By Staff Writer

Most councils appear to have some limited capacity to raise more revenue, if they and their communities wished to do so, according to a draft report released by the Productivity Commission.

The report — Assessing Local Government Revenue Raising Capacity — responds to a request by the Australian Government to examine the capacity of local government to raise own source revenue.

‘Local governments are funded mainly through rates, fees and charges (including developer charges and fines). Grants from the Australian and State governments also are a substantial source of revenue to councils in rural and remote locations, on a per person basis’, said Commissioner Judith Sloan.

‘The impact of raising additional own-source revenue would vary across classes of councils. A modest increase by urban councils would be less difficult than for rural and remote councils where a higher proportion of community income is already drawn upon. For this reason, many rural and remote councils may continue to depend more on grants than their urban counterparts’, said Commissioner Sloan.

The report also indicates that State legislative and regulatory factors may limit the ability of councils to raise revenue. However, other than in New South Wales, this effect appears to be minimal due to the flexibility of arrangements in place. Rather, the major constraint on raising revenue from rates, and fees and charges, appears to be policy choices made by local governments in response to their political environments.

The Commission has also set out some principles to guide the revenue raising (and expenditure) decisions of local government.

The wider and more rigorous application of these principles could help councils more effectively determine the services local communities really want and how much they are willing to pay for them. In this way, there is scope for local governments to better discharge their functions and enhance the well-being of their communities.

For a copy of the Draft Report click here.

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