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Appendix B : State Methods for Distributing Financial Assistance Grants 2001-02

The methods each State Local Government grants commission employed for allocating grants to councils in 2001-02 are provided under the following sections:

Descriptions of methods are based on information supplied by Local Government grants commissions.

The Australian Capital Territory requires no distribution of grant because the Territory Government directly exercises Local Government functions.

New South Wales

The New South Wales Grants Commission methodology has not changed significantly since last year. The two components of the grants are distributed on the basis of principles developed in consultation with Local Government and consistent with the national principles of the Financial Assistance (Local Government) Act 1995.

General purpose component

The general purpose component of the grant attempts to equalise the financial capacity of councils. The Commission uses the direct assessment method. The approach taken considers cost disabilities in the provision of services on the one hand (expenditure allowances) and a theoretical assessment of revenue-raising capacity on the other (revenue allowances).

Expenditure allowances are calculated for each council for a selected range of council functions. They attempt to compensate councils for expected above-average costs because of factors beyond their control. Council policy decisions concerning the level of service provided, or if there is a service provided at all, are not considered (effort-neutral).

Expenditure allowances are calculated for 21 functions or areas of expenditure. These functions are: general administrative services, aerodromes, services for aged and disabled, building control, public cemeteries, services for children, general community services, cultural amenities, control of dogs and other animals, fire control and emergency services, general health services, library services, noxious plants and pest control, town planning control, recreational services, stormwater drainage and flood mitigation, street and gutter cleaning, street lighting, and maintenance of urban local roads, sealed rural local roads, and unsealed rural local roads.

An additional allowance is calculated for councils outside the Sydney statistical district that recognises their isolation.

The general formula for the calculation of expenditure allowances is:

No. of units x standard cost x disability factor


The no. of units is the measure of use of the function for the council. For most functions the number of units is the population. For others it may be the number of properties or the length of roads.

The standard cost represents the State average cost for each of the 21 selected council functions. The calculation is based on a State average of each council's unit cost, excluding extreme values, using selected items from Special Schedule 1 of councils' 1999-2000 Statements of Accounts.

The disability factor is the extent to which it is estimated to cost the council more than the standard to provide the service.

A disability factor is the Commission's estimate of the additional cost, expressed as a percentage, of providing a standard service due to inherent characteristics that are beyond a council's control. For example, if it is estimated that it would cost a council 10 per cent more than the standard, for town planning, because of population growth in the area, then the disability factor would be 10 per cent. Consistent with the effort-neutral principle, the Commission does not compensate councils for cost differences that arise due to policy decisions of council, management performance or accounting differences.

For each function the Commission has identified a number of variables that are considered to be the most significant in influencing a council's expenditure on that particular function. These variables are termed 'disabilities'. A council may have a disability due to inherent factors such as topography, climate, traffic, duplication of services etc. In addition to disabilities identified by the Commission, 'other' disabilities relating to individual councils may be determined from council visits or submissions.

The general approach for calculating a disability factor is to take each disability relating to a function and apply the following formula:

Disability factor = (council measure / standard measure - 1) x 100 x weighting


The council measure is the individual council's measure for the disability being assessed (for example, population growth).

The standard measure is the State standard (generally the average) measure for the disability being assessed.

The weighting is meant to reflect the significance of the measure is terms of the expected additional cost. The weightings have generally been determined by establishing a factor for the maximum disability based on a sample of councils or through discussion with appropriate organisations.

Generally, negative scores are not calculated, that is, if the council score is less than the standard, a factor of zero is substituted. The factors calculated for each disability are then added together to give a total disability factor for the function.

The Commission uses the inclusion approach in the treatment of specific purpose grants. This means that the disability allowance is discounted by the specific-purpose grant as a proportion of the standardised expenditure.

For the functions of services for aged and disabled, and services for children, the deduction approach is used. This method deducts specific-purpose grant amounts from all councils' expenditure before standard costs are calculated. This approach is considered more appropriate for functions where the level of specific-purpose payment assistance is related to council effort. The deduction approach is, therefore, more consistent with the 'effort-neutral' requirement specified in the principles. A deduction approach is used for street lighting because of differences in accounting practice between councils and county councils in various parts of the State.

As indicated previously, the Commission also calculates an allowance for additional costs associated with isolation. The isolation allowance is calculated using a regression analysis model based on the additional costs of isolation and distances from capital cities. Details of the formula are shown later in this section. An additional component to the isolation allowance is included which specifically recognises the additional industrial relations obligations of councils in western NSW.

A pensioner rebate allowance is calculated which recognises that a council's share of pensioner rebates is an additional cost. Councils with high proportions of eligible pensioner rebates are, therefore, more disadvantaged than those with a lower proportion. Details of the formula used are shown later in this section.

The calculation of revenue allowances is a broad-brush attempt to compensate councils for their relative lack of revenue-raising capacity. Property values are the basis for assessing revenue-raising capacity because rates, based on property values, are the principal source of councils' income and property values, to some extent, are an indicator of the relative economic wealth of local areas.

In the Commission's methodology, the calculation of revenue allowances involves determining each council's theoretical revenue-raising capacity by comparing land values per property to a State standard and applying a State standard rate-in-the-dollar.

To reduce seasonal and market fluctuations in the property market, the valuations are averaged over three years. In the revenue allowance calculation, councils with low values per property are assessed as being disadvantaged and are brought up to the average (positive allowances), while councils with high values per property are assessed as being advantaged and are brought down to the average (negative allowances). That is, the theoretical revenue capacity of each council is equalised against the State standard. The Commission's approach excludes the rating policies of individual councils (effort-neutral).

Separate calculations are made for urban and non-urban properties. Non-rateable properties are excluded from the Commission's calculations. This is because the calculations deal with relativities between councils, based on the theoretical revenue-raising capacity of each rateable property.

In developing the methodology for the 1986 legislation the Commission was concerned that use of natural weighting would exaggerate the redistributive effect of the average revenue standards. That is, the revenue allowances are substantially more significant than the expenditure allowances. This issue was discussed with the Commonwealth and the approved principles provide that 'revenue allowances may be discounted to achieve equilibrium with the expenditure allowances'. As a result both allowances are given equal weight. This approach has continued under the provisions of the 1995 legislation.

The discounting helps to overcome the distortion caused to the revenue calculations as a result of the property values in the Sydney metropolitan area.

The objective approach to discounting revenue allowances reduces the extreme positives and negatives calculated, yet maintains the relativities between councils established in the initial calculation.

Rate pegging, which applies in NSW, is not specifically considered by the Commission. The calculations are essentially dealing with relativities between councils, and rate pegging affects all councils.

Generally, movements in the grants are caused by annual variations in property valuations, standard costs, road and bridge length, disability measures and population.

The Commission, because of the practical and theoretical problems involved, does not consider the requirements of councils for capital expenditure. In order to assess capital expenditure requirements the Commission would have to undertake a survey of the infrastructure needs of each council and then assess the individual projects for which capital assistance is sought. This would undermine council autonomy, because the Commission, rather than the council, would determine which projects were worthwhile. Further, councils that had failed to adequately maintain their assets could be rewarded at the expense of those that did maintain them.

The issue of funding for local water and sewerage undertakings was examined during the process of consultation between the Commission, the Local Government and Shires Associations, and Local Government generally. The consultation process preceded the development of the distribution principles required under the 1986 Commonwealth legislation.

The Associations and Local Government recommended to the Commission that water and sewerage functions should not be included in the financial assistance grants distribution principles. The main reasons given were:

  • Water and sewerage services are not functions performed by all general purpose councils in NSW.
  • If water and sewerage functions were to be considered the level of funds available for other council functions would be significantly diminished.
  • Including water and sewerage services would result in a reduced and distorted distribution of funds to general purpose councils.
  • Other sources of funds and subsidies are available to councils by the State government for water and sewerage schemes.

The Commission agreed with the submissions of the Associations and Local Government. Accordingly, water and sewerage functions are excluded from the distribution formula.

The Commission views income from council business activities as a policy decision and, therefore, does not consider it in the grant calculations (effort neutral). Similarly, losses are not considered either.

Debt servicing is related to council policy and is therefore excluded from the Commission's calculations. In the same way, the consequences of poor council decisions of the past are not considered.

The grants are generally not affected by the levels of a council's expenditure on a particular function. The use of a council's expenditure is generally limited to determining a State standard cost for each selected function. The standard costs for these functions are then applied to all councils in calculating their grants. What an individual council may actually spend on a function has very little bearing on the standard cost or its grant.

Efficient councils are rewarded by the effort-neutral approach of the calculations. To illustrate this, two councils with similar populations, road networks, property values, and disability measures would receive similar grants. The efficient council can use its grant funds to provide better facilities for its ratepayers. The inefficient council needs to use its grant funds to support an inefficient operation and cannot provide additional services to its ratepayers. Therefore, the efficient council will benefit from its efficiency.

Council categories have no bearing on the grants. Categories simply provide a convenient method of grouping councils for analysis purposes.

Local roads component

The method of allocation of the local roads component is based on a simple formula developed by the New South Wales Roads and Traffic Authority. The formula uses councils' proportion of the State's population, local road length and bridge length. Refer to the 'principles' elsewhere in this report for details.

Summary of formulae used in the calculation of expenditure and revenue allowances of the general purpose component

Expenditure allowances


Allowances for the majority of functions are calculated on the following general formula:

Ac = Nc x Es x Dc


Ac = allowance for the council for the expenditure function
Nc = number of units to be serviced by council
Es = standard expenditure per unit for the function
Dc = disability for the council for function in percentage terms

Road length allowances

In addition to the disability allowances, length allowances are calculated for each road type based on the following formula:

Ac = Nc x Es x (Lc/Nc) - (Ls/Ns)


Ac = allowance for road length allowance
Nc = number of relevant properties for the council
Es = standard cost per kilometre
Lc/Nc = council's relevant length of road per relevant property.
Ls/Ns = standard relevant length of road per relevant property.

