 1980-81, the basis for determining the amount to be made available by the Commonwealth to the States as general revenue grants for local government has been 2 percent of personal income tax. However the basis for determining the amount for allocation for 1985-86 was altered as a consequence of the Common­ wealth Government's expenditure reduction policies announced on 14 May 1985 by the Commonwealth Treasurer in his statement on 1985-86 Budget Initial Expen­ diture Savings Measures. 1.2 The Local Government (Personal Income Tax Sharing) Amendment Act 1985 provides that the amount available for allocation for 1985-86 will be an amount equal to that allocated in 1984-85, adjusted to provide for a 2 percent increase in real terms, based on movements in the Consumer Price Index for the relevant period. The estimated increase in the Consumer Price Index, as published in the Commonwealth of Australia Gazette, No. S342, of 28 August 1985, is 7.8 percent. The application of the formula thus provides an amount of $136,157,634 for allocation to local government in Victoria as general revenue grants for 1985-86. This is an increase of 9.956 percent over the amount provided for allocation for 1984-85. If the formula had not been amended, the increase would have been about 15.6 percent, which would have provided an additional $7 million for local govern­ ment in Victoria. 1.3 The Local Government (Personal Income Tax Sharing) Amendment Act 1985 also provides for adjustments to be made to the allocations in the event of there being any difference between the estimated increase in the Consumer Price Index for the relevant period and the eventual actual increase. Therefore, the amount of $136,157,634 that has been so far provided is an estimated total for Victoria for 1985-86, subject to adjustment when the March 1986 Consumer Price Index increase is known. Any adjustments are to be made to all allocations (exclud­ ing special factor allowances) in proportion that each municipality's allocation as determined by the Commission on 22 August 1985 bears to the total estimated allocation for the State of $136,157,634 (less the total amount allocated for special factor allowances in Victoria's case). 1.4 The amended basis applies for the 1985-86 allocations only as the revenue sharing arrangements are to be reviewed in the light of the recommendations of the Commonwealth's National Inquiry into Local Government Finance. The Report of the National Inquiry is expected to be available early in October 1985. 1.5 The total amount available to the six States for allocation to local govern­ ment authorities in 1985-86 is $534,973,200, an increase of 9.956 percent over the amount for 1984-85. The apportionment to the six States is set out in the Common­ wealth Act and is based on recommendations bv the Commonwealth Grants Com­ mission (see Commonwealth Grants Commission Special Report 1977 on Financial Assistance for Local Government). The relative State percentages and the amounts for 1985-86 are shown below: Percentage Amount($) New South Wales 36.4977 195.252,913 Victoria 25.4513 136,157,634 Queensland 16.8606 90,199,691 South Australia 8.6010 46,013,045 Western Australia 9.3897 50,232,379 Tasmania 3.1997 17,117,538 100.0000 534,973,200

1 The total of general revenue funds made available by the Commonwealth for allocation to local government since the first revenue grants were made in 1974-75 is $3399m; of this total amount Victoria has received $865m. (see Appendix VI for further details.) 1.6 The Commission completed the Determination of the allocations and presented them to the Minister for Local Government, the Hon. J. L. Simmonds, on 22 August 1985, for transmittal to the Commonwealth Minister for Local Gover­ nment and Administrative Services, the Hon. Tom Uren, for ratification. The allocations for individual Councils were announced on 4 September 1985 and payment of the grants was made on 10 September 1985.

INSPECTIONS 1. 7 Inspections were undertaken of thirty-nine municipalities throughout the State over the period commencing 23 October 1984 running through to 15 May 1985 (see Appendix Il); this completed the fourth year of a five year cycle of visits to municipalities. 1.8 The aim of the inspections is to cover the range of services being provided by the respective councils, in order that the Commission might better appreciate the conditions which each Council faces in serving its community. A period is set aside at the end of each inspection for discussion with Councillors and their officers about the role of the Commission and about aspects of municipal functions which are relevant to that role. 1.9 These inspections and discussions have been invaluable to the Commis­ sion because of the benefit of a more comprehensive knowledge of the physical characteristics of each municipality and a greater appreciation of the social and environmental aspects of the respective areas which have influenced Council's expenditure policies. This is important in distinguishing between costs which are related to needs and disabilities and costs which reflect Council's policy decisions. 1.10 The flexibility available in inspection programming as a result of the shift to a five-year framework has enabled the Commission to devote more time to areas where special circumstances prevail. In addition, the Commission has been able to program its inspections to include visits to areas that experience heavy pressure on facilities due to the influx of visitors during the summer holiday period. In this respect, visits to the municipalities of Phillip Island, Bass, Wonthaggi, Bellarine and Queenscliffe were undertaken in January 1985. l.11 At the request of the respective Councils, the Commission held discus­ sions with the Councils of the Cities of South Melbourne and Waverley and the Shire of Belfast to explain aspects of the Commission's methodology and the effects of local factors on the allocations determined for the municipalities.

SUBMISSIONS 1.12 The Commission does not require Councils to make formal submissions each year. In many cases annual submissions would simply be repeating points made in previous submissions and therefore would serve little purpose. However, the Commission encourages Councils to make submissions where they believe there have been material changes to circumstances within the municipality or where some aspect of the municipality's functions may have been overlooked. Also, as part of the presentation of itineraries, the Commission requires detailed summaries of significant features of the respective municipalities, particularly those in areas being inspected during the visit. This provides a further opportunity to update information on various aspects of each municipality.

2 ANNUAL RETURN OF INFORMATION 1.13 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, 5 Decem­ ber 1984 was the date fixed by notice in the Victoria Government Gazette No. 96 of 12 September 1984 as the date by which the prescribed information for the financial year ended 30 September 1984 should be returned to the Commission. 1.14 The Commission has worked closely with the Victorian office of the Australian Bureau of Statistics on the continuing development of the joint Return of statistical and other information which serves the needs of the Commission and the Bureau. The Return has been devised to conform with the standardised form of recording local government financial statistics and with the new regulations for local government accounting, which is also aligned to the standardised format. The statistics derived from the Annual Returns are published by the Australian Bureau of Statistics in its Bulletin "Local Government Finance Victoria" (Catalogue No. 5501.2), which provides detailed information on local government income and expenditure for each municipality, over a wide range of functional headings. 1.15 In spite of the substantial improvement to the presentation of local gov­ ernment financial information as a consequence of the adoption of the standardised format of local government accounting, the lack of uniformity in the treatment of oncosts and overheads is a matter of some concern. Until this issue is resolved, it will be necessary to continue to seek information about the treatment of oncosts and overheads for all functions, so that adjustments can be made to the data to make it more comparable. 1.16 The Commission has previously referred to the benefit that can accrue from reducing delays in the processing of information which is essential to the allocation process. The date of payment of the grants is largely determined by the date by which the allocations are finalised, once the total for the State is known. With the amount of money now involved, there is an obvious financial incentive for all Councils to ensure that there is no undue delay to the Commission's work which might hinder the early completion of the determination. 1.17 As in previous years the majority of municipalities lodged their Returns on or about the due date, but a number again failed to do so without reasonable excuse. In some instances repeated efforts by the Commission's staff to have the required information provided within a reasonable time or in a satisfactory manner were ignored. While the Commission is reluctant to apply the penalty provision of the legislation to the allocations for those Councils which have been unhelpfuL no responsibility can be accepted for deficiencies in allocations which are a con­ sequence of the failure to co-operate in the provision of essential information at the appropriate time.

OTHER MATIERS STRUCTURE OF LOCAL GOVERNMENT 1.18 The Commission has continued to advise the Minister for Local Govern­ ment on the financial characteristics of municipalities throughout the State, with particular reference to differences attributable to the structure of local government in the State. 1.19 The Chairman presented papers to two seminars on local government structure: the first at Kew in June 1984, which was attended by representatives of metropolitan Councils, and the second at Camberwell in October 1984. Some 550 persons attended the latter conference which was organised j?intly by the .In~titute of Municipal Management and the Local Government Engmeers AssociatiOn of Victoria.

3 1.20 As a follow-up to the October 1984 Seminar, the then Minister for Local Government, the Hon. F. N. Wilkes, M.P., on 29 November 1984 formallv requested

the Commission to: J "report on the prospective financial advantages of restructuring local govern­ ment in Victoria with particular regard to: (i) The relative strength of the 211 municipalities with regard to the propor­ tion of locally derived revenue to total income; that is the degree of dependence on extraneous revenues and the reliability of such sources of income. (ii) The level of rate revenue necessary for a municipality to be autonomous and effective. (iii) The relationship of the size of a municipal district to the number of rateable properties and the level of rating. (iv) The effect of the existing structure on local government's capacity to raise and/or draw upon and effectively use (a) rate revenue; (b) personal income tax sharing allocations; (c) State Government specific purpose funding; (d) Road Construction Authority allocations; (e) Commonwealth Government specific purpose funding. (v) The relationship of the number and standard of services to the financial strength of municipalities, including the relationship of the rating capacity of municipalities to the range and standard of services provided. (vi) Any clear trends which indicate financial savings in administration costs or the provision of economic services. (vii) Any cost advantages in the purchase and deployment of capital equip­ ment that could be expected from restructure. (viii) The incidence of financial savings due to the lack of service provision and/ or reliance upon facilities and services of neighbouring municipalities and the effects on host municipalities. (ix) The effects on the principle of tax equity and on fiscal equalisation of the existing structure and the benefits that could result from a rationalisation of municipal boundaries. (x) The effect of differences among municipalities in the bases used for rating purposes and the effect of the adoption of a common valuation base and differential rating on the revenue raising capacity of municipalities and the ability of certain groups of persons to pay rates. (xi) Any other matters concerning the relationship between the financial characteristics and the structure of local government in Victoria that the Commission regards as relevant."

