LGAs in Melbourne’s outer suburbs will face rising costs to meet the needs of growing communities, at the same time as the state government moves to tamp down spending, a new report warns.

“The Victorian Government has announced a reduction in capital spending from its peak levels to meet broader fiscal objectives, including stabilising and reducing debt,” the report released this month says.

“Despite this, local governments in growth areas will require increased spending to cater to their growing populations.”

The report into financial relationships between the state and local governments was commissioned from KordaMentha by the recently rebranded Outer Melbourne Councils group, which was previously known as The Interface Councils Group.

OMC, representing the 10 municipalities that form a ring around metropolitan Melbourne and 1.6 million residents, was formed to advocate for improved services and infrastructure.

Need for partnerships

The report highlights the impact that cost shifting has had on the local government sector, and stresses the need for strategic partnerships between all levels of government on planning and funding infrastructure projects.

“As Melbourne’s population is projected to outgrow Sydney due to factors beyond local government control, the need for substantial investment in new suburbs and infrastructure, especially within the geographical boundaries of the Outer Melbourne Councils, becomes paramount,” KordaMentha says.

“Melbourne’s anticipated population growth requires a proactive and collaborative approach to infrastructure development and urban planning.”

However it says by implementing recommendations outlined in report, both local and state governments can ensure that the city’s growth is sustainably managed.

Local councils already manage $10 worth of assets per every dollar of revenue collected, the report says. This compare to $4 for the Victorian government and 40 cents for the Commonwealth.

Financial platform to support growth

The report makes a number of recommendations providing a financial platform to support further population growth.

These include rate cap indexation reform, unlocking value from existing property portfolios, exemptions from the rate cap for infrastructure programs to provide for population growth and exemption for local government from the State’s windfall gains tax where landholdings are repurposed for community benefit.

The report also lays out various accounting treatments for capital revenues and developer contributions that need to be understood when assessing the strength of councils’ financial positions.

OMC representative and Chair of the City of Whittlesea Administrators Lydia Wilson says the report  recognises local government manages its finances well and and is carrying ‘prudent’ levels of debt. 

“In short, The KordaMentha report shows that Outer Melbourne Councils are doing what we can to meet today’s challenges,” Ms Wilson said.

However she said said restrictions on revenue sources, rising costs and the needs of forecast population growth are creating an ongoing challenge for local government.

“Outer Melbourne Councils is calling on the State Government, and the Federal Government where applicable, to enter into a new partnership with local government to address growth challenges,” she said.