Isolation allowances

Isolation allowances are calculated for all non-metropolitan councils based on the following formula:

Ac = Pc x ([Dsc x K1] + [Dnc x K2] + Ic)


Ac = the isolation allowance for each council
Pc = the adjusted population for each council
Dsc = the distance from each council's administrative centre to Sydney
Dnc = the distance from each council's administrative centre to the nearest major regional centre (a population centre of more than 20 000)
Ic = the additional per capita allowance due to industrial award obligations (if applicable)
K1 and K2 are constants derived from regression analysis

Specific-purpose payments

Allowances for functions are discounted where appropriate to recognise the contribution of specific-purpose grants. The discount factor that generally applies is:

1- Gc
(Nc x Es) + Ac


Gc = the specific purpose grant received by the council for the expenditure function
Nc = number of units to be serviced by council
Es = standard expenditure per unit for the function
Ac = allowance for the council for the expenditure function

Revenue allowances


The general formula for the calculation of revenue allowances is:

Ac = Nc x ts x (Ts -Tc)


Ac = revenue allowance for the council
Nc = number of properties (assessments)
ts = standard tax rate (rate-in-the-dollar)
Ts = standard value per property
Tc = council's value per property.

The standard value per property (Ts) is calculated as follows:

Ts = Sum of rateable values for all councils
Sum of number of properties for all councils

The standard tax rate (ts) is calculated as follows:

ts= Sum of net rates levied for all councils
Sum of rateable values for all councils

Pensioner rebates allowances

The general formula for the allowance to recognise the differential impact of compulsory pensioner rates rebates is:

Ac = Rc x Nc x (Pc - Ps)


Ac = the allowance for the council
Rc = the standardised rebate per property for the council
Nc = the number of residential properties
Pc = the proportion of eligible pensioner assessments for the council
Ps = the proportion of eligible pensioner assessments for all councils

The standardised rebate for the council (Rc) is:

Rc = 0.25 x Tc x ts


Tc = the average value per residential property in the council
ts = the standard tax rate (rate-in-the-dollar) for residential properties

The maximum value for Rc is set at $125.

NB: Tc and ts are calculated as for the revenue allowances except only residential properties are used.


General purpose (equalisation) component

These principles, consistent with the national principles of the Local Government (Financial Assistance) Act 1995, are based on an extensive programme of consultation with Local Government prior to the implementation of the 1986 legislation.

The agreed principles are:

  1. General purpose grants to local governing bodies will be allocated as far as practicable on a full equalisation basis as defined in the Local Government (Financial Assistance) Act 1995; that is, a basis which attempts to compensate local governing bodies for differences in expenditure required in the performance of their functions and in their capacity to raise revenue.
  2. The assessment of revenue and expenditure allowances of local governing bodies will, as far as is practicable, be independent of the policy or practices of those bodies in raising revenue and the provision of services.
  3. Revenue-raising capacity will primarily be determined on the basis of property values; positive and negative allowances relative to average standards may be calculated.
  4. Revenue allowances may be discounted to achieve equilibrium with expenditure allowances.
  5. Generally, for each expenditure function an allowance will be determined using recurrent cost; both positive and negative allowances relative to average standards may be calculated.
  6. Expenditure allowances will be discounted to take account of specific purpose grants.
  7. Additional costs associated with non-resident use of services and facilities will be recognised in determining expenditure allowances.
  8. In the event of council amalgamations, the new council will receive grants for two years as if the councils had remained separate entities and any subsequent change may be phased in at the discretion of the Commission.

Local roads component

Financial assistance which is made available as an identified local roads component of Local Government Financial Assistance shall be allocated so as to provide Aboriginal communities equitable treatment in regard to their access and internal local roads needs.

  1. Urban [metropolitan] area
    'Urban area' means an area designated as an 'urban area':
    (a) the Sydney Statistical Division
    (b) the Newcastle Statistical District
    (c) the Wollongong Statistical District
  2. Rural [non-metropolitan] area
    'Rural area' means an area not designated as an 'urban area'
  3. Initial distribution
    27.54 per cent to local roads in urban areas
    72.46 per cent to local roads in rural areas
  4. Local roads grant in urban areas
    Funds will be allocated:
    (a) 5 per cent distributed to individual councils on the basis of bridge length
    (b) 95 per cent distributed to councils on the basis of:
    1. 60 per cent distributed on length of roads
    2. 40 per cent distributed on populatio
  5. Local roads grant in rural areas
    Funds will be allocated:
    1. 7 per cent distributed to individual councils on the basis of bridge length
    2. 93 per cent distributed to councils on the basis of:
      1. 80 per cent distributed on length of roads
      2. 20 per cent distributed on population
  6. Population shall be based on the most up-to-date Estimated Resident Population figures available from the Australian Bureau of Statistics.

Road length shall be based on the most up-to-date data available to the Local Government Grants Commission of NSW for formed roads, which are councils' financial responsibility.

Bridge length shall be based on the most up-to-date data available to the Local Government Grants Commission of NSW for major bridges and culverts six metres and over in length, measured along the centre line of the carriageway, which are councils' financial responsibility.

The method of application of the statistics shall be agreed to between representatives of the Local Government Grants Commission of NSW and the Local Government and Shires Associations of NSW.

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The Victoria Grants Commission allocates general purpose and local road grants according to the relevant national principles.

Methodology for general purpose grants

At the time the 2001-02 general purpose grants were allocated, the Victoria Grants Commission had completed its major review of the general purpose grants methodology (the final report being released in May 2001) and was in the process of implementing its findings, with the intention of using the new model to allocate the 2002-03 general purpose grants. Because of the pending introduction of the revised methodology, there were only minor changes to the methodology used to calculate the 2001-02 general purpose grants.

The requirement to comply with the national principles applies regardless of any changes to the methodology used to calculate the general purpose grants. Consequently, to be consistent with the requirement of allocating the grants to councils on the basis of horizontal fiscal equalisation, the Commission sought to equalise the capacity of each Victorian council to provide an average range of services at a standard level.

A council's grant is defined as the 'raw grant', which is the difference between its standardised expenditure and the standardised revenue. Usually, a council's standardised expenditure exceeds its standardised revenue. The 'raw grant' represents the gap between the two amounts and is expressed mathematically as follows:

G = E - R


G is the 'raw grant' for any council
E is the standardised expenditure for the council
R is the standardised revenue for the council

Standardised expenditure (E)

Standardised expenditure is calculated for each Victorian council on the basis of 20 specified expenditure functions: public safety, law and order, family services, health and welfare, aged services, community services, heritage, culture and recreation, local sealed roads, local formed and surfaced roads, local natural surfaced roads, footpaths, kerbs and channels, traffic management, aerodromes, street beautification, sanitation, street cleaning, environment protection and drainage.

For any particular function, the standardised expenditure (E) is calculated as the product of its units of need (u), the standard cost per unit of need (c), a discount factor (d) and its disability factor (D). The following formula displays this mathematically:

E = u x c x d x D

This formula is applied to each of the core set of functions commonly carried out by councils. The derived standardised expenditure for a council on the set of core functions comprises the summation of all the products of the above calculation.

Units of need (u)
Units of need are the prime users or drivers of the service and are also known as major cost drivers. Examples of these are population and number of households serviced.

Standard cost per unit of need (c)
A standard unit cost for each function is the average cost of providing that function in Victoria.

Standard cost (u x c)
The standard cost for any council is the product of the standard unit cost (the same for all councils) and the number of units of need for that council.

Discount factor (d)
A discount factor is included in the formula to discount the total expenditure on a function by the revenue received from grants and certain other sources.

Disability factors (D)
The Commission may assign a disability factor for each function for each council, to compensate the council for factors beyond its control, such as age of infrastructure, socioeconomic profile, population density or isolation.

Further discussion of the calculation of the disability factors occurs in a later section.

Standardised revenue (R)

The standardised revenue for each council is calculated by multiplying its total net annual value (at a common valuation date) by the average (or implied) rate for all Victorian councils. In 2001-02, the implied rate was 7.1 cents, slightly reduced from the previous year's figure of 7.5 cents.

Mathematically, the standardised revenue (R) for each council can be expressed as follows:

R = V x r


V is the valuation base for the council averaged over three years
r is the standard rate for all councils calculated as a three-year average

Minimum grants

The national principles require each council to receive a minimum per capita amount (also termed an 'as-of-right grant') regardless of assessed need. In other words, where a council's standardised expenditure exceeds standardised revenue by only a small amount, or is less than its standardised revenue, it still receives a minimum grant. In 2001-02, a minimum grant of $14.90 per head was received by eight councils, plus the Docklands Authority.

Calculation of disability factors

As mentioned earlier there were no major changes to the methodology used to calculate the 2001-02 grants, pending the implementation of a revised methodology in 2002. However, the disability factor for tourism was broadened to include people staying in caravan parks and camping grounds, as well as hotels, motels and guest houses, using additional information published by the Australian Bureau of Statistics.

Movements in grants

Because the 2001-02 grant outcomes for a number of councils varied significantly from the 2000-01 grants, caps were applied to the highest and lowest grants as a means of minimising these variations and introducing some stability in the grant outcomes. A major contributing factor to these variations was the robust increases in valuations in a number of localities (especially the middle-ring metropolitan councils and some regional centres).

The Commission applied an upper limit cap of 25 per cent (as opposed to 20 per cent in 2000-01) to grant increases, which affected both Mornington Peninsula and Cardinia Shire Councils. A minimum cap or floor of -6 per cent (same as for 2000-01 general purpose grants) affected eight councils.