This request was made under section 16 of the Victoria Grants Commission Act 1976 whtch provides:

"16. The Commission shall inquire into and report upon any matter relating to local government finances which is referred to it by the Minister."

1.21 The Commission's report on these matters was presented to the Minister for Local Government, the Hon. J. L. Simmonds, M.P., on 25 June 1985. A copy of the report, entitled "The Prospective Financial Advantages of Restructuring Local Government in Victoria" was made available to each Council.

4 NATIONAL INQUIRY INTO LOCAL GOVERNMENT FINANCE 1.22 On 10 May 1984 the Minister for Local Government and Administrative Services (then Territories and Local Government), the Hon. Tom Uren, M.P., announced that the Commonwealth Government was establishing a Committee to review the arrangements for Local Government revenue sharing. The Committee's terms of reference were: "To review the local government tax sharing arrangements and report on any changes required to improve the operation of the Local Government (Personal Income Tax Sharing) Act 1976 with reference to: • the respective roles of the Commonwealth and the States in regard to local government; • the purpose and functions of local government revenue sharing; • the level and form of funding for local government available from the Com­ monwealth, State and local government sources, and the principles which should determine the level and allocation of the local government revenue sharing funds between and within States." Professor Peter Self, Senior Research Fellow at the Urban Research Unit, Aus­ tralian National University and formerly Professor of Public Administration at the London School of Economics was appointed Chairman of the Review Committee. Other members are: Mr Noel Dawkins, Chief Executive Officer, City of Canning, Western Australia Mr Peter Emery, Deputy Under-Treasurer of South Australia Mr Michael Eyers, Consultant, Sydney Dr Ian Manning, Research Fellow, Institute of Applied Social and Economic Re­ search, University of Melbourne Mr Tony Philbrick, Town Clerk and City Administrator, City of Brisbane Dr Judith Yates, Department of Economics, University of Sydney and a Director of the Commonwealth Bank of Australia The Committee is expected to report its finding to the Government early in Oc­ tober 1985. 1.23 The Chairman of the Victoria Grants Commission was a member of an interdepartmental sub-committee formed to prepare the State Government's sub­ mission to the Inquiry and was also a member of the panel of State Officers which gave evidence to the Inquiry in relation to the Government's submission at public hearings in Melbourne on 6 May 1985. The Commission also gave evidence to the Committee on technical issues related to fiscal equalisation principles and meth­ odology on 7 May 1985. 1.24 The recommendations of the Review Committee will have important implications for future general revenue arrangements for local government. The Minister for Local Government and Administrative Services has already foreshad­ owed further changes to the Commonwealth legislation in his Second Reading Speech when introducing the Local Government (Personal Income Tax Sharing) Amendment Act 1985 as a consequence of any recommendations contained in the Committee's report.

CONFERENCE OF STATE GRANTS COMMISSIONS 1.25 The 1984 Conference of State Grants Commissions was hosted by Western Australia's Grants Commission and held in Perth on 26-28 October 1984. The main theme for the Conference concentrated on issues arising from the National Inquiry into Local Government Finance, the outcome of which could have a direct impact on the State Grants Commissions. The Chairman of the Committee of Inquiry, Professor Peter Self, Mr Noel Dawkins (member) and Mr John Nethercote (Secre­ tary) participated in sessions of the Conference. (The 1985 Conference will concen­ trate on the Committee's recommendations; it is to be held in Sydney in November 1985.)

5 MEMBERS 1.26 The Hon. J. M. Walton, who was appointed for a three year term com­ mencing 1 November 1982, resigned from the Commission on 31 January 1985 because he was moving interstate. John Walton's wide knowledge of local govern­ ment and extensive experience in local and community affairs was of great benefit to the Commission during his short tenure of office. At the time of writing this Report, no replacement had been made. 1.27 It is with pleasure that we record the award of the Medal of the Order of Australia in the general division to Mr Len Cheffers, a member of the Commission since January 1981. for services to local government and the community. This award was announced in the Queen's Birthday Honours List for 1985. STAFF 1.28 The Commission's staff has been strengthened by the appointment of a Computer Systems Officer whose primary task is to design and monitor the opera­ tions of the analytical programs used by the Commission in its allocation processes. The establishment of an in-house computing facility has greatly enhanced the Com­ mission's capability for detailed analysis of financial and other data, the benefits of which extend to areas of the Department of Local Government.

6 Chapter2 THE BASES OF THE DETERMINATIONS 2.1 The principal legislation governing the general revenue grant arrange­ ments for local government is the Commonwealth's Local Government (Personal Income Tax Sharing) Act 1976, as amended. This is supplemented by the Victoria Grants Commission Act 1976, which provides, inter alia, for the establishment of the Victoria Grants Commission and the parameters within which it shall operate. 2.2 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. 2.3 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 ofthe 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 2.4 For the 1976-77 allocations the Interim State Grants Committee, follow­ ing 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 Area 15 per cent The same basis has been used for determining the As-of-Right entitlement for all allocations since that time. 2.5 For the 1985-86 allocations the population and area figures used were taken from the publication of the Australian Bureau of Statistics, "Estimated Re­ sident Population in Local Government Areas, Victoria, 30 June 1982, 1983 and Preliminary 1984" (Catalogue Number 3203.2) The resultant As-of-Right en­ titlement factors are: Population $11.3609 per head Area $35.9728 per square km. The allocations for two municipalities, the Shires of Rosedale and Walpeup, were determined by reference to their entitlements As-of-Right. 2.6 The As-of-Right entitlement is a means of ensuring that each munici­ pality receives a minimum grant. The basis upon which it is calculated ensures that some recognition is given to population and area effects on the relative costs of local government services, particularly for any municipality that may not qualify for a larger allocation. However, in order to avoid double counting of the partial equalisation effects of the As-of-Right entitlement, the Commission's approach is to determine the allocations on general equalisation principles, with the proviso

7 that the amount 'so determined for each municipality shall not be less than the ".As­ of-Right Entitlement" of the municipality'. In other. words, the 'As-of-Rtght Entitlement' is regarded simply as a base gr.ant con~tramt. It follows, that ~xc~pt for a municipality which receives an As-of-Rtght entitlement only, the equalisation allowance for a municipality is its total allocation, not simply the difference betwet;n the As-of-Right and the total allocation. This is consistent with the procedures lmd down in the Victoria Grants Commission Act 1976.

GENERAL EQUALISATION 2. 7 The Commonwealth legislation uses the long-established description of fiscal equalisation to define the broad principles to be followed by the State Grants Commissions. The primary objective is to ensure "so far as is practicable" that each municipality is able to function, by reasonable effort, at a standard not appreciably below the standards of other municipalities in the State. The term "so far as is practicable" recognises two things: (i) in the foreseeable future the total amount available in any one year is unlikely to be sufficient to achieve complete fiscal equalisation, so that at best the Commission's role is limited to a partial equalisation exercise; and (ii) fiscal equalisation is a rather inexact science which is delimited by the quality and availability of data and the extent of knowledge about each municipality that the Commission can draw upon at any time. 2.8 "By reasonable effort" recognises that differences among municipalities in the standard of services may simply be a reflection of Councils' policies about rating effort and the standard of services to be provided, which largely go hand in hand. The general revenue grants are not designed to subsidise those activities of municipalities which are below the standard of other municipalities simply because of differences in policy decisions. For example, a low standard of service in a municipality may be a reflection of low rate policies adopted by successive Coun­ cils; this low standard of service would not be recognised in the grant allocations. Nor would a high level of rating be recognised if this was only a reflection of a Council's policy to provide a higher standard of service than was being provided in other municipalities. 2.9 A concomitant of reasonable effort is that the methodology of fiscal equalisation be neutral in terms of the effort made by Councils to raise revenue or provide services, except that it be at a reasonable level. 'Effort neutral' means that a Council should not be able to influence the size of the allocation for its munici­ pality by deliberate policy decisions, nor should the bases for the allocations con­ strain the independence of the policy-making role of Councils. If it were not so those Councils which were best able to do so could maximise the share of the grants for their municipalities at the expense of other municipalities. Also, if the Commis­ sion were able to influence the policies of Councils because of the way by which it determined the allocations, it could become, in effect, the principal determinant of revenue-raising and expenditure policies at the local government level, which would be an abrogation of the responsibilities of the elected councils. 2.10 A 'reasonable level of effort' is recognised, and an 'effort neutral' effect achieved, by using standard levels of rates and expenditures for the various func­ tions and applying objective measures wherever practicable to determine what allowances should be made. The Commission relies upon the levels of rates and expenditures which Councils themselves have most commonly set as reasonable in the circumstances within which they function. The level of 'reasonable effort' used by the Commission is, in effect, the consensus of the 210 municipal Councils in the State.

