Jim Magee is a councillor and the Mayor of the City of Glen Eira in Melbourne’s inner south. In this opinion piece, he outlines the need for local government reform in the state of Victoria, Australia and a funding, governance and finance system that meets the need of 21st century councils.
It’s time for a major shake-up of local government in Victoria — and I don’t mean amalgamation.
It’s been almost 30 years since then Premier Jeff Kennett made substantial structural changes to Victorian local government. While the initially controversial changes have served us well, they’re now decades old. The model hasn’t kept pace with the challenges we now face.
Councils deliver far more than roads, rates and rubbish. While all councils are different, most deliver upwards of 120 different services to their communities — from maternal child health to aged care services that help keep people living independently in their homes. In the case of Glen Eira, we even run a residential aged care facility.
While the sector isn’t broken, setting aside the odd scandal or mishap from rogue corners, we are working in an environment that is changing. It’s becoming tougher to operate and our long-term sustainability is far from guaranteed.
Costs are increasing much quicker than local government can cover, and it’s putting services at risk.
In fact, while inflation is at above six per cent and growing, council rates are capped by the State Government at 1.75 per cent. Of course, there’s no self-imposed limit on Victorian taxation revenue, which increased more than 30 per cent from September 2019 to June 2022 according to Treasury’s own figures.
At the same time, the State Government is shifting the cost of critical services — like maternal and child health services and school crossing supervision — through outdated funding models that see us wearing 70 per cent of the cost of programs purported to be 50-50.
Meanwhile, they’re putting more regulations in place that cost us time and money, like the Building Regulation Reform and Circular Economy Policy. These aren’t bad policies, but time and again it falls to local government to implement them with little to no financial support.
Without a doubt, one of the biggest risks to our financial sustainability is the massive building and construction industry cost escalations. Councils are always delivering new projects and we must constantly renew and improve our assets — many of which may require extensive repair. To put it in perspective, while local government collects only 3.8 per cent of taxes, we manage one third of the nation’s infrastructure.
This imbalance has real-world consequences. For example, Glen Eira City Council had planned to start construction of a redeveloped Carnegie Memorial Swimming Pool earlier this year, but heritage delays pushed the project back to 2023. In that time, increased costs of building materials and labour has seen the projected project cost soar by millions of dollars.
Almost every project that we put out to tender this year is coming in 10 to 20 per cent above what we had anticipated in our financial modelling before rampant inflation took hold.
Skyrocketing interest rates are also hitting us hard. Most Councils have a long-term capital works program that relies on a level of borrowing. While this is a healthy approach to investing in inter-generational assets, we also need to factor the cost of borrowing into our long-term plans.
Given the scale of this rapid change, it’s time to ask ourselves some big questions. We simply can’t afford to keep kicking the can down the road.
We need to start a serious conversation now about whether the current model or way that local government is organised is affordable in the long term. Even if every council is individually operating as efficiently as they could be, is that enough to ensure we can deliver even core services in five or 10 years?
The answer to what local government looks like in the future is not simply more amalgamations. There are other models out there that we can look to for consideration.
Take the City of Brisbane, for example. The Council has a whole-of-city focus and delivers many of the services that are delivered by the State Government in Victoria. In transport and infrastructure planning, for example, this enables them to deliver a more integrated outcome with less bureaucracy and fewer turf wars.
In states like South Australia, local governments are looking at how they can share resources, learnings, or functions or offer them to other councils on a fee for service basis. In Victoria, we’ve been slow off the mark to consider this. To be fair, we haven’t seen been a burning platform to force the level of vision, creativity, investment and compromise necessary to make these models work.
Closer to home, we’ve seen inner metro Melbourne form the M9 – the City of Melbourne and the eight neighbouring municipalities. The M9 represents one in five Victorians and a third of Victoria’s Gross State Product. It was established as an alliance to work cooperatively and collectively advocate for issues and projects of mutual interest. In the inner south, Glen Eira has formed a similar alliance with Bayside, Boroondara and Kingston City Councils, who collectively represent one in eight Melburnians. These alliances are not amalgamations — but they consider how working together in different ways can deliver better outcomes.
We are an industry that employs 33,000 people and has an annual turnover of $7.2 billion. The rapidly changing financial context presents a burning platform and a need to start a conversation.
We can’t keep pushing these issues into the never-never. Within a decade, if the model doesn’t change, we will be having a much different conversation about which critical services we can still afford to deliver.
As a sector, we need to mobilise now and start having these difficult conversations. We can’t afford to wait for the State Government to do it for us.
Councillor Jim Magee was re-elected as Mayor of the City of Glen Eira in Melbourne’s inner south on 23 November 2022. He is serving his fourth term on Council as Tucker Ward Councillor. Cr Magee’s family emigrated from Belfast, Northern Ireland in 1970. He is married with two sons and has lived in Bentleigh East since 1988.
For more information on local government reform and finance in Australia, check out these policy briefings – open to corporate members:
- Local government – Pacesetters in productivity – LGiU
- The state and distribution of federal grants to local government – LGiU
- Australian National Urban Policy – careful what you wish for – LGiU
- State Regulation of Local Government Revenues: can it be justified? – LGiU
- Reconsidering the local-Federal relationship – LGiU