To take account of the relatively greater reliance that smaller councils place on grant revenue and the need to provide such councils with financial stability, for the third successive year the Commission applied a more generous minimum cap to councils with a population of less than 15 000 as follows:

  • For those councils with a population of up to 10 000, the general purpose grant for 2001-02 was no less than the previous year's grant (three councils were affected).
  • For councils with a population of between 10 000 and 15 000, any reduction was limited to 2 per cent (two councils were affected).

Natural disaster assistance

The Commission allocates funding from the general purpose grants pool to councils which have incurred expenditure attributable to restoration work arising from natural disasters, on the condition that they submit approved natural disaster documentation from the Department of Treasury and Finance and/or VicRoads to the Commission.

Councils are not eligible for natural disaster relief unless they have contributed a minimum of $10 000 to the repairs/restoration work, and relief is capped at $35 000 per natural disaster for each council in any one year. In 2001-02 only one grant of $35 000 was allocated to Central Goldfields Shire Council to assist with restoration work relating to flood damage.

Proposed changes to general purpose grants methodology

As mentioned earlier, the review of the Commission's general purpose grants methodology was completed during the year. The final report outlining the findings of the review and the results of the consultation with interested parties was released in May 2001 and distributed to all Victorian councils.

The Commission implemented most of the recommendations in its allocation of the general purpose grants for 2002-03 in early 2002.
In the calculation of the 2002-03 general purpose grants a number of changes were made to the model:

  • All recurrent expenditure (with the exception of works undertaken for VicRoads) was taken into account in the model.
  • The number of expenditure functions assessed was decreased from 20 to nine.
  • A revised set of cost adjustors was adopted, replacing the former disability factors, to better reflect the relative needs of councils.
  • A move was made away from the use of individual council discount factors in order to take account of other grant support.

A more detailed discussion of the changes incorporated in the new methodology for the calculation of the 2002-03 general purpose grants will appear in the next Local Government National Report.

Local roads funding

Introduction of new model

Indicative estimates of each council's local roads grant for each of the 3 years between 2001-02 and 2003-04, based on a new methodology, were released to all councils by the Commission on 23 April 2001. The introduction of the new model is being implemented over a three-year period, in order to smooth the variations between the grant outcomes under the new model and the previous outcomes under the old model. The first instalment of the new local roads grants was paid to councils on 15 August 2001.

The advantages of the new formula are that it better reflects the relative needs of councils in relation to local roads funding and more closely addresses the national principle pertaining to the distribution of local roads funds than the previous methodology.

The new model has produced a significant increase in local roads grants to most regional and rural councils and a general decline in grant levels to the inner and middle-ring metropolitan councils and several of the major regional centres. The predominant factor influencing this trend is the removal of the artificial constraint in the former model that arbitrarily provided set shares of the available funding to categories of urban and regional councils.

Data sources

As explained in the Review of Distribution Arrangements for Local Roads Funding in Victoria: Final Report, the data inputs for the new model are the average annual preservation costs and road lengths by traffic volume categories and a series of cost modifiers relating to freight loading, climate, materials availability, reactivity of the subgrade and strategic routes.

The new model also takes account of the deck area of bridges on local roads.

Road length and traffic volume data, as well as information relating to strategic routes, are sourced directly from councils. All other data are sourced externally.

The average annual preservation costs for each traffic volume range are used in the allocation model to reflect local road maintenance and renewal costs. The initial cost of construction (which is relatively higher for kerbed roads) is excluded as the model attempts to reflect the cost of maintaining existing local roads assets, as opposed to new ones. The average annual preservation costs used in the allocation of local roads grants for 2001-02 were developed by ARRB Transport Research and were published in Table 7.1 of the Review, which was released in July 1999.

Grant calculation

The formula used to calculate each council's local roads grant derives a 'local road network cost' for each council by multiplying a council's length of road for each traffic volume category by the average asset preservation cost for that category and by an overall factor reflecting the product of the value of each cost factor for each cost modifier. Relatively high cost modifiers add to the network cost calculated for each council and consequently increase its local road grant. Bridge costs are also included in the model at a standard rate of $10 per square metre of timber deck area and $5 per square metre of concrete deck area.

Mathematically, the calculation of the network cost for a single traffic volume range can be expressed as follows:

Length of local roads in category
Average annual asset preservation cost for category
Overall cost factor*
Network cost +
Bridge costs
Total network cost

* Overall cost factor is calculated by multiplying the individual cost factors for freight loading, climate, materials availability, reactive sub-grades and strategic routes.

The actual local roads grants are then calculated by applying the available funds in proportion to each council's calculated total network cost.

Cost modifiers

As mentioned earlier, the new model uses a series of five cost modifiers to take account of differences in conditions between councils. The data sources for these are described below.

Freight loading

The cost modifier pertaining to freight loading represents a measure of the relative intensity of freight use of local road systems in various municipalities. Its calculation includes measures of freight generation and attraction sourced from the Australian Bureau of Statistics survey of motor vehicle usage, estimations of trip length on local roads in each municipality based on earlier studies and length of local roads.


Because particular climatic conditions have an adverse effect on road durability and hence increase the annual average preservation costs, a separate cost modifier for climate was included in the model. The primary effect of climate for lightly constructed pavements is through its influence on soil-bearing capacity, an influence that has been shown by studies to be correlated with the Thornthwaite Moisture Index (TMI). This index takes account of the effects of rainfall and evaporation. Whilst the index was originally developed for agricultural purposes, the consultants who conducted the review into the local roads grants methodology thought it to be the best available source of information reflecting the broad influence of climate on local road costs.

Materials availability

Another cost modifier used in the model relates to the local availability of good quality pavement materials. The source of this information was a VicRoads Pavement Material Inventory map showing the locations of the operating hard rock quarries in Victoria as at November 1999.

Reactive subgrade

According to the final report on the review of the local roads grants methodology, the performance life of pavement is affected by seasonal swelling and shrinkage of the sub-grade, an effect which is essentially accelerated environmental deterioration. These conditions mainly affect parts of the western suburbs of Melbourne and western Victoria. Using soil classification maps provided by VicRoads showing expansive soils in Victoria, the area proportions of each municipality with expansive clay subgrades were estimated for use in the model.

Strategic routes

The strategic route cost modifier recognises that certain local roads need to be maintained at a higher standard than would normally be the case because of certain characteristics or functions they perform. For all road categories, local roads that are tram or bus routes, including school bus routes, are considered to be strategic routes. Also, unkerbed local roads that carry less than 100 vehicles a day, but carry at least 10 trucks, or carry less than 100 but more than 50 vehicles per day and are in steep terrain or irrigated areas, are considered strategic routes requiring higher levels of expenditure.

It is intended to review these cost modifiers periodically.

Transition process

As the implementation of the new methodology has resulted in significant changes in the level of local roads funding for a number of Victorian councils, the Commission recommended the adoption of a three-year transition period to phase in the new grant outcomes. The local roads grant for each council for 2001-02 was the council's grant for 2000-01 plus one-third of the difference between the council's actual allocation for 2000-01 based on the Commission's previous formula and a grant outcome based totally on the new formula. The new formula will be applied fully in 2003-04.

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Fiscal equalisation component

The principles of fiscal equalisation attempt to provide the resources necessary to enable councils to supply services to an average standard while facing a diverse range of geographic, social and economic circumstances. The relative dependency of councils on the financial assistance varies considerably and this provides the basis for the allocation.

The Queensland Local Government Grants Commission uses a balanced budget approach.

The Commission takes into account the expenditure needs and the revenue-raising capacity of councils. It therefore determines a notional budget for each Local Government in Queensland. The notional budget is calculated by assessing the expenditure need and revenue capacity based on a State average for Local Government activities.

Once a notional budget has been determined for each council, a grant is calculated which ensures each council has an equal ability to fund its assessed expenditure need. This is presented in the equations below with k representing the scaling factor, G the grant, R the revenue capacity, E the expenditure need and I other grants treated as revenue.

G = kE - (R + I)

I + R + G = kE


k = scaling factor
G = the grant
R = revenue capacity
E = expenditure need
I = other grants treated as revenue

The formula ensures that the calculated grant G plus the assessed revenue R and other grants treated as revenue I would fund the same proportion k of expenditure needs E across all councils.

Expenditure need is calculated as the total assessed expenditure on services, roads and the actual expenditure on a range of functions referred to as 'effort-positive' functions.

The revenue-raising capacity of each council is calculated as the total of assessed rates, assessed other revenue and effort-positive revenue.

In determining the grant for each council other grant contributions from the Commonwealth and State are taken into account as revenue.

The major inclusion for all councils is the Commonwealth's Identified Road Grant. The Queensland Local Government Grants Commission takes 70 per cent of this grant revenue into account. It is discounted to 70 per cent as the grant revenue can be expended on functions excluded by the Grants Commission in calculating the Fiscal Equalisation Grant, namely water and sewerage. It is estimated that, on average, 30 per cent of council expenditure is on water and sewerage.

The other source of grant revenue taken into account is the State and Commonwealth operating subsidies received by Aboriginal and Torres Strait Island councils. Sixty-seven per cent of this grant revenue is taken into account. It is discounted as the grant revenue is able to be expended on excluded functions, such as water and sewerage, and other functions, such as police services, which are not supplied by the non-Aboriginal and Island councils.

Identified road component

In 2001-02 the identified road component was distributed between local governing bodies on the following basis:

  • 62.85 per cent in proportion to road length ($341.80 per kilometre)
  • 37.15 per cent in proportion to population ($8.25 per capita).

National principles

The national principles relating to allocation of general purpose grants payable under section 9 of the Local Government (Financial Assistance) Act 1995 are at Appendix A.

Transitional modification of national principles

Modification principle

Queensland was given an extension to phase in significant grant distribution effects resulting from implementing the national principles, in force under section 6 of the Local Government (Financial Assistance) Act 1995.