8 Revenue Raising Needs 2.11 The first element in the equalisation equation, capacity to raise revenue, is a reflection of the value of rateable property within each municira_lity; :vhic~ is the sole taxing base available to local government. Clearly, muntcipahties with higher values of rateable property can raise a given quantum of revenue mo~e readily than those with lower values. It is appropriate. therefore. to use this "better-off" group as the benchmark or standard against w~ich the cap!l~ity .of other municipalities is compared. To the extent that the capacity of a mumc1pahty is greater than the standard, then the 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 standard, the municipality is said to have positive revenue needs, or a disability in raising revenue. 2.12 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 charactens­ tics 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 re­ venue grant allocation. 2.13 The Commission has referred in its previous Reports to the problems it has encountered in the measurement of capacity to raise revenue and the ways in which it has attempted to overcome these problems. Firstly, there is need to nor­ malise the valuations of rateable property for each municipality. This is because in non-metropolitan areas, valuations are made in different years for the respective municipalities. Also the time period between valuations in non-metropolitan areas differs from that in the metropolitan area. Private valuers are generally employed throughout the State to undertake the work, and because of this, there may be differences between municipalities in valuations of property which simply reflect differences in the application of valuation practices. To overcome these effects the Valuer-General provides the Commission, on a confidential basis, with valuations for each municipality adjusted to a common date on the basis of sales information held by the Valuer-General's Office. The valuations are expressed in net annual value terms, the most common basis for rating purposes throughout the State. 2.14 Secondly, there is the necessity to take account of differences in the size of municipalities. This requires the valuations for each municipality to be expressed as a value per unit. Most commonly per head values are used for comparisons of taxable capacity between larger government units (i.e. for comparisons between States) but have been found to have serious defects when used for making com­ parisons between the very much smaller local government units. The Commission has opted for the use of per property values as more realistic bases for comparison, on the grounds 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 value of rateable properties within the municipality. However, difficulties have been encountered in the application of these bases to the measurement of relative revenue-raising capacity, particularly because of the problem of defining what constitutes a property. Since the 1981-82 allocations the Commission has moved toward allowances for differences in revenue-raising capacity based solely on values of rateable property per assessment, but having regard to relativities produced by other measurements. 2.15 Thirdly, the types of property within a municipality will also influence its capacity to raise revenue and therefore effects of variations in the mix of property types should be recognised. Thus, the Commission separately measures capacity to raise revenue from residential property, capacity to raise revenue from commercial and industrial property and capacity to raise revenue from rural and other

9 property. Allowance is also made for the relative proportions of each of the three classes of property in the total valuation of each municipality. The allowance for capacity to raise revenue is, therefore, the sum of the allowances for the three classes of property, weighted for the mix of property types. 2.16 Since 1979-80, adjustments have been 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). Also it has been necessary for the Commission to make adjustments to residential property numbers for all municipalities where these numbers are in­ flated by a large number of undeveloped properties. The proportions of developed residential properties to total residential properties were calculated and adjust­ ments made to the numbers of residential properties where the proportions for individual municipalities were lower than those commonly applying. 2.17 As indicated above, revenue needs were assessed mainly in relation to per assessment values of rateable property. Separate calculations were made for each of the three classes of property residential, commercial and industrial, and rural and other property. The standard values of rateable property per assessed property which were used were the weighted mean values for the top 25 per cent of the State, for each class of property. The standard rates in the dollar for each property class were similarly derived, being the weighted mean rate for each property class for the top 25 per cent of municipalities (see Appendix IV for further details). Regard was also had to revenue needs measured in relation to per head values of rateable property, the calculations being made on the same basis as for previous years. 2.18 The Commission believes an assessment-based comparison of revenue­ raising capacity is more equitable than a population-based measurement, but it is clear that there are still a number of elements in the process which cannot be resolved satisfactorily. These elements derive from the disparate characteristics of the 210 municipalities in the State. There is no basic logic in the structure of local government and there is therefore no reason to expect a single formula to cope with the widely varying elements that make up the rate base for local government and, at the same time, produce results that do justice to the principles of equity that are the corner stone of the general revenue arrangements. For this reason the Commis­ sion has continued an examination of the "balanced budget method" for the assess­ ment of fiscal equalisation needs. This method is similar to that originally used by the Commonwealth Grants Commission to assess the fiscal needs of claimant States but has been superceded in recent years by direct measurements of revenue and expenditure needs. 2.19 Briefly, the approach is predicated on the basis that the competence of local government is prescribed by legislation and, within broad limits, each local authority provides the range of services which are perceived to be necessary for the area, at a level which is perceived to meet reasonable community standards. To the extent that a gap exists between the total cost which would be incurred by a municipality (i.e. necessary expenditure net of specific purpose grants) in providing municipal services at standard levels and the amount able to be raised by that municipality at standard effort, the degree of fiscal inequality can be identified. The Commission considers that this method would help to resolve the major problems which exist in the measurement of revenue needs. It is intended that a discussion paper on the matter will be circulated to all municipalities for comment when the methodology is refined to the point where its use in the determination process was thought to be a practical possibility. 2.20 Variations in capacity to raise revenue are subject to short-run fluctua­ tions and also exhibit secular trends. In some cases, sharp fluctuations in values between years may be simply a reflection of a revaluation cycle, heightened demand for certain classes of property in a particular period or in rural areas

lO seasonal conditions. In order to smooth out such year-to-year fluctuations, the Commission uses 3 year moving averages of the up-dated valuations provided by the Valuer-General. Nevertheless longer-run trends towards relatively higher values have persisted for bayside and inner eastern metropolitan are~s and !or irrigated farmland and better-class wheat country. These trends, other thmgs bemg equal, will result in a gradual decline in the share of f':lnds all?cated to areas where the rate of increase in property values exceeds that which applies generally. 2.21 Capacity to raise revenue is also affected by developm~nt and the extent to which this will affect allocations depends upon the strengh of Its effect upon !he overall values of propertv within the municipality and upon the extent of offsettmg increases in expendi~ure' need~. Substantial increas~s i~. valuations :vithout c?m­ mensurate increases m expenditure needs can be a s1gmficant factor m allocatiOns varying between years. 2.22 During 1984-85 the Commission undertook a detailed verification of the apportionment of assessment numbers and valuations between the three ~l~ss~s.of property. This resulted in significant ch.anges to the data for several mumcipahtJes which have affected the relevant allocatiOns for 1985-86. Expenditure Needs and Disabilities 2.23 Allowances for differences in the cost of local government services is the second element of the fiscal equalisation equation. Expenditure by a municipality on the various functions can reflect a number of factors, e.g. Council priorities, the level of efficiency, the level of self-help, differences in the number of units to be serviced, effects of climate, topography, availability of materials, isolation from service centres, etc. The assessment of allowances should be effort neutral; that is, it should neither penalise nor reward Councils where expenditure patterns vary from the norm because of policy decisions, differences in efficiency and the level of self-help. The allowances should however reflect differences in costs that arise because of the inherent characteristics of the population within the various munici­ palities and the inherent physical characteristics of each of the municipalities. 2.24 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 Local Government 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 im­ portance that the Commission attaches to the detailed inspections of each municipality. 2.25 The expenditure component of the allocations is the summation of assess­ ments of relative needs and disabilities over the range of municipal functions, generally following the functional classification of expenditure adopted by the Austraiian Bureau of Statistics. The broad classifications are given in paragraph 2.34 along with the subdivisions for each classification which were considered in detail. 2.26 Unit costs are derived from the data for most of the functions shown under the sub-headings, except for Special Factors where the allowance was the net cost to the municipality of expenditure approved under Commonwealth/State arrangements for natural disaster repair and restoration work. Where unit costs can not be satisfactorily derived from the data, the Commission exercises its judgment about the allowances to be made. 2.27 Allowances for differences in costs can be assessed under two broad headings- needs and disabilities. "Needs" is the expression used to describe the number of units to be serviced in the performance of any particular function. The