The phase-in arrangements are to accord with the agreement the Commonwealth and Queensland Ministers for Local Government entered into. The relevant phase-in conditions of that agreement are detailed below.

  • No allocation of general purpose grants to a local governing body by the State of Queensland is to be made such that the increase in the payment is in excess of 7 per cent of the allocation of general purpose grants made to that Local Government body in financial year 2000-01 unless:
    • the Local Government Grants Commission for Queensland determines that there are special circumstances applying to that local governing body for an increase in excess of 7 per cent, or
    • to comply with national principle A3 (Minimum Grant), an increase in excess of 7 per cent is required.
  • No allocation of general purpose grants to a local governing body by the State of Queensland is to be made such that it is less than the allocation of general purpose grants to that local governing body by the State of Queensland in financial year 2000-01.
  • No allocation of general purpose grants and local roads grants to a local governing body by the State of Queensland is to be made such that the total of those grants is less than 95 per cent of the total of the general purpose and local roads grants allocated to that Local Government body by the State of Queensland in financial year 2000-01.
  • Calculations of allocations for a particular financial year referred to in this determination include, where appropriate, adjustments under sections 10 and 13 made in respect of allocations for the previous financial year but actually paid in the particular year.
  • The national principles, save as modified by this determination, apply to the State of Queensland.

Fiscal equalisation component

In the equations below the following codes are used:

TRP = Total number of rateable properties

GVRP = Gross value of rural production (averaged over five years)

PI = Personal income of all residents of a local governing body area (1996 Census data adjusted for taxable income)

RRTS = Residual retail turnover sales (the difference between the retail sales turnover in a local governing body area and that local governing body's urban personal income multiplied by the average state retail sales per state urban personal income, and adjusted for taxable income)

UCV = Unimproved capital value

POP = Population

KR = Kilometres of total local road


Rate raising capacity

Total rates $ = 25.769 TRP + 0.01307886 GVRP + 0.01525395 PI + 0.00474784 RRTS + 0.002218 UCV (Local Governments)
Total rates $ = 0.00 (Aboriginal and Torres Strait Islander councils)


Fees and charges $ = 133.13 POP

Effort-positive charges

Parking fines and fees, Aerodrome, Other transport $ = Effort-positive (actual revenue)



Current and capital $ = 983 804 + 348.31 POP (Local Governments)

Current and capital $ = 918.06 POP (Aboriginal and Torres Strait Islander councils) Roads

Current and capital $ = 3 166.76 KR



  • aerodromes
  • other transport
  • agricultural and forestry
  • urban storm water drainage
  • parking

Current and capital $ = Effort-positive (actual expenditure)

Other expenditure not elsewhere included

Current and capital treated as an overhead and apportioned on a pro rata basis of total assessed expenditure need of other functions.


The Commission treats the following items as inclusions.

  • 70 per cent of the year under reviews Identified Road Component
  • 67 per cent of the Aboriginal and Torres Strait Islander councils' operating grant received from the Queensland Department of Aboriginal and Torres Strait Islander Policy and Development.

Identified road component

In 2001-02 the identified road component was distributed between local governing bodies on the following basis:

  • 62.85 per cent in proportion to road length ($341.80 per kilometre)
  • 37.15 per cent in proportion to population ($8.25 per capita).

Changes to methodology from previous year

With the current review of the Local Government (Financial Assistance) Act 1995, which could introduce basic changes to grants methodologies, the Commission again decided that two changes in grant outcomes within a year or so were undesirable. In making its recommendations the Commission:

  • retained the current regression equations rather than changing to new ones
  • continued the partly phased in road network factors for another year
  • introduced a 'no fall' floor, and a 7 per cent maximum rise to the equalisation pool (except for Boonah Shire Council which was capped at 10 per cent because of boundary changes).

Table B.1 Fiscal equalisation formula - Queensland

Grant = x% expenditure - revenue - inclusions

Revenue Grant x% Expenditure

Assessed rates
$25.769 x rateable properties +
$0.01307886 x gross value rural production +
$0.01525395 x personal income +
$0.00474784 x residual retail sales +
$0.002218 x unimproved capital value +
Assessed non-road services
($983,804 + ($348.31 x
population)) x disability
factor (Local Governments)
($918.06 x population)) x
disability factor (Aboriginal
Torres Strait Islander councils
) +
Assessed charges Assessed roads
$133.13 x Population + $3,166.76 x km x Road
disability factor +
Effort-positive charges (actual) + Effort-positive expenditure
(actual) +
70% identified road grant +
67% ATSI operating grant
Special disability factors (actual)

Note x% - Same rate applied to each council except those councils which receive the per capita minimum grant

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Western Australia

The Western Australian Local Government Grants Commission (WALGGC) uses the balanced budget method, as in previous years, for allocating Commonwealth general purpose funding, and an asset preservation model for allocating the identified local road funding component.

General purpose grant funding

The 'balanced budget' approach to horizontal equalisation was based on the formula

Assessed revenue capacity - Assessed expenditure need = Assessed equalisation requirement

for all 142 Local Governments in WA, calculated simultaneously.

Calculation of assessed revenue capacity, based on standardised mathematical formulae, involved assessing the revenue-raising capacity of each Local Government in five categories:

  • Residential and commercial/industrial rates
  • Agricultural rates
  • Pastoral rates
  • Mining rates
  • Extraordinary revenue.

Assessed expenditure need, also based on standardised mathematical formulae, involved assessing each Local Government's operating expenditures in the provision of core services and facilities under eight 'standard' categories:

  • Governance
  • Law, order and public safety
  • Education, health and welfare
  • Community amenities
  • Recreation and culture
  • Building control
  • Capital works
  • Transport.

Assessed equalisation requirement (AER) is the result of subtracting assessed expenditure need from assessed revenue capacity. The WALGGC used a three-year average of AER as the basis for determining the grant allocations, to provide a degree of stability to grant outcomes.

The derived 2001-02 final outcome was then subjected to the Minimum Grant Principle (30 per cent of total general purpose grant component) before the balance was factored back to approximately 78 cents in the dollar in order that Local Governments received grants proportional to their calculated allocation within the State's share of the Commonwealth per capita funding pool.

In the 2001-02 determinations, 23 Local Governments received the minimum grant entitlement (one fewer than previous year).

Refinements made to the methods, as a result of WALGGC's ongoing research programmes, public hearings visit programmes, and consideration of Local Government submission claims are briefly described below.

Units of measurement

The major influence in the calculation of expenditure 'standards' was population. The WALGGC used the latest (30 June 2000) Australian Bureau of Statistics' estimated resident population data (cat. no. 3234.5). Sixty-seven Local Governments showed a decline in population on the previous year. Other key drivers used in the balanced budget approach were a range of disability factors, given relative weightings to calculate Local Governments' allowances for additional costs in the provision of services.

Grant capping

The City of Albany's submission for the continued maintenance of its grant level, equivalent to the combined pre-amalgamation levels of the former Town and Shire of Albany, was considered justifiable and therefore maintained for the fourth year. However, the City was advised that 2001-02 was the final year of such maintenance.

Seven agricultural shires were in the area declared by the Commonwealth government as 'exceptional circumstances' due to a succession of bad seasons. Submissions were received from a number of affected shires seeking consideration of their circumstances. The WALGGC included an 'exceptional circumstances' allowance in the governance assessment. In the final grant allocation, it was apparent that a number of the affected shires would have received grant reductions. The WALGGC resolved to hold these shires' grants at the 2000-01 level. (The funds required to bring these grants up to the 2000-01 level were subtracted from Local Governments receiving increases greater than 10 per cent.)

Maximum reduction

Maximum reduction to grant allocations was limited to 15 per cent. This method was adopted to ameliorate the impact of the more severe reductions that would have otherwise been experienced by four Local Governments (Towns of Bassendean and Kwinana, and Shires of Busselton and Augusta-Margaret River).

Revenue standards

The council categories for the mining rates assessment method were reviewed. As a result, a number of high mining valuation councils were moved to Category 1 and a similar number of low mining valuation councils were moved to Category 2.

Expenditure standards

There were no significant changes in the methods of assessments and calculations. All expenditure standards, except Law Order and Public Safety and Transport, were assessed 'net of disabilities' preliminarily, in order that state total assessed expenditures were broadly equivalent to actual average expenditures.

A few Local Governments' submissions have argued for consideration of other dwelling and property statistics in the calculation of standards. For the 2001-02 determinations, additional indicators were used for the recreation and culture and governance standards.

Disability factors

Generally, factors were reviewed and retained; some resulted in minor updates. A significant change in method was the introduction of three new factors: recognition of Australia's largest off-road vehicle area that saw the introduction of an additional allowance for the Shire of Gingin; an 'extraordinary planning' factor to recognise the responsibilities and workloads of councils affected by significant growth; and an allowance for maintenance costs of jetties and boat ramps.

The reviews saw the 'tourism' factor discontinued (following a poor rate of response from Local Governments to the WALGGC's discussion paper on this issue), and a rationalisation of environmental issues on salinity/landcare and coastal management to a single environment allowance (incorporating information from the Department of Conservation and Land Management). A separate Environment Assessment factor was retained and updated.