ll number may be higher (positive needs), equal to (zero needs) or less than (negative needs) the norm. For example, a municipality may have a relatively high propor­ tion of elderly persons in its population compared with the State average pro­ portion and would therefore have positive needs for the provision of services related to this age group. On the other hand, the same municipality would most likely have negative needs in relation to services for mothers and children as the proportion of children in the under 5 age group would almost certainly be less than the State average proportion. 2.28 Needs allowances are assessed by reference to objective data. For exam­ ple, needs for personal services functions (health, welfare, recreation, etc.) are assessed by comparing the demographic characteristics of each municipality with the average characteristics for the State as a whole. Variations from the State average characteristics can be taken to indicate positive or negative needs and the degree of variation can be used to calculate the level of needs allowance that should be taken into account for the relevant functions. 2.29 Needs (and disabilities) calculations can be made in terms of expenditure on the relevant function per head of population or in terms of expenditure per relevant unit. The former, i.e. per head expenditure for the function, was used up to the 1980-81 allocations but a change to the latter, i.e. expenditure per relevant demographic unit, was made for the calculations used as the basis for the 1981-82 allocations and those for subsequent years. This change was made to remove distortions from the calculations of standards which were evident in the use of per head values and to simplify the procedures. It has made little difference to the allowances made for the various functions, compared with allowances calculated using per head values. 2.30 Changes have also been made to the bases for calculating road main­ tenance needs. These changes relate to the discounting procedures which are used to remove the effect of government grants for road maintenance from the total assessed road needs allowance. Up until1980-81, the discounting was applied after the needs allowance was assessed, that is it was applied to needs allowance only and ignored the level of government grants in relation to the standard length of road. For the 1985-86 allocations the Commission continued with the practice first adopted in 1981-82 of discounting the total length of road to reflect the level of financial involvement by each municipality in the maintenance of the various classes of roads. The needs allowances are then calculated in relation to the discounted road lengths. In this way recognition is given to the level of government grants for the whole of the road system and not only to above (or below) standard length. Details of these procedures are given in Appendix IV. 2.31 "Disabilities" relates to differences in costs which arise essentially from the physical characteristics of each municipality. Terrain, climate, location, traffic conditions, regional use, isolation, sparsity, rate of population growth, etc. are illustrations of inherent characteristics which could influence the costs of functions in each of the municipalities compared with the norm. Recognition is also given to the ethnic characteristics 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 concentra­ tions 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. Again the varia­ tions from the norm can be reflected as positive disabilities (high costs situations), zero disabilities (normal costs situations) or negative disabilities (low costs situations). 2.32 The derivations of disability factors cannot be done directly from the data, because individual levels of expenditure may be as much the re~ection of policy attitudes and differences in efficiency, as the refl~ction of cost differences attributable to inherent characteristics. However, expenditure levels can be used as

12 a first indicator of cost differences compared with the norm, but other evidence, such as that from submissions and general knowledge gained from inspections, is used to confirm that differences in cost levels are a reflection of inherent character­ istics and to assess the extent to which such differences should be recognised. ln this regard the run of reliable data now available to the Commission is proving useful in assessing the extent of cost disabilities, particularly for the road maintenance function. 2.33 Allowances for needs and disabilities are assessed for each function by reference to the costs most commonly incurred by municipalities throughout the State in providing each function. In other words, the standard cost of service for each function against which each municipality's cost conditions are compared, is taken to be the level of expenditure most commonly decided upon by the Councils administering the 210 municipalities in the State. There is no arbitrary determina­ tion of standards by the Commission. 2.34 The Commission derived unit costs from the expenditure data supplied in the Return of Accounting and General Information for the financial year ended 30 September 1984. The following parameters were used: General Administration Growth and Planning average rate of population growth over past five years. Isolation and Sparsity population, area and distance from Melbourne. Law, Order and Public Safety Fire Protection- population. Health Infants and Mothers proportion of population aged less than five years. Preventative Services population. Other- population. Welfare Families and Children proportion of population aged less than five years. Aged and Disabled proportion of population comprising males 65 years and over and females 60 years and over. Other- population. Housing and Community Amenities Street Cleaning -length of sealed roads in built-up areas. Urban Drainage population. Household Garbage Collection and Disposal - number of households serviced on a once-a-week basis (arbitrary allowances for a twice-a-week collection were made for a number of municipalities). Other- population. Recreation and Culture Public Halls, etc.- population. Swimming Pools, Beaches, etc. population. Sporting Clubs, etc. -proportion of population aged between five years and thirty-five years. Parks. Gardens and Recreation Reserves- population. Libraries- population. Other Culture (Art Centres, etc.)- population. Roads and Bridges ( disaggregated by road classification and by surface type). Construction and Reconstruction of Roads- main cost components such as earthworks, pavements and sealing, per kilometre; other components actual expenditure (land acguisition and fencing, relocation of services, drainage and erosion control). Construction and Reconstruction of Bridges- actual expenditure.

13 Maintenance of Roads length of roads per assessment. Maintenance of Bridges actual expenditure. Economic Services Street Lighting length of road in built-up areas. Traffic Control population. Duplication Recreation, Health and Welfare, Other- number and size of population centres. Regional Facilities Recreation and Culture, Health and Welfare, Resort Areas, Historic Buildings, Aerodromes broad judgment. Special Factors Natural Disasters- net cost to Council of approved repair and restora­ tion works. 2.35 The standard costs used for assessing allowances for expenditure needs and disabilities were derived from the gross cost of the respective functions. Except for the calculation of road maintenance needs referred to in paragraph 2.30 the gross disability so assessed for a function was discounted by the proportion that expenditure on the function by a municipality 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 allow­ ances described above ensures that needs and disability allowances are related to ratepayers' contributions to expenditure and avoids double counting in relation to government grants for particular services. The total allowance for each function for differences in the cost of services is the sum of the net needs allowance and the net disabilities allowance. 2.36 As with allowances for capacity to raise revenue, changes to expenditure characteristics will influence the relative shares of funds allocated to individual municipalities. To illustrate this: the cost of road construction and reconstruction works 1s strongly influenced by factors such as terrain, land acquisition, relocation of services, earthworks, drainage and erosion control measures and the like and these characteristics are likely to vary from project to project. Also the total amount expended by a Council on such works will vary from year to year. Clearly allowances related to the level of expenditure in one year and the cost characteris­ tics of the work undertaken in that year, cannot influence the size of allocations for another year when the works undertaken may have quite different cost character­ istics and the amount allocated to road construction and reconstruction in real terms might be quite different. (Similar considerations apply to the construction or reconstruction of drains). Also, allowances for the costs associated with high rates of population growth are phased out as growth tapers off. The removal of such allowances, other things being equal, will mean that allocations for the relevant municipalities increase at a lower rate relative to the increase for the State as a whole. 2.37 For less populous municipalities in the State where roadworks are the dominant activity, allowances for roadworks will dominate allowances in the ex­ penditure component of the allocations and thus will have a significant effect on the level of allocations for individual municipalities. Where there are disparities in cost conditions for roadworks within a municipality and these are reflected in differ­ ences in unit costs of components in road construction and reconstruction projects from year to year, there will be concomitant variations to the allocations from year to year. These variations are likely to be greater, the greater the emphasis is on roads expenditure in the municipality's activities.

14 DETERMINING THE INDIVIDUAL ALLOCATIONS 2.38 The total fiscal equalisation allowance for a municipality is based on the summation of the allowances for revenue-raising capacity (plus or minus) and the net expenditure allowances (plus or minus) for the range of municipal functions. The sum of the total allowances for the 210 municipalities, assessed without any heed to the constraint of the amount of funds available, will exceed the sum available for allocation by a substantial degree. Each municipality's total allowance must therefore be reduced so that the total allocated equals the total available. 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 210 municipalities. It is important to note that the net cost to a municipality of recognised natural disaster relief and restoration measures is allowed in full and is not subject to the foregoing discounting procedure. Therefore the amount available for purposes of the discounting procedure is the State's total allocation less the sum of special factor allowances. The special factor allowances are added back to the fiscal equalisation shares for the relevant municipalities when these have been finally settled. 2.39 Technical details of the various methodologies used for calculating rev­ enue needs and expenditure needs and disabilities are given in Appendix IV. The changes made from time to time to the method of calculating the various com­ ponents that make up the assessment of fiscal needs for each municipality are designed to enhance the equity 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 significant changes to some of the fiscal relativities that have been established between municipalities to date. Such changes may affect the relative shares for each municipality of the amount available for distribution each year. In the longer-run, changes to the underlying fiscal rela­ tivities should be minimal and most Councils should then be able to estimate, with reasonable certainty, their municipality's share of the amount available for distribu­ tion, subject to the qualifications about variations in road works, valuations and development activity outlined in paragraphs 2.20 and 2.36. 2.40 The use of precise mathematical formulae may not necessarily reflect the relative fiscal needs of the 210 municipalities in the State because of the diverse range of circumstances within which they operate. Thus, the allowances calculated in the manner described in the foregoing and detailed in Appendix IV can at best be seen as a first approximation to the allocations that will be finally determined. Arbitrary adjustments are made where the mathematically derived allocations produce differences in allocations that cannot be sustained in the light of other evidence and the Commission's detailed general knowledge of local government in the State. This exercise of judgment on the part of the Commission is the most difficult and demanding part of the whole assessment process and re9uires a com­ prehensive knowledge of the specific circumstances of each municipality. It under­ scores the importance of the inspections particularly, as well as the importance of updating submissions when any significant changes to circumstances occur. Above all, it underscores the importance of accuracy in completing the annual returns of information which provide a statistical background profile of each municipality. 2.41 It should also be appreciated that with the limitation on the overall alloca­ tion of funds for general revenue grants, the allocations can reflect only a partial recognition of the needs and disabilities of individual local government authorities throughout the State. NATURAL DISASTERS. 2.42 The principles of special factor allowances arising from the effects of natural disasters and Council's decisions in relation to them were spelt out in the Commission's 1978 Annual Report, after raising the issues with conferences of local government representatives throughout the State. This arose from actions

15 taken or proposed to be taken by some Councils following the February 1977 bushfires in the Western District, the October 1977 hail storm in the Mildura area and the February 1978 fires in the Bairnsdale area. (See paragraphs 2.35 to 2.41, Victoria Grants Commission Annual Report 1978.) 2.43 In general, the Commission can only recognise expenditure incurred by Councils as a result of the effects of natural disasters that are approved under the Commonwealth/State arrangements for natural disaster relief and restoration. On the production of documentary proof that the expenditure claimed has been ap­ proved under these arrangements, the Commission will include in the relevant allocation a special factor allowance equivalent to the net cost incurred by the Council on approved measures in relation to the disaster. 2.44 The allocations for 1985-86 include a total of $671,634 for special factors (see Appendix I). As these special factor allowances are equal to the total approved net cost of relief and restoration measures incurred by the respective municipalities during the 1983-84 municipal year, the amounts so included in the total allocations should not be included in any adjustment process when the actual Consumer Price Index figure for the period ending the March quarter 1986 is known. COMPARISONS BETWEEN YEARS 2.45 The continued upgrading of financial data and other information about the 210 municipalities has assisted in the development of more precise statistical measurements of fiscal need, which underlie the allocations. However, it is difficult to devise methodology that can satisfactorily cope with all of the different aspects of the 210 municipalities at the one time. The determinations therefore reflect not only statistical measurements of fiscal need but also the Commission's judgment of these measurements against the background of the considerable knowledge of local government that it has accumulated. Consequently, as improvements are made to the methodology and its application to the data, and the Commission's knowledge and understanding of the circumstances of each municipality is extended, adjust­ ments 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 in­ crease for the State as a whole. For this reason, no necessary conclusions should be drawn about the allocation to a municipality for any year from the allocations determined for prior years. 2.46 As has been repeatedly emphasised by the Commission, the volatile nature of some of the elements upon which the allocations are based further com­ plicates any comparison of allocations between years. Illustrations of these effects on the revenue and expenditure components are given in paragraphs 2.20 and 2.36 respectively. Also, the special factor allowances for natural disasters are once-off additions to the general equalisation grant and therefore the relevant amounts should be excluded from any comparisons against previous years' allocations or with allocations for other municipalities. 2.47 As the unification of the Borough of Koroit and the Shire of Warrnam­ bool is to take effect from 1 October 1985 (that is, the commencement of the financial year to which these grants apply) the Commission treated the statistical and other information in relation to the two municipalities as information from one municipality. Thus, the 1985-86 allocation determined for the Shire of Warrnam­ bool included an allowance for the area comprehended by the former Borough of Koroit. Likewise, the allocations for the Shires of Alexandra and Healesville reflect the transfer of the former Marysville Riding of the Shire of Healesville to the Shire of Alexandra, effective from 1 October 1984. ACKNOWLEDGEMENTS 2.48 The quality and availability of financial, demographic, and other data which is essential to the Commission's work owes much to the efforts of the staff of

16 the Finance and Distribution Branch of the Victorian office of the Australian Bureau of Statistics. Their assistance with the design of the returns and their work in verifying and collating the data is gratefully acknowledged. 2.49 We also acknowledge the assistance and provision of back-up facilities provided by the Government Computing Service during the installation, program­ ming and testing of the Commission's in-house microcomputer system. 2. 50 We wish also to record our appreciation for the help of the Local Govern­ ment Department throughout the year, and especially the Valuer-General's Office which has supplied us with much detailed information about valuation changes throughout the State. 2.51 Finally we acknowledge the help and support of the Commission's staff who have been equal to all the demands put on them throughout another busy round of inspections, data analysis and associated tasks.

17 APPENDIX I VICTORIA GRANTS COMMISSION The Hon. J. L. Simmonds, M.P., Minister for Local Government, 480 Collins Street, MELBOURNE, VIC. 3000. Victoria Grants Commission Act i976 Determination of Allocations of General Revenue Assistance for i985-86 to Municipal Councils in Victoria In accordance with the provisions of the Victoria Grants Commission Act i976 we have pleasure in submitting to you the Determination of allocations of general revenue grants to municipal Councils in Victoria for the 1985-86 financial year, from funds made available under the Commonwealth's Local Government (Per­ sona/income Tax Sharing) Act i976. The basis for determining the amount that the Commonwealth Government would make available for allocation to local government as general revenue grants for the 1985-86 financial year was altered as a result of the Commonwealth Treasurer's Statement of 14 May on "1985-86 Budget Initial Expenditure Savings Measures". The Local Government (Persona/income Tax Sharing) Amendment Act i985 provides that the amount available for allocation for 1985-86 will be an amount equal to that allocated in 1984-85, adjusted to provide for a 2 per cent increase in real terms, based on movements in the Consumer Price Index for the 12 months period ending the March quarter 1986 compared with the 12 months period .ending the March quarter 1985. The Commonwealth Treasurer's estimate of the movements in the Consumer Price Index for the relevant reriod is 7.80 per cent. The application of the formula thus provides an amount o $136,157,634 for allocation to local government in Victoria as general revenue grants for 1985-86. This is an increase of 9.956 per cent over the amount provided for allocation for 1984-85. The amending legislation also provides for adjustments to be made to the allocations in the event of there being any difference between the estimated increase in the Consumer Price Index for the relevant period and the eventual actual increase. These adjustments are to be made to all allocations in proportion to each municipality's share of the total estimated allocation for the State as is now determined. The amount of $136,157,634 has been distributed among the 210 municipalities in the State in accordance with the bases laid down in section 12 of the Victoria Grants Commission Act i976 and is consistent with the provisions of the Local Government (Personal Income Tax Sharing) Act i976. That is to say, the Commis­ sion has followed broad equalisation principles, giving consideration to the revenue and expenditure needs of each municipality and the cost disabilities encountered in providmg municipal services, and to the effort made to function effectively and provide services at a reasonable standard. Special factor allowances have been made for the effects of natural disasters upon the operations of a number of municipal Councils throughout the State. These allowances, which are equal to the net cost of approved relief and restoration measures, amount to $671,634 and are identified in the Determination. As these special factor allowances are equal to the total approved net cost of relief and restoration measures incurred by the respective municipalities in the review period, the amounts so included in the total allocations should not be included in any adjustment process when the actual Consumer Price Index figure for the period ending the March quarter 1986 is known. The allocation for each municipality is not less than its entitlement As-of­ Right. The As-of-Right entitlements are calculated by taking 40 per cent of the

18 total amount for the State and allocating this on the basis of population, 85 per cent, and area, 15 per cent. The relevant figures for calculating the 1985-86 As-of­ Right entitlements are: Population $11.3609 per head Area $35.9728 per square kilometre. The allocations for two municipalities, the Shires of Rosedale and Walpeup, were determined by reference to their respective entitlements As-of-Right. As the unification of the Borough of Koroit and the Shire of Warrnambool takes effect as from 1 October 1985, (that is, the commencement of the financial year to which these grants apply) the Commission has treated the statistical and other information in relation to the two municipalities as information from one municipality. Thus the allocation determined for Warrnambool Shire includes an allowance for the area comprehended by the former Borough of Koroit. Likewise, the allocations for the Shires of Alexandra and Healesville reflect the transfer of the former Marysville Riding of the Shire of Healesville to the Shire of Alexandra, effective from 1 October 1984. The Commission has emphasised in previous Reports the volatile nature of some of the elements upon which the allocations are based, in particular expen­ diture on roadworks and the relative cost characteristics of such works. Variations in these factors from year to year can significantly affect the allocations for in­ dividual municipalities, especially rural municipalities whose expenditures are heavily dominated by roadworks. Also the relative strength of property values in bayside and inner eastern metropolitan areas, compared with other areas, was maintained during the review period. These factors continue to be reflected in the allocations for municipalities in relevant areas through enhanced capacity to raise revenue. Moreover, the Commission undertook a detailed verification of data inputs for the measurement of revenue raising capacity, which has resulted in significant changes to the allowances for several municipalities. A further thirty-nine municipalities throughout the State have been inspected since the last allocations were announced; this completed the fourth round of a five­ year programme of inspecting each municipality. We remain indebted to the Councillors and staff of all municipalities for the assistance given to the Commission throughout the year, especially to those re­ presenting the municipalities in which inspections were undertaken. The continued co-operation and assistance of the Australian Bureau of Statistics in providing essential statistical information is gratefully acknowledged; the assistance and pro­ vision of back-up facilities given by the Government Computing Service during the installation, programming and testing of the Commission's in-house microcom­ puter system is similarly acknowledged. We also acknowledge the support of the Local Government Department and the assistance of the Valuer-General's Office in providing detailed information about movements in valuations for each munici­ pality. The contribution of the Commission's staff in the provision of support services is similarly gratefully acknowledged.