Table B.2 Revenue and Expenditure Standards - WA



Standard = ($117.50 assessments + (0.060638 valuations)
Valuations: Equalised gross rental values, 1997-98 to 1999-00
Assessments: Number of rateable assessments provided in 1999-00 information return


Standard = ($45.12 x Tlease 979) + (0.0757 x MINVAL979) for Category 1 councils.
Standard = ($111.41 x Tlease 979) + (0.0292 x MINVAL979) for Category 2 councils.
Standard = $0 for Category 3 councils.
Tlease979: Total number of mining leases, 1997-98 to 1999-00
MINVL979: Total unimproved mining valuations, 1997-98 to 1999-00


Standard = [(0.001484 x TVAL979) + ($1.18 x VGAREA) + (301.12 per assmt)] x 1.0863
TVAL979: Total average valuations of agricultural areas, 1997-98 to 1999-00
VGAREA: Total average agricultural area in hectares, 1997 to 1999


Standard = 0.078641 x pastoral valuations 1997-98 to 1998-99


Standard = Individual assessments


Standard = Total assessed expenditure 1995-96 x 0.22



Standard = $27.88 per rate assessment + $28.02 ADJPOP00 + $96 595
ADJPOP00: Service population (population + net additional employment) 2000


Standard = WAFRS levy + (15.52 x dwell2000) + (6.69 x Pop00) for fully WAFRS protected councils
Standard = WAFRS levy + ($213.71 x dwell2000) + ($126.96 x Pop00) for PCC
Standard = WAFRS levy + (158.44 x dwellings outside WAFRS) + (6.44 x Pop00) for metropolitan fringe councils
DWELL2000: Number of dwellings in 2000
POP00: Population 2000


Standard = $38.26 x Pop00, and SPG Factor 0.57
POP00: Population 2000


Standard = $19.87 x ADJPOP00 & SPG Factor 0.99
ADJPOP00: Service population (population + net additional employment) 2000


Standard = [$66.30 x ADJPOP00 + 189.22 x dwell + $69 500]
ADJPOP00: Service population (population + net additional employment) 2000


Standard = (28.10 x SIZE2000) + (3.21 x VTBLD979)


Standard = Total assessed expenditure 1995-96 x 0.04


Standard = 1.0 x 1995-96 expenditure standard + 4.0 x calculated standard
Local roads grant funding

Under the current principles, 7 per cent of the federal funds was allocated for 'Special projects' (one-third for access roads serving Aboriginal communities and two-thirds for major bridge works) as in previous years. The remaining 93 per cent was distributed according to the Asset Preservation Model (APM). The amounts involved were:

Access roads serving Aboriginal communities $ 1 506 710
Bridge works $ 3 013 420
Balance of 93 per cent for distribution $60 053 152

Total local road funding $64 573 282

Special projects - access roads serving Aboriginal communities

The Aboriginal Roads Committee, which comprised representatives from the WA Municipal Association, Main Roads WA, Department of Aboriginal Affairs and the Aboriginal and Torres Strait Islander Commission, fulfilled its advisory role with input into the allocation process. The aim of the committee was to ensure that the funds were allocated in accordance with the needs of WA's Aboriginal communities.

The committee established funding criteria based on several factors, namely, the number of Aboriginal people served by a road, the distance of the community from a sealed road, the condition of the road, the proportion of traffic serving Aboriginal communities and the availability of an alternative access. These criteria have successfully provided a rational method of assessing priorities in developing a five-year programme.

Special projects - bridge works

Allocation was made in accordance with recommendations from Main Roads WA (MRWA), which has specialised expertise in the management of bridges. MRWA assessed proposals submitted by Local Governments, using bridge condition reports and a bridge management programme. Recommendations were based on a priority of bridge maintenance needs.

Distribution of the balance of 93 per cent

The remaining funds were distributed in accordance with road preservation needs determined by the APM method. APM principles, such as minimum standards and reconstruction standards, were retained.

As in previous years, the model assessed the average annual cost of maintaining each Local Government's road network. The application of minimum standards provided additional allowances in the model. These standards have helped Local Governments not able to develop their local road systems to achieve the same standard as that of the more affluent Local Governments.

New asset preservation needs were determined using updated road data. Road lengths data were generally found to be similar to those used in 2000-01. The few Local Governments that had already updated their local road statistics received an increased assessment of asset preservation needs.

Most of the Local Governments received increased grants for 2001-02. Fourteen received increases of 6 per cent or more. The Shire of Mount Magnet received the highest increase of 29 per cent because a significant length of gravel roads had been sealed.

Only five Local Governments received decreases, the maximum being 3.41 per cent.

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South Australia

Methods - general purpose component

The methodology used to assess the general purpose component of the Local Government Financial Assistance Grants is intended to achieve an allocation of grants to local governing bodies in the State consistent with the national principles. The over-riding principle is one of Horizontal Fiscal Equalisation, which is constrained by a requirement that each local governing body must receive a minimum entitlement per head of population as prescribed in the Commonwealth legislation.

The South Australian Local Government Grants Commission uses a direct assessment approach to the calculations. This involves the separate estimation of a component revenue grant and a component expenditure grant for each council, which are aggregated to determine each council's overall equalisation need. Available funds are distributed in accordance with the relativities established through this process and adjustments are made as necessary to ensure the per capita minimum entitlement is met for each council. For local governing bodies outside the incorporated areas (the Outback Areas Community Development Trust and five Aboriginal communities) allocations are made on a per capita basis.

A standard formula is used as a basis for both the revenue and expenditure component grants.

Component revenue grants

Component revenue grants compensate or penalise councils according to whether their capacity to raise revenue from rates is less than or greater than the State average. Councils with below-average capacity to raise revenue receive positive component revenue grants and councils with above average capacity receive negative assessments.

The Commission estimates each council's component revenue grant by applying the State average rate in the dollar to the difference between the council's improved capital values per capita and those for the State as a whole, and multiplying this back by the council's population. The State average rate in the dollar is the ratio of total rate revenue to total improved capital values of rateable property. The result shows how much less (or more) rate revenue a council would be able to raise than the average for the State as a whole if it applied the State average rate in the dollar to the capital values of its rateable properties. This calculation is repeated for each of five land use categories: residential, commercial, industrial, rural and other.

To overcome fluctuations in the base data, valuations, rate revenue and population are averaged over three years.


Subsidies that are of the type that most councils receive and are not dependent upon their own special effort - that is, they are effort-neutral - are treated by the 'inclusion approach'. That is, subsidies such as those for public bus and library services and roads are included as a revenue function.

Component expenditure grants

Component expenditure grants compensate or penalise councils according to whether the costs of providing a standard range of Local Government services can be expected to be greater than or less than the average cost for the State as a whole due to factors outside the control of councils. The Commission assesses expenditure needs and a component expenditure grant for each of a range of functions and these are aggregated to give a total component expenditure grant for each council.

The methodology compares each council per capita against the State average. This enables the comparison to be consistent and to compare like with like.

Each function is identified by a main driver or unit of measure. This is divided into the total expenditure on the function for the State as a whole to determine the average or standard cost for the particular function. For example, in the case of the expenditure function built-up sealed roads, 'kilometres of built-up sealed roads' is the unit of measure.

Using this example, the length of built-up sealed roads per capita for each council is compared with the State's length of built-up sealed road per capita. The difference, be it positive, negative or zero, is then multiplied by the average cost per kilometre for construction and maintenance of built-up sealed roads for the State as a whole (standard cost). This in turn is multiplied back by the council's population to give the component expenditure grant for the function. As already indicated this grant can be positive, negative or zero.

In addition, it is recognised that there may be other factors beyond a council's control which require it to spend more (or less) per unit of measure than the State average, in this example to reconstruct or maintain a kilometre of road. Accordingly, the methodology allows for a cost relativity index (CRI) to be determined for each expenditure function for each council. Indices are centred around 1.0, and are used to inflate or deflate the component grant for each council. In the case of roads, CRIs measure relative costs of factors such as material haulage, soil type, rainfall and drainage.

To overcome fluctuations in the base data, inputs into the expenditure assessments (with the exception of the newly revised road lengths) are averaged over three years.

Aggregated revenue and expenditure grants

Component grants for all revenue categories and expenditure functions, calculated for each council using the method outlined above, are aggregated to give each council's total raw grant figure. Where the raw grant calculation per head of population for a council is less than the per capita minimum established as set out in the Act ($14.88 for 2001-02), the grant is adjusted to bring it up to the per capita minimum entitlement. The balance of the allocated amount, less allocation to other local governing bodies outside the incorporated areas, is then apportioned to the remaining councils based on their calculated proportion of the raw grant. Commission-determined limits may then be applied to minimise the impact on council's budgetary processes. An iterative process is then undertaken until the full allocation is determined.

Methods - identified local road grants

In South Australia, the identified local road grants pool is divided into formula grants (85 per cent) and special local road grants (15 per cent).

The formula component is divided between metropolitan and non-metropolitan councils on the basis of an equal weighting of road length and population.

In the metropolitan area, allocations to individual councils are determined again by an equal weighting of population and road length. In the non-metropolitan area, allocations are made on an equal weighting of population, road length and area of council.

Distribution of the special local road grants is based on recommendations from the Local Roads Advisory Committee. This committee is responsible for assessing submissions from regional associations on local road projects of regional significance.

Methods - Outback Areas Community Development Trust

The Outback Areas Community Development Trust is prescribed as a local governing body for the purposes of the Grants Commission's recommendations.

The Trust was established in May 1978 under legislation of the South Australian Parliament. It has a broad responsibility for community development activities in the outback areas of the State and with particular emphasis on those functions that are at present normally undertaken by local councils elsewhere in the State.

Due to the lack of comparable data, the Commission is not able to calculate the grant to the Trust in the same manner as grants to other local governing bodies. Rather, a per capita grant has been established. The 2001-02 grant was $156.77 per capita.

Methods - Aboriginal communities

Since 1994-95 the Grants Commission has allocated grants to five Aboriginal communities recognised as local governing authorities for the purposes of the Commonwealth Local Government (Financial Assistance) Act 1995.

The Aboriginal communities are Anangu Pitjantjatjara, Gerard Community Council Inc., Maralinga Tjarutja, Nepabunna Community Council Inc., and Yalata Community Council Inc.

Again due to the unavailability of data, grants for these communities are not calculated in the same manner as grants to other local governing bodies. The Commission used the services of a consultant, Alan Morton, of Morton Consulting Services, who undertook a study on the expenditure needs of the communities and their revenue-raising capacities. Comparisons were made with communities in other states and per capita grants were established. For 2001-02 the grant varied from $227.38 per capita for Gerard to $310.06 for Anangu Pitjantjatjara and Maralinga Tjarutja.


General financial assistance

The formula for the calculation of the raw revenue grants can be expressed as:

G = Pc x S x [( Us /Ps x CRIs) - ( Uc/Pc x CRIc)]

Similarly, the formula for the calculation of the raw expenditure grants can be expressed as:

G = Pc x S x [( Uc/Pc x CRIc) - ( Us/Ps x CRIs)]

Subscripts of s or c are used to describe whether it applies to the state or a particular council

G = council's calculated relative need assessment
P = population
U = unit of measure. Some units of measure are multiplied by a weight.
S = standard, be it cost or revenue =
expenditure or income/U
CRI = Cost Relativity Index (previously known as the disability factor). They are centred around 1.00, that is, CRIs equals 1.00. If more than one CRI exists for any function then they are multiplied together to give an overall CRI for that function.

Currently in all calculations with the exception of stormwater and roads there are no disability factors applied and consequently, CRIc = 1.0.

]The raw grants, calculated for all functions using the above formulae, both on the revenue and expenditure sides, are then totalled to give each council's total raw grant figure. Any council whose raw calculation per head is less than the per capita figure, ($14.88 for 2001-02), then has the per capita figure applied. The balance of the allocated amount is then apportioned to the remaining councils based on their calculated proportion of the raw grant. Commission-determined limits are then applied to minimise the impact on council's budgetary processes. (For 2001-02, the Commission allowed changes to some councils to be as great as positive 20 per cent, and some to be greater than minus 10 per cent from the previous year's actual allocation.) An iterative process is then undertaken until the full allocation is determined.

The following table details the approach taken to expenditure functions included in the new methodology.

Table B.3 Expenditure function, standard cost and units of measure - SA

Expenditure function

Standard cost

Units of measure

Subsidised services - public buses Set at 1.00 Derived from the level of State subsidy received by each council1
Subsidised services - and animal plant control Set at 1.00 Derived from the level of council contributions to Animal and Plant Control Boards2
Garbage Reported expenditures3 Number of residential properties
Aged care services Reported expenditures3 Population aged 65+ per ABS Census and estimated resident population
Services to families and children Reported expenditures3 Population aged 0-4 yrs per ABS Census and estimated resident population
Health inspection Reported expenditures3 Sum [3 x establishments to inspect, 1 x registered nursing homes, hospitals and hostels, and 1.5 x number of sub-standard dwellings]
Subsidised services - libraries Set at 1.00 Derived from the level of State grant received by each council4
Sport, recreation and culture - active Reported expenditures3 Population aged 5-24 years per ABS Census and estimated resident population
Sealed roads - built-up Reported expenditures3 Kilometres of built-up sealed road as reported in GIR
Sealed roads - non-built-up Reported expenditures3 Kilometres of non-built-up sealed road as reported in GIR
Unsealed roads - built-up Reported expenditures3 Kilometres of built-up unsealed road as reported in GIR
Unsealed roads - non-built-up

Reported expenditures3

Kilometres of non-built-up unsealed road as reported in GIR

Unformed roads - non-built-up

Reported expenditures3

Kilometres of unformed road as reported in GIR

Stormwater construction5,6

Reported expenditures3

Number of urban properties7

Stormwater maintenance5,6

Reported expenditures3

Number of urban properties7

Emergency services

Reported expenditures3

Total number of properties

Planning and building control

Reported expenditures3

Number of new developments and additions

Other needs assessments

Set at 1.00

Based on Commission determined relative expenditure needs in a number of areas8

  1. The unit of measure or standardised expense is derived as the product of the council subsidy for each council and the average ratio of council expenditures (net of revenue) to State subsidies, for all councils having subsidised bus services.
  2. The unit of measure or standardised expense is taken as each council's contribution to the operation of Animal and Plant Control Boards.
  3. Councils' expenditures reported on ABS returns.
  4. The unit of measure or standardised expense is derived as the product of the council grant for each council and the average ratio of council expenditures (net of revenue) to State grants, for all councils.
  5. Includes both construction and maintenance activities.
  6. The Commission has also decided, for these functions, to use CRIs based on the results of a previous consultancy by BC Tonkin and Associates.
  7. Urban properties = sum [residential properties, commercial properties, industrial properties, exempt residential properties, exempt commercial properties, exempt industrial properties].
  8. Comprises Commission-determined relative expenditure needs with respect to the following: non-resident use/tourism; duplication of facilities; isolation/distance; needs of councils with respect to aboriginal communities; socioeconomic aspects; andother special needs of councils.

Table B.4 Summary of standards by function - SA

Table summary of standards by function


in dollars

Unit of
per capita

Total units
of measure

Unit of measure

Expenditure functions

Subsidised services - public buses


0. 76065

1 128 290

Standardised expense

Subsidised services - animal and plant control



2 213 584

Expenditure from Animal and Plant Control Board




586 361

Number of residential properties

Aged care services



205 824

Population aged more than 65

Services to families and children



99 282

Population aged 0-4

Health inspection



137 579

3 x establishments to inspect + 1 x hospitals, registered nursing homes, rest homes and hostels + 1.5 x sub-standard dwellings

Subsidised services - libraries



28 607 982

Standardised expense

Sport recreation and culture



409 117

Population aged 5-24

Sealed roads - urban

10 054.65


9 736

Kilometres of sealed built-up

Sealed roads - non-urban

4 227.74


5 751

Kilometres of sealed non-built-up

Unsealed roads - urban




Kilometres of formed and surfaced, and natural surface formed built-up

Unsealed roads - non-urban



48 655

Kilometres of formed and surfaced, and natural surface formed non-built-up

Roads - unformed



9 030

Kilometres of natural surfaced unformed

Stormwater drainage - construction



634 629

Number of urban, industrial and commercial properties including exempt

Stormwater drainage - maintenance



634 629

Number of urban, industrial and commercial properties including exempt

Emergency services



801 784

Total number of properties

Planning and building control



40 990

Number of new developments and additions

Revenue functions


- residential


45 459

67 430 468 809

Valuation of residential

- commercial


7 003

10 388 163 204

Valuation of commercial

- industrial


1 250

1 853 652 147

Valuation of industrial

- rural


9 138

13 555 142 153

Valuation of rural

- other


2 994

4 440 540 040

Valuation of other




29 706 542

The total of the subsidies

Note: Total population = 1 494 634

The Commission is aware that there are many factors that may influence a council's expenditure and that it is not always possible to determine objectively the extent to which a council's expenditure is affected by inherent or special factors. Therefore, in determining units of measure and cost relativity indices, the Commission must exercise its judgement based on experience, the evidence submitted to the Commission, and the knowledge gained by the Commission during visits to council areas and as a result of discussions with elected members and staff.

The above table enables a council to calculate its raw grant for each of the given functions. To do this the council must calculate its own unit of measure per capita, compare it with the similar figure from the table and then multiply the difference by the standard from the table and its own population. If CRIs are applicable then they must be included as a multiplier against the council's unit of measure per capita. Currently CRIs are only used in the roads and stormwater functions. Further CRIs will be developed over time.

It must be stressed that this only allows the calculation of the raw grant, not the estimated allocation. The calculation of the estimated grant is not possible as per capita minimums need to be applied and the total allocation apportioned to the remaining councils.

Road length audit - Geographical Information System (GIS) mapping

During 1999-00, the Commission sought the assistance of consultants PPK Environment and Infrastructure Pty Ltd to audit council's road lengths by mapping all local roads across the State (primarily from hard copy maps) into a Geographical Information System (GIS).

The review involved extensive council involvement. The consultants worked closely with the data councils supplied to the Commission as part of their General Information Return, that is, road maps and summary data on road lengths by type. The consultants then liaised with councils over the data to ensure that the information the consultants were mapping was accurate.

While the Commission used the outcome of the road length audit in the allocation of the 2000-01 general purpose grants, the Commission believed that the data would need further refinements and an ongoing commitment to its maintenance.

As a result in early in 2001 the Commission engaged the services of an engineer on a part-time basis to refine the road length data (following updates supplied to the Commission by councils), to address other ongoing engineering-related concerns and to authenticate the data used in the calculation process.

The revisions to the road length data (as at 30 June 2000) were used in the calculation of the 2001-02 general purpose grants.

The CRIs developed previously to reflect the difference between councils of the cost of re-constructing and maintaining roads were re-run to ensure the factors reflected the revised road lengths.

The outcome of revising the road length data was that:

  • no general trends were identified through the introduction of the revised road lengths. The adjustments were on an individual council basis
  • the revised CRIs resulted in a greater recognition of council's with very poor soils.

A by-product of the road length audit process has been the production of detailed maps by council, prepared in a GIS format, consistently mapped across the State. The Commission was again able to give councils a copy of their map for their own use.

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General purpose grant distribution

State methods for distributing Financial Assistance Grants 2001-02

The Commission's equalisation model is based on the 'balanced budget' approach. That is, each local governing body's grant entitlement is derived from the difference between:

  • the expenditure 'required' to provide a common range of services, given its unique cost conditions (standardised expenditure), and
  • revenue that could be raised by applying a standard or average rate per dollar of assessed annual values to all rateable property in that local governing body (standardised revenue), plus
  • specific purpose payments received that are treated by the 'inclusion' approach.