D.V.MOYE Chairman

L. F. CHEFFERS Member W. A. PHILLIPS Secretary

22 August 1985

19 APPENDIX I-continued VICTORIA GRANTS COMMISSION

DETERMINATION OF ALLOCATIONS OF GENERAL REVENUE GRANTS TO MUNICIPAL COUNCILS IN VICTORIA- 1985-86 FINANCIAL YEAR

General 5Jpecial Equalisation Factor Total Municipality Allocation Allocation Allocation ($) ($) ($) Alberton(S) ...... 587,000 16,150 603,150 Alexandra(S) ...... 414,000 414,000 Altona(C) ...... 612,000 612,000 Arapiles(S) ...... 178,000 178,000 Ararat(C) ...... 472,000 472,000 Ararat(S) ...... 517,000 517,000 Avoca(S) ...... 291,000 1,350 292,350 Avon(S) ...... 273,000 273,000 BacchusMarsh(S) ...... 414,000 19,250 433,250 Bairnsdale (S) ...... 472,000 472,000 Bairnsdale (T) ...... 543,000 543.000 Ballaarat (C) ...... 1,660,000 1,66o:ooo Ballan (S) ...... 221,000 23,000 244,000 Ballarat(S) ...... 818,000 818,000 Bannockburn (S) ...... 203,000 203,000 Barrabool (S) ...... 322,000 6,400 328,400 Bass(S) ...... 380,000 380,000 Beechworth(S) ...... 336,000 336,000 Belfast (S) ...... 117,000 117,000 Bellarine (S) ...... 1,110,000 1,110,000 Benalla (C) ...... 420,000 420,000 Benalla(S) ...... 234,000 2,150 236,150 Bendigo (C) ...... 1,510,000 1,510,000 Berwick (C) ...... 1,145,000 1,145,000 BetBet(S) ...... 237,000 35,000 272,000 Birchip(S) ...... 150,000 150,000 BoxHill(C) ...... 1,084,000 1,084,000 Bright(S) ...... 465,000 465,000 Brighton (C) ...... 420,000 420.000 Broadford (S) ...... 188,000 188:ooo Broadmeadows(C) ...... 2,864,000 2,864,000 Brunswick(C) ...... 1,476,000 1,476,000 Bulla(S) ...... 578,000 17,400 595,400 BulnBuln(S) ...... 620,000 26.850 646,850 Bungaree(S) ...... 174,000 174,000 Buninyong(S) ...... 510,000 510,000 Camberwell(C) ...... 1,445,000 1,445,000 Camperdown (T) ...... 210,000 210,000 Castlemaine (C) ...... 453,000 453,000 Caulfield (C) ...... 1,397,000 1,397,000 Charlton(S) ...... 177,000 177,000 Chelsea(C) ...... 1,070,000 1,070,000 Chiltern (S) ...... 136,000 136,000 Cobram(S) ...... 397,000 397,000 Coburg(C) ...... 1,686,000 1,686,000

20 APPENDIX I-continued

General Special Equalisation Factor Total Municipality Allocation Allocation Allocation

Cohuna(S) ...... 295,000 8,200 303,200 Colac(C) ...... 470,000 470,000 Colac(S) ...... 450,000 450,000 Collingwood(C) ...... 715.000 715,000 Corio(S) ...... 1,315,000 1,315,000 Cranbourne (S) ...... 1,099,000 1,099,000 Creswick(S) ...... 350,000 350,000 Croydon (C) ...... 1,075,000 1,075,000 Dandenong(C) ...... 1,300,000 1,300,000 Daylesford & Glenlyon (S) ... . 507,000 507,000 Deakin(S) ...... 524,000 35,000 559,000 DiamondValley(S) ...... 1,312,000 1,312,000 Dimboola(S) ...... 438,000 438,000 Donald(S) ...... 250,000 250,000 Doncaster& Templestowe(C) ...... 1,590,000 1,590,000 Dundas(S) ...... 244,000 244,000 Dunmunkle (S) ...... 276,000 276,000 Eaglehawk (B) ...... 398,000 398,000 EastLoddon(S) ...... 178,000 18,500 196,500 Echuca(C) ...... 396,000 396,000 Eltham(S) ...... 1,087,000 1,087,000 Essen don (C) ...... 1.496,000 1,496,000 Euroa(S) ...... 303,000 303,000 Fitzroy(C) ...... 793,000 793,000 Flinders(S) ...... 743,000 743,000 Footscray(C) ...... 2,030,000 2,030,000 Franks ton (C) ...... 1,756,000 1,756,000 Geelong(C) ...... 496,000 496,000 GeelongWest(C) ...... 563,000 563,000 Gisborne(S) ...... 345,000 24,950 369,950 Glenelg (S) ...... 507,000 507,000 Gordon(S) ...... 307,000 9,850 316,850 Goulburn (S) ...... 170,000 170,000 Grenville (S) ...... 268,000 268,000 Ham1lton (C) ...... 530,000 530,000 Hampden (S) ...... 525,000 525,000 Hastings(S) ...... 391,000 391,000 Hawthorn (C) ...... 482,000 482,000 Healesville (S) ...... 547,000 547,000 Heidelberg (C) ...... 1,637,000 1,637,000 Heytesbury(S) ...... 687,000 687,000 Horsham (C) ...... 705,000 705,000 Huntly(S) ...... 202,000 4,100 206,100 Kaniva(S) ...... 225,000 225,000 KaraKara(S) ...... 155,000 19,000 174,000 Karkarooc(S) ...... 407,000 407,000 Keilor(C) ...... 2,215,000 2,215,000 Kerang(B) ...... 237,000 237,000 Kerang(S) ...... 438,000 35,000 473,000

21 APPENDIX I-continued

General Special Equalisation Factor Total Municipality Allocation Allocation Allocation ($) ($) ($)

Kew(C) OOoOOooooooooooooooooOooooo 477,000 477,000 Kilmore (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 290,000 290,000 Knox(C) ooOooooooooooooooOOOOooooo 1,900,000 1,900,000 Korong(S) OOOOooooooooooo OOOOooooo 417,000 35,000 452,000 Korumburra(S) ooooooooooooooooo 538,000 538,000 Kowree(S) OOooOoooooooooooooooooo 382,000 382,000 Kyabram(T) ooooooooooooooooooooo 283,000 283,000 Kyneton(S) oooooooooooooooOOooooo 460,000 460,000 Leigh(S) 000000 ooooooooooooooooooooo 153,000 153,000 Lexton(S) OooooooooooooooooooooooOO 96,000 96,000 Lillydale (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,771,000 54,830 1,825,830 Lowan(S) oooooooooooooooooooOooooo 310,000 310,000 Mclvor(S) ooooooooooooooooooooooooo 190,000 190,000 Maffra(S) Ooooooooooooooooooooooooo 625,000 625,000 Maldon(S) 000000 oooooooooooooooooo 210,000 210,000 Malvern(C) ooooooooooooooooooooooo 743,000 743,000 Mansfield (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 457,000 457,000 Marong(S) oooooooooooooooooooooooo 500,000 500,000 Maryborough (C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 446,000 446,000 Melbourne(C) ooooooooooooooooooo 2,288,000 2,288,000 Melton(S) ooooooooooooooooooooooooo 813,000 813,000 Metcalfe (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 188,000 188,000 Mildura(C) ooooooooooooooooooooooo 760,000 760,000 Mildura(S) OOOooooooooooooooooooooo 1,230,000 1,230,000 Minhamite (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 244,000 244,000 Mirboo(S) Ooooooooooooooooooooooooo 158,000 158,000 Moe(C) oooooooooooooooOoOoOoooooooo 790,000 790,000 Moorabbin(C) OooOOooOooooooooooo 1,345,000 1,345,000 Mordialloc (C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 767,000 767,000 Mornington (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 605,000 605,000 Mortlake (S) 00 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0 0 00 265,000 265,000 Morwell (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,200,000 1,200,000 Mount Rouse (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 177,000 177,000 Myrtleford(S) ooooo 0 OOOOOOOooooooo 285,000 285,000 Narracan(S) OoOOOoooOooooooooooooo 690,000 690,000 Nathalia(S) ooooooooooooooooooooooo 271,000 15,800 286,800 Newham&Woodend(S) ooooooo 236,000 16,900 252,900 Newstead (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 168,000 168,000 Newtown(C) ooooooooooOOOOOOooooo 370,000 370,000 Northcote(C) ooooooooooooooooooooo 1,744,000 1,744,000 Numurkah (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 410,000 410,000 Nunawading(C) ooooooooooooooooo 1,645,000 1,645,000 Oaklei~h (C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,042,000 1,042,000 Omeo(S) oooooooooooooooooooooooooo 246,000 246,000 Orbost(S) ooOoooOoooooooooooOoooooo 648,000 648,000 Otway(S) oooooooooooooooooooooooooo 512,000 22,050 534,050 Oxley(S) oooooooooooooooooooo ooooooo 296,000 296,000 Pakenham(S) ooooooooooooooooooooo 868,000 25,740 893,740 Phillipisland(S) oooooooooooooooooo 440,000 440,000 PortFairy(B) ooooooooooOoooooooooo 192,000 192,000

22 APPENDIX I-continued

General Special Equalisation Factor Total Municipality Allocation Allocation Allocation ($) ($) ($)

PortMelbourne(C) 0000000000000 246,000 246,000

Portland ~S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 682,000 682,000

Portland T) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 547,000 547,000

Prahran (C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 783,000 783,000

Preston(C) oooooooooooooooooooooooo 2,077,000 2,077,000

Pyalong (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 41,000 41,000

Queenscliffe (B) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 160,000 160,000

Richmond (C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 790,000 790,000

Ringwood (C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 902,000 902,000

Ripon(S) 00000000000000000000000000 279,000 279,000

Rochester(S) 0 0 0 0 00 0 0 0 00 0 0 0 0 0 0 0000 550,000 550,000

Rodney(S) OOOOOOOOOOOOOOOoOOOoOOOO 723,000 13,850 736,850

Romsey(S) oooooooooooooooooooooooo 217,000 217,000

Rosedale (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 163,000 163,000

Rutherglen (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 206,000 206,000