The difference between standardised expenditure and standardised revenue is the 'standardised deficit'. This becomes the net standardised deficit after adjustment for specific purpose payments and any special allowances. It should be noted that the total net standardised deficit normally exceeds the total of grant funds available. Accordingly, the final step in determining grant entitlements is to proportionately adjust the individual net standardised deficits to account for the shortfall.

Specific purpose payments are treated by either the 'inclusion' or 'deduction' approach. The 'inclusion' approach recognises funds received by councils as contributing to normal expenditure for the purpose of calculating expenditure standards. They are treated as a source of revenue and subsequently deducted from a municipal area's standardised deficit. Using the 'deduction' approach, funds are excluded from expenditure and revenue data prior to the determination of expenditure standards. The deduction approach is employed where:

  • a council is effectively acting as an agent of the State or Commonwealth Governments and the specific purpose payment is a reimbursement of costs incurred, or
  • grants for a particular service are received by only a relatively small number of councils, and the service is generally provided only where grants are received.

Equalisation therefore occurs on the basis of 'net' expenditures where this particular approach to the treatment of specific purpose payments is adopted.

No matter how sophisticated the Commission's methodology might become, there is always the need for the Commission to exercise broad judgement as it considers the issues which confront it each year as it goes about its task of assessing grants.

A full explanation of the operation of the model is provided in the following paragraphs.

Calculating standardised revenue

A council's revenue capacity, or standardised revenue, is determined by multiplying the rateable assessed annual value (AAV) of properties in the municipal area by the average rate charged across the State. The Commission uses AAV data, adjustment factors and exempt AAV information supplied by the Office of the Valuer-General, and rate and water sales revenue information contained in the ABS Local Government finance statistics. An adjustment is made to account for the value of properties that are partially exempt from rates, that is, liable for service charges only.

The rateable AAV for each council is determined and then adjusted using the Valuer-General's adjustment factors so that all figures are expressed in terms of a common valuation year. Total adjusted rateable AAV for the State is divided by the total rate revenue raised by all councils (which now also includes all revenues derived from the sale of water, including charges levied on a consumption basis) to yield a State average rate in the dollar. Standardised revenue for each council is then the product of its adjusted rateable AAV and the State average rate levied per dollar of AAV. The final standardised revenue for each council used in the base grant assessments is the relevant three-year averaged standardised revenue.

Calculating standardised expenditure

In general, the cost of providing council services varies depending upon the number of residents. Therefore, to determine the standard expenditure that is 'required' to provide a service, the Commission multiplies the State average expenditure per person by the number of residents in each municipal area.

Many councils face a range of unavoidable cost pressures in providing services. This means that they cannot provide a service at the standard level of expenditure. This is recognised by the Commission through the application of council-specific disability factors, which represent these unavoidable cost pressures, to standard expenditure to determine the standardised expenditure for each council. This method of estimating standardised expenditure is applied to all expenditure categories except the road category.

The Commission uses a modified version of the Mulholland asset preservation model to assess standardised road expenditure, based on each councils' road assets. The fundamental basis of the Mulholland asset preservation model is that, in statistical terms, a kilometre of road has an 'expected life', assuming it is appropriately constructed and maintained. At the end of this period, it will require re-construction followed by a new cycle of maintenance and rehabilitation in order to preserve it at an acceptable standard. The 'expected life', or durability, of a kilometre of road maintenance work will clearly differ depending upon both the type of activity (sealing, re-grading) and the type of road (urban sealed, urban unsealed, rural sealed, rural unsealed) involved. Similar arguments hold with respect to both road rehabilitation and road re-construction work.

Performance standards specify, for each road type, the length of road requiring re-construction, re-grading or re-sealing each year in order to preserve the existing road asset. For example, if the seal on a nine-kilometre stretch of road has an expected life of 30 years, then, on average, 300 metres will need to be sealed each year to maintain the road at the current standard. In this case, the performance standard is approximately 0.03, or 3 per cent. Average costs per kilometre for each road type and activity combination have been derived from published unit price estimates for the same undertakings. For any given council, specific disabilities may increase or decrease the average cost of undertaking a given activity.

The model recognises 'Climate', 'Drainage', Material', 'Soil', 'Terrain', and 'Traffic' disabilities in road rehabilitation and re-construction, and 'Climate', 'Material', 'Terrain' and 'Traffic' disabilities in road maintenance. The need for different sub-base depths (re-construction only) is incorporated within the workings of the model. Reflecting the conclusions of an extensive review, the model now also recognises a 'Remoteness' disability factor, and an 'Urbanisation' disability adjustment for all activities. These are intended to capture elements of expenditure disabilities not otherwise accounted for in the model, and apply to a minority of councils only.

The model also makes an allowance for additional bridge-related maintenance, by converting bridge areas to equivalent road lengths (which involves multiplication by ten to recognise the greater cost per equivalent area) and adding these lengths to the road lengths used in the model.

Hence in assessing 'road' expenditure needs for a given council, performance standards are applied to each category of road (urban sealed, urban unsealed, rural sealed, rural unsealed) to determine the length of road to be maintained, rehabilitated and reconstructed in that year in order to preserve the existing road structure. The relevant disability factors and costs per kilometre are then applied to each of these figures and the whole is summed to yield standardised 'road' expenditure for that council.

An explanation of the types of expenditure that comprise each expenditure function is set out in the following table.

Table B.5 Description of expenditure functions - Tasmania

Expenditure function

Explanation of expenditure function

General administration

Legislative, executive, financial and fiscal affairs relating to general purposes only ie not solely related to any one of the purposes listed below.

Health, housing and welfare

Nursing homes and other services for the aged, community health services, health inspections, family and child welfare, housing services.

Sanitation and the environment

Household and other garbage services, urban storm water drainage, street cleaning, flood mitigation and other protection of the environment.

Planning and community amenities

Planning and building services, street lighting, public conveniences, shopping malls, cemeteries and crematoria.

Recreation and culture

Public halls and civic centres, swimming pools, parks and playing grounds, sports assistance and promotion, libraries and other cultural services.


Provision of water services.


Provision of sewerage services.


Re-construction and maintenance of roads and bridges.

Public safety

Fire protection, animal control and other public order and control.


Expenditure on items not elsewhere classified. Includes saleyards and markets, tourism and area promotion, aerodrome operations, communications and natural disaster relief.

Application of council-specific disability factors

Disability factors are used to reflect unavoidable relative cost disadvantages councils face in providing services. A range of factors have been developed to account for differences between councils in the demand for a service as well as variations in the per unit cost of supplying that service.

A factor is calculated for each municipal area by comparing its demand or supply disadvantage with the State average. The councils that demonstrate the least relative disadvantage for the class of disability concerned are assigned a minimum factor of 1.00. All other councils are compared to those councils on the minimum to determine their relative disability factors.

The following disability factors have been carefully considered by the Commission and a method adopted to quantify them:

  • Scale
  • Dispersion
  • Isolation
  • Regional responsibility
  • Population growth
  • Population decline
  • Worker influx
  • Absentee population
  • Unemployment
  • Age Profile
  • Tourism
  • Day-trippers
  • Climate
  • Equivalent tenements.

An outline of the approach developed by the Commission to quantify each of the above-mentioned factors is provided below. The 'climate' disability factor is not specifically dealt with as the Commission continues to use broad judgement in determining this factor.


The scale disability accounts for the diseconomies of small scale that councils face in providing some services. Diseconomies occur where the cost per person of a certain activity is greater for councils with a small population than those with larger ones. For example, each council requires a general manager whether the municipal population is 1000 or 100 000. The cost per person of the general manager is therefore much greater for smaller councils than for larger ones.

Different expenditure categories show varying degrees of diseconomy, so three scale categories have been developed - high, medium and low. The application of these to the different expenditure categories is detailed in Table B.6.

Population dispersion

The dispersion disability relates to the additional costs incurred in servicing a widely scattered population within a municipal area. The Commission recognises that associated costs arise from the need to both duplicate services and incur greater travelling and communication costs than would otherwise be the case.

The Commission completed a thorough review of the method of calculating this factor during 2001 and it is now determined according to:

  • the number of population centres in each municipal area
  • the population weighted distance between those centres and the municipl area's administrative centre.


This factor recognises the increased costs that arise from geographical isolation. Such costs are associated with attracting staff to remote areas, communicating with relevant bodies, travelling and the supply of necessary construction and maintenance materials.

This disability factor is calculated according to the distance between a municipal area's main centre and the closest major regional population centre, and the distance from Hobart, the main administrative and political focus within the State.

Regional responsibility

A disability is recognised by the Commission for those authorities (host municipal areas) which provide particular services for the residents of surrounding municipal areas, without there being a counter-balancing use of services in surrounding municipal areas by residents of the regional centre, or any offsetting cash contribution for the use of those facilities.

The Commission recognises that certain towns and cities throughout the State act as regional focal points for the provision of some services. The expenditure categories that cover these services are General Administration, Planning and Community Amenities and Recreation and Culture.

The sparsity of Local Government level data related to the consumption of council services by non-residents requires the Commission to exercise broad judgement in its assessment of regional responsibility. The Commission supplements its judgement with the results of a regression equation that draws upon actual levels of expenditure within each expenditure category to predict the magnitude of the population that is likely to be served by that level of expenditure.

Population growth / population decline

The Commission recognises that a local governing body faces certain expenditure disabilities as a result of not being able to continually change staff numbers and the scale of infrastructure in response to fluctuations in population levels. Such changes typically require planning and implementation horizons of several years or more. As a consequence, councils are often faced with excess or inadequate capacity in certain service areas depending on whether they are faced with rapid population decline or growth. Both circumstances are believed to confront councils with added expenditure burdens.

The disability factors are determined by comparing the average annual rate of population growth/decline for a particular municipal area over a five year period, against the average rate of population growth/decline for either growing or declining councils in the State as a whole.

The Commission has determined that it should provide additional assistance to those councils experiencing sustained population decline. Accordingly, commencing with the 2001-02 assessments, the threshold at which the population decline factor is applied to councils has been reduced from an average of 2 per cent a year over five years to an average of 1 per cent a year over the same period. The weight of the disability factor has also been adjusted so as to increase its influence upon the Commission's equalisation model.

The threshold for the application of the population growth disability factor remains unchanged at an average rate of growth of 2 per cent per annum over five years.

Worker influx

This disability factor reflects the additional costs imposed on those municipal areas that have significant daily net influxes of non-resident workers. It is felt that this effect is likely to have an impact that is in excess of the more general effect of regional responsibility.

Consideration is given for potential worker influx for the major population centres in the State. Municipal areas outside these main centres are unlikely to have sufficient commercial or industrial development relative to their surrounding regions to cause any net influx of non-resident workers which impose a significant cost on the municipal area.

Determination of this factor involves estimating, from ABS census data, the number of residents working outside the municipal area and the number of non-residents working within the municipal area. The difference, or the net worker inflow, is then used to derive a disability factor in relation to actual total population. Factors are now allocated to Hobart, Glenorchy, Launceston and Burnie. All other municipal areas in the study areas had either a negative or zero net influx of non-resident workers.

Absentee population

Allowance is made by the Commission for the additional population that is not captured in the Census statistics but which nevertheless must be serviced. Specific reference is made here to those municipal areas that have a significant number of holiday residences.

The calculation of this disability factor is based on the proportion of dwellings in each municipal area which were unoccupied at the time of the 1996 Census.

For the 2000-01 assessments the Commission has made an adjustment to the absentee population factor in order to recognise the situation faced by the West Coast Council where mine workers reside outside of the municipal area between shifts. It was accepted that the existing unoccupied dwelling statistics do not adequately reflect this phenomenon.

Age profile

A disability factor based on the proportions of residents aged between 0 and 5 years, between 15 and 25 and over 65 has been calculated by the Commission. This disability factor reflects the additional costs associated with having a higher than average proportion of the population in these groups. For example, additional costs may be incurred in the provision of health and welfare services for infants and retirees, or in the provision of sporting facilities for people under 25.


A disability factor reflecting the level of unemployment within a municipal area has been calculated by the Commission using data on income support payments from Centrelink. This disability factor has been calculated to capture the costs to councils of having a higher than average proportion of working-age residents unemployed. For example, additional expenditure might be incurred in the provision of recreation/leisure facilities or welfare programmes as a result of the need to cater for unemployed residents.

Following consultation with councils during the Commission's 2001 hearings and visits, the application of this factor has been extended to the Recreation and Culture and Law, Order and Public Safety Expenditure categories.


The Commission recognises that councils generally incur additional costs as a result of tourist influx through increased use of council resources and infrastructure. A disability factor that seeks to recognise these costs has been determined on the basis of the equivalent number of tourist beds in all establishments ranging from motels to registered camping grounds in each municipal area.


Significant numbers of day-trippers who make use of council facilities are recognised as increasing council costs. Details of the number of tourist attractions and an index of visitor frequency have been combined with a factor representing the distance from major population centres and the population of those centres, to determine a relative disability. Municipal areas close to large population centres receive higher factors.

Equivalent tenements

The use of population to estimate standard water and sewerage expenditure does not recognise expenditures incurred in providing water and sewerage services to non-residential establishments. Therefore, a factor has been developed to recognise the cost of providing these services to commercial properties. This has been done by dividing the total value of serviced commercial properties by the modal residential assessed annual value in each water and sewerage district to determine the number of residential 'equivalent tenements'. From the 2000-01 assessments, a disability factor is recognised for all councils, whereas previously it was only applied to those councils with greater than one thousand equivalent tenements.

Table B.6 Application of disability factors to expenditure standards - Tasmania

Expenditure category

Disability factors

General administration

Scale (high)

Absentee population


Population decline


Population growth

Regional responsibility


Worker influx

Health, welfare and housing

Scale (medium)

Absentee population


Population decline


Population growth


Sanitation and the environment

Scale (medium)

Absentee population





Worker influx

Population growth

Planning and community amenities

Scale (medium)

Absentee population


Age profile



Regional responsibility


Population growth

Population decline


Recreation and culture

Scale (medium)

Absentee population


Age profile



Regional responsibility


Population growth

Population decline





Absentee population

Population growth

Population decline


Worker influx


Equivalent tenements



Absentee population

Population growth

Population decline


Worker influx


Equivalent tenements

Public Safety

Scale (medium)

Age profile


Population decline


Population growth



Scale (low)*

* Both Flinders and King Island councils receive the Scale (high) factor for expenditure classified to 'Other'. Identified local road fund distribution

Identified local road fund distribution

To accord with the national principle (see Appendix A) and while ensuring that the grant distribution reflects the particular needs of Tasmanian councils, the road grants are distributed in the following manner:

  • road preservation component: 66.5 per cent of funds, based on the relative road expenditure needs of each council as determined using the Mulholland asset preservation model
  • bridge expenditure component: 28.5 per cent of funds based on relative bridge deck areas (including all concrete and wooden bridges, and box culverts over three metres total span)
  • special needs, or 'betterment' component: 5 per cent of funds allocated to councils with an above average proportion of rural unsealed roads, based on rural unsealed road lengths.

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Northern Territory


The methodology used by the Commission in making its assessments for 2001-02 conforms with the requirements of the Local Government (Financial Assistance) Act 1995. Wherever possible, it has followed horizontal equalisation principles as set out in section 6 (3) of the Act, and as embodied in the national distribution principles.

In assessing relative expenditure and revenue needs, the Commission used the balanced budget approach. The Commission assesses the total standardised expenditure needs for each local governing body, and then deducts the assessed revenue-raising capacity to arrive at the standardised deficit. The deficit represents the funding required to enable each local governing body to deliver an average level of services when an average revenue-raising effort is made.

The methodology used by the Commission calculates standards and applies disability factors and weightings to assess each local governing body's revenue-raising capacity and expenditure requirements.

The assessed revenue-raising capacity and assessed expenditure requirements are the Commission's measures of each local governing body's ability to function at the average standard.

The calculation of standardised expenditure and revenue needs took into account population changes. These cover both increases as well as decreases where they occurred. In order to smooth the effect of these variations, the Commission adopts a three-year average of its calculated core community populations.

Revenue-raising capacity

As the ownership of the land on which many communities are located is vested in Land Trusts established pursuant to the Commonwealth Aboriginal Lands Rights (Northern Territory) Act 1976, it is not feasible to use a land valuation system to assess revenue-raising capacity.

The method of calculating revenue-raising capacity is achieved through the use of personal income statistics, obtained from the Australian Bureau of Statistics, which allows for the determination of a councils theoretical gross income. In addition, councils that are recipients of the Northern Territory Operational Subsidy have 50 per cent of this revenue taken into account. The Commission considers that given the unique circumstances within the Northern Territory, this approach provides a reasonable indication of a council's revenue-raising capacity.

Expenditure needs and disability factors

The assessment of expenditure needs calculates standards in each category with disability factors applied as appropriate.

There are six expenditure categories taken into account by the Commission. For the 2001-02 year the total standardised expenditure needs for each local governing body is adjusted by a combination of five disability factors. In arriving at these factors the Commission took into account the factors of distance, isolation, geographic location, dispersion, external access, growth and communications, which would influence costs of service delivery by individual councils.

Population estimates

In making its assessments, the Commission considered 1996 Census data provided by the Australian Bureau of Statistics. However, it was concerned that these data were at variance with that returned directly by the councils and endorsed by the Department of Local Government. The Commission has recently began a joint validation exercise with the ABS in identifying reasons for the differences. This may lead to future pilot counts in a number of regional communities.

Population data for smaller local governing bodies are more difficult to determine. This is partly because of enumeration difficulties in remote areas and the non-defined boundaries of some local governing bodies. In addition, whatever population is adopted may be of limited relevance in view of the seasonal increases and decreases of the predominantly Aboriginal communities.

The Commission has derived estimated resident population data for these smaller local governing bodies by reference to information obtained from a range of sources, including the Department of Local Government and the communities themselves.

In assessing the needs of communities, the Commission took into account local resident population and included a factor for those in outstations dependent on the relative council for Local Government services.

In addition the Commission took into account interstate and overseas tourist visitors to communities that impact on the provision of Local Government services.


Revenue component

All councils:

Assessed revenue

Raising capacity = Gross income/State income x $31 154 002

Assessed revenue = Assessed rates + 50 per cent operational subsidy


Gross income = Community gross income

State income = Total NT gross income

Operational subsidy = NT operational subsidy 2000-01 = Total Local Government rate revenue of $31 154 002

Expenditure components


(Community population/Territory population) x NT amenity expenditure x (isolation works x dispersion x growth) - amenity grants

General administration

(Community population/Territory population) x NT general administration expenditure x (isolation administration x dispersion x Aboriginality) - administration grants

A base level ($70 000) of expenditure is applied to all councils.

Human services

(Community population/Territory population) x NT human services expenditure x (isolation administration x Aboriginality x growth) - human services grants


The population figure used for these calculations is the sum of the populations in those centres that are in receipt of library services.

(Community population/Territory population) x NT Library expenditure x (isolation administration x Aboriginality x growth) - NT Library Grants


(Community population/Territory population) x NT recreation expenditure x (isolation works x growth) - NT recreation grants


Community road factor/NT road factor x NT roads expenditure

This category is calculated on weighted road lengths by surface type. The summing of these figures determines a council's road factor. The road factor equation is:

10 x kerbed and sealed road + 8 x sealed road + 4 x gravel road + 1 x formed road + 0.4 x unformed road + 2 x cycle paths.

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