St. Arnaud (T) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 215,000 4,100 219,100

St. Kilda(C) ooooooooooooooooooooooo 1,307,000 1,307,000

Sale(C) oooooooooooooooooooooooooooo 652,000 652,000

Sandringham (C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 542,000 542,000

Sebastopol(B) 00000000000000000000 336,000 336,000

Seymour(S) 000 0 0 0000 0 0 0000 0 0 0 0000 0 514,000 514,000

Shepparton (C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 888,000 888,000

Shepparton (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 502,000 502,000

Sherbrooke (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,236,000 1,236,000

SouthBarwon(C) 0000000000000000 1,225,000 1,225,000

South Gippsland (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 538,000 12,100 550,100

SouthMelbourne(C) ooooooooooo 340,000 340,000

Springvale (C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,594,000 1,594,000

Stawell ~S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 286,000 29,650 315,650

Stawell T) 0000000000000000000000000 412,000 412,000

Strathfieldsaye (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 506,000 10,500 516,500

Sunshine(C) oooooooooooooooooooooo 2,950,000 2,950,000

Swan Hill~ C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 506,000· 506,000

Swan Hill S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 868,000 868,000

Talbot&Clunes(S) 00000000000000 222,000 222,000

Tallangatta(S) 00000000000000000000 371,000 24,600 395,600

Tambo(S) ooooooooooooooooooooooooo 640,000 640,000

Traralgon !C) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 855,000 855,000

Traralgon S~ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o o o 0 0 o o 134,000 9,350 143,350

Tullaroop S 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 178,000 178,000

Tungamah(S) oooooooooooooooooooo 272,000 2,004 274,004

UpperMurray(S) oooooooooooooooo 275,000 275,000

UpperYarra(S) 000000000000000000 545,000 545,000

VioletTown(S) 000000000000000000 130,000 130,000

Walpeup(S) ooooooooooooooooooooooo 431,000 431,000

Wangaratta~C) 0000000000000000000 770,000 770,000

Wangaratta S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 144,000 2,500 146,500

Wannon(S) 00000000000000000000000 326,000 326,000

Waranga(S) 0 00000 0 0000 00 000000 00 00 494,000 494,000

Warracknabeal (S) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 326,000 326,000

23 APPENDIX I continued General Special Equalisation Factor Total Municipality Allocation Allocation Allocation ($) ($) ($)

Warragul (S) ...... 484,000 11,100 495,100 Warrnambooi(C) ...... 1,064,000 1,064,000 Warrnambool(S) ...... 590,000 590,000 Waverley(C) ...... 1,596,000 1,596,000 Werribee (S) ...... 1,450,000 35,000 1,485,000 Whittlesea(S) ...... 1,670,000 1,670,000 Williamstown(C) ...... 1,054,000 1,054,000 Wimmera (SO ...... 316,000 25,500 341,500 Winchelsea S) ...... 414,000 7,900 421,900 Wodonga(C) ...... 867,000 7,110 874,110 W onthag~i (B) ...... 436,000 436,000 Woorayl S) ...... 750,000 750,000 Wycheproof(S) ...... 482,000 482.000 Y ackandandah (S) ...... 233,000 3,900 236;900 Yarrawonga(S) ...... 338,000 338,000 Yea(S) ...... 290,000 290,000

TOTAL 671,634 136,157,634

D. V. MOYE, Chairman

L. F. CHEFFERS, Member

24 APPENDIXII MUNICIPALITIES INSPECTED 1984-85

Date 1984 23 October ...... Shire of Swan Hill 24 October ...... Shire of Swan Hill 25 October ...... City of Swan Hill 30 October ...... Shire of Wycheproof 31 October ...... Shire of Birchip 1 November ...... Shire of Warracknabeal 13November ...... Shire of Charlton 14November ...... Shire of Donald 15 November ...... Shire of Dunmunkle 27November ...... Shire of Korong 28November ...... Shire of Kara Kara 29 November ...... Town of St Arnaud 4December ...... City of Brighton 6December ...... City of Malvern 1985 15January ...... Borough of Wonthaggi 16January ...... Shire of Bass 17 January ...... Shire of Phillip Island 23 January ...... Shire of Bellarine 24 January ...... Borough of Queenscliffe 12February ...... Shire of Ballarat 13 February ...... City of Ballaarat 14 February...... Borough of Sebastopol 26February ...... Shire of Alexandra 27February ...... Shire of Yea 28 February ...... Shire of Upper Yarra 19 March ...... :...... City of Heidelberg 20 March ...... City of Box Hill 21 March ...... City of Camberwell 26 March ...... City of Sandringham 27 March ...... Shire of Corio 28March ...... Shire ofWerribee 16April ...... Shire of Mortlake 17 April ...... Shire of Heytesbury 18April ...... Shire of Hampden 30 April ...... City of St. Kilda 1 May ...... City of Port Melbourne 2May ...... City of Williamstown 14May ...... Shire of Chiltern 15 May ...... Shire of Yackandandah 16May ...... Shire of Beechworth

25 APPENDIX Ill CATEGORIES OF MUNICIPALITIES (As Revised 1979)

CATEGORY 1 (42Councils) Altona City Dandenong City Knox City Preston City Box Hill City Diamond Valley Shire Malvern Citv 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 Caulfield City Frankston City Nunawading City Springvale City Chelsea City Hawthorn Ci:y Oakleigh City Sunshine City CoburgCity Heidelberg City Port Melbourne City Waverley City Collingwood City Keilor City Prahran City Williamstown City Croydon City KewCity

CATEGORY 2 (34 Councils) Ararat City Echuca City Moe City Shepparton City Bairnsdale Town Geelong City Newtown City Stawell Town Ballaarat City Geelong West City Port Fairy Borough Swan Hill City Benalla City Hamilton City Portland Town Traralgon City 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 ColacCity 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 Hinders Shire Morwell Shire Stmthfieldsave Shire Berwick City Hastings Shire Pakenham Shire Warragul Shire Bulla Shire Lillydale Shire Rodney Shire Werribee Shire CorioShire Melton Shire Seymour Shire Whittlesea Shire Cranbourne Shire Mildura Shire Sherbrooke Shire

CATEGORY 4 (111 Councils) Alberton Shire Bet Bet Shire Dimboola Shire Kaniva Shire Alexandra Shire Birchip Shire Donald Shire Kara Kara Shire Arapiles Shire Bright Shire Dundas Shire Karkarooc Shire Ararat Shire Broadford Shire Dunmunkle Shire Kerang Shire AvocaShire Buln Buln Shire East Loddon Shire Kilmore Shire Avon Shire Bungaree Shire Euroa Shire Korong Shire Bacchus Marsh Shire Buninyong Shire Gisborne Shire Korumburra Shire Bairnsdale Shire Charlton Shire Glenelg Shire Kowree Shire Ballan Shire Chiltern Shire Gordon Shire K yneton Shire Bannockburn Shire Cobram Shire Goulburn Shire Leigh Shire Barrabool Shire Cohuna Shire Grenville Shire Lexton Shire Bass Shire Colac Shire Hampden Shire Lowan Shire Beechworth Shire Creswick Shire Healesville Shire Mclvor Shire Belfast Shire Daylesford & Glenlyon Shire Heytesbury Shire Maffra Shire Benalla Shire Deakin Shire Huntly Shire

26 APPENDIX Ill-continued

CATEGORY 4 (111 Councils) continued 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 (a) Mortlake Shire Portland Shire Tambo Shire 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 Rosedale Shire Upper Yarra Shire Yarrawonga Shire Shire Rutherglen Shire Violet Town Shire Yea Shire Newstead Shire

(a) the unification of the Borough of Koroit and the Shire of Warrnambool took effect as from 1 October 19115, reducing the number of municipalities in Victoria to 210.

27 APPENDIX IV FORMULAE GENERAL FORMULA

Where G = grant relevant municipality (claimant) R = revenue component E = expenditure component The Revenue Component (R) for any municipality can be expressed as: Re Pc. ts (Ts Tc) Where P = population, number of assessments or other parameter t = rate in$ (tax rate) standard T revenue or tax base (value of rateable property) per head, or assessment, or other parameter and the Expenditure Component (E) as Ec Es · gc Where gc = disability factor for the municipality so that the general formula becomes:

Gc =Pc. t5(T,- Tc) + E,. gc

REVENUE COMPONENT (R) Re Pc. ts(T,- Tc) This is the basic formula used by the Commission. Ts is the weighted average of the top 25 per cent of municipalities in the State and, measured in assessment terms, is derived as follows: total value of rateable property of top 25 per cent ~~---.---.----~~~~--~~~--~-·andtotal number of assessments in 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 assessment. Assessments are classified into three property types - residential, commer­ cial and industrial, and rural and other so that allowances for differences in capacity to raise revenue can be wei~hted to take account of the different mixes of property within a municipality. This IS achieved in the following way:

RESIDENTIAL = total value of residential property of top 25 per cent ;and total number of residential assessments in top 25 per cent total rates collected from residential property by top 25 per cent total value of rateable property of top 25 per cent (r = residential)

28 APPENDIX IV-continued Similarly for 'Commercial and Industrial' (C) and 'Rural and Other' (0), substituting the relevant figures in respect of each 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 three property classes for each municipality. The weighting which makes allowances for the contribution that each class of property makes to the rate base for each municipality is accomplished by adjusting the assessment numbers for each municipality according to a standard distribution of the three classes of property. This standard distribution is obtained by dividing the number of assessments for the State for each type of property by the total number of all assessments for the State, viz: E residential assessments in State (=RES)+ X all assessments in State

E and industrial assessments in State COM)+ E all assessments in State X rural and other assessments in State OTH)= 1 E all assessments in State i.e. RES+ COM + OTH

The standard distribution is then applied to the total number of properties in each local authority to obtain a standardised property distribution for each author­ ity. 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 figures as derived would enter the equation as Tc.

Adjusted assessment numbers for jlh municipality = E; assessment numbers . RES + assessment numbers . COM + E; assessment numbers. OTH Then, E; value of residential propertY. Tcr E; assessment numbers. RES ' Tee Xi_..:._ value ______of commercial and industrial ;:___.:___:_;and Ei assessment numbers. COM T = E; value of rural and other property eo X; assessment numbers . OTH and Re = L; assessment numbers. RES. tsr (T,r- Tcr) + L; assessment numbers . COM . tsc (T,c - Tee) +

L; assessment numbers. OTH. t,0 (T,0 - Tco) = Li assessment numbers. [RES. tsr (T,, Tcr) + COM. tsc

(Tsc- Tee)+ OTH. t,0 (Tso- Tco)]

29 APPENDIX IV- continued

EXPENDITURE COMPONENT (E) Ec=Es.gc Allowances for expenditure components can be separated into two elements: a needs allowance and a disabilities allowance. The needs allowance takes account of the differences between municipalities in the number of eligible units to be served, while the disabilities allowance recognises differences in the cost of provid­ ing the relevant service which arise because of differences in the inherent character­ istics of municipalities. Some examples follow: ROADS. Using the number of assessments as the parameter for assessing road needs (i.e. comparing the len$th of road per assessment against the standard length per assessment) the formula 1s: Ac · Cs( Kmc Ac Where Ac = municipality's number of assessments Cs standard cost per kilometre Kmc = municipality's length of road responsibility per assessment Ac Kms standard length of road responsibility per assessment As Road cost disabilities are calculated by the formula: Kmc.Cs·~ WhereKmc =municipality's total length of road responsibility in kilometres Cs = standard cost per kilometre ~ = municipality's cost disability factor 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 in both road needs and the road disabilities calculations, the discount factor being the proportion that the municipality's expenditure from its own resources bears to its total expenditure on roads. Because funding arrangements for main roads differ from those for unclassified roads, separate discount factors are calculated for the two categories. The discount factors are applied to the relevant lengths of road for each municipality to give implicit road lengths of full financial responsibility. The expenditure allowances for roads, is the sum of the two calculations the needs calculation and the disabilities calculation. The final formula is therefore:

Where GRc = municipality's grant for road needs and disabilities The standard cost per assessment may vary according to the type of road surface. Therefore the calculations for needs and for disabilities take account of the proportions of sealed, formed and surfaced, formed only and unformed roads.

30 APPENDIX IV- continued

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: GAc [ Pc. C(A), ( ~cc-~') +Pc. C(A),. gc] D WhereGAc allowance for expenditure needs and disabilities in relation to services for the pensionable group municipality's population standard cost of services for pensionable group per head of eligible population proportion of persons in municipality receiving pensions and supplements = standard proportion of pensionable group (e.g. State average proportion) = 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 sub­ stituting 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: Gc = (Es · gc) D = allowance for the function = standard gross cost of the function disability factor for the municipality 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 stan­ dard) then its disability factor could be derived simply by: E gc=Ec·-1 s = disability factor = municipality's expenditure per unit on the function = standard expenditure per unit on the function (subtracting 1 from reduces the factor to a fraction)

31 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 func­ tion. 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 available to the Commission and its knowledge of the circumstances of each municipality.

32 APPENDIX V DISTRIBUTION OF RATEABLE PROPERTY, RATE INCOME, RATING AND POPULATION 1975-76 to 1983-84 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 Common­ wealth 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 for 1975-76 to 1979-80 have been derived from the revised annual estimates of population published by the Australian Bureau of Statistics based on the results of the 1976 Census. Figures for 1980-81 are based on resident population data collected in the 1981 Census and detailed in the Bureau's Catalogue Number 3201.2 dated 17 June 1982. Figures for 1982-83 and 1983-84 have been derived from revised estimates of resident population (catalogue number 3203.2 dated 20 March 1985) which are based on the results of the 1981 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 Implied Year Property Rate Income Rate in Population (1 October- NAV $(cents) at 30 September) 30June $m $per head $m $per head

METROPO LITAN 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 8.5 2,334,500 1978-79 ··········· 2361.5 1007.98 214.4 91.51 9.1 2,342,800 1979-80 ...... 2527.1 1077.52 238.6 101.74 9.4 2,345,300 1980-81 ...... 2739.2 1155.20 269.7 113.76 9.8 2,371,200 1981-82 ...... 3138.7 1314.47 308.0 128.99 9.8 2,387,800 1982-83 ...... 3403.8 1419.97 357.5 149.15 10.5 2,397,100 1983-84 ...... 3960.6 1652.11 386.5 161.22 9.8 2,397,300

PROVINCIAL CITIES AND TOWNS 1975-76 ...... 156.1 396.34 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 ...... 269.9 737.00 32.6 81.92 11.1 402,850 1979-80 ...... 336.3 826.96 36.7 90.31 10.9 406,670 1980-81 ...... 383.1 940.03 44.8 109.81 11.7 407,540 1981-82 ...... 413.2 1004.28 49.2 119.58 11.9 411,440 1982-83 ...... 429.4 1032.26 57.5 138.22 13.4 415,980 1983-84 ...... 470.9 1120.28 61.7 146.79 13.1 420,340

33 APPENDIX V continued

Rateable Implied Year Property Rate Income Rate in Population (1 October- NAV $(cents) at 30 September) 30June $m $ head $m head

ALL OTHER MUNICIPALITIES 1975-76 ...... 698.7 692.23 77.1 79.30 11.5 1,009,400 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 1979-80 ...... 1333.1 1176.47 125.2 110.49 9.4 1,133,140 1980-81 ...... 1505.9 1287.48 146.3 125.12 9.7 1,169,650 1981-82 ...... 1704.1 1426.30 166.7 139.53 9.8 1,194,770 1982-83 ...... 1837.3 1504.17 189.8 155.41 10.3 1,221,470 1983-84 ...... 2050.0 1630.62 198.4 157.81 9.7 1,257,190

TOTAL FOR STATE 1975-76 ...... 2654.8 709.39 257.0 71.92 10.1 3,742,350 1976-77 ...... 3497.5 925.48 284.6 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 1979-80 ...... 4196.5 1080.15 400.5 103.09 9.5 3,885,110 1980-81 ...... 4628.2 1172.17 460.8 116.71 10.0 3,948.390 1981-82 ...... 5256.0 1315.97 523.9 131.17 10.0 3,994,010 1982-83 ...... 5670.5 1405.49 604.8 149.91 10.7 4,034,550 1983-84 ...... 6481.5 1590.62 646.6 158.68 10.0 4,074,830 NOTE: Statistics relating to the financial distribution of municipal expenditure will appear in detail in the Australian Bureau of Statistics local government bulletins.

34 APPENDIX VI TAX SHARING FUNDS FOR LOCAL GOVERNMENT AUTHORITIES 1974-75 to 1985-86 ($'000)

New South Queens- South Western Tas- Wales Victoria land Australia Australia mania 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 t) 51,289 35,398 24,222 11,925 13,162 4,004 140,000 1977-78 b) 60,341 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) 80,930 56,436 37,387 19.072 20,821 7,095 221,739 1980-81 b) t)d) 109,780 76,554 50,714 25,871 28,243 9,624 300,786 1981-82 bj d) 128,058 89,300 59,158 30,178 32,945 11,227 350,865 1982-83 b (d~ 154,928 108,037 71,571 36,510 39,858 13,582 424,486 1983-84 b)(d 167,647 116,907 77,447 39,507 43,130 14,697 459,335 1984-85 b) ~d) 177,574 123,829 82,033 41,847 45,684 15,568 486,534 1985-86 (b) e) 195,252 136,157 90,199 46,013 50,232 17,117 534,970 TOTAL: 1,241,902 865,234 573,620 292,135 318,930 107,906 3,399,723

(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 1.75 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. (e) Estimated amount available for allocation; equal to amount allocated in 1984- 85, adjusted for the estimated increase in the Consumer Price Index for the 12 months ending the March Quarter 1986 and allowing for a 2 per cent better­ ment factor. The amount is subject to adjustment when the Final Consumer Price Index figure is known. 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 Terri­ tory and Local Government Authorities 1977-78'. 1979-80 to 1982-83, 'Payments to or for the States, the Northern Ter­ ritory and Local Government Authorities 1982-83'. 1983-84 on, 'Payments to or for the States, the Northern Territory and Local Government Authorities 1985-86'.

F D Alkinson Govemmenl Prin1er Melbourne