By: David Jenkins
One of Australia’s most significant infrastructure challenges is the mismatch between community expectations of local government service delivery and the revenues which fund the sector.
Local government has primarily done the best it can with the resources it has at its disposal. The sector has responded to rising expectations and provides a growing range of essential services that underpin our communities. Still, the cost of delivering and maintaining the assets that provide services to our communities outweighs revenue growth in many locations.
This was identified in 2006 when an Australian Local Government Association (ALGA) report identified how this challenge created financial operating deficits for many councils and led to deferment or reduced expenditure on infrastructure maintenance and renewal.
The analysis found that, without reforms, up to 30% of local government councils needed help with sustaining services at an affordable level. Fifteen years later, the 2021 National State of the Assets Report highlighted that in total, $51bn of non-financial (fixed assets) were reported in poor condition, with $46bn having poor function and $48bn having poor capacity.
All this provides context to one of the critical points in the communique issued after IPWEA’s recent International Asset Management Congress in June: to re-activate the push for nationally consistent frameworks for local government financial sustainability.
The crux of the communique is a call for State and Territory governments to audit local government financial plans, publish the results, and encourage the Federal Government to benchmark these against the financial sustainability ratios in the International Infrastructure Financial Management Manual.
The communique states, all levels of Government should facilitate these audits, ensuring alignment with the lifecycle forecasts and trade-offs on performance, cost and risk reported in asset management plan.
It also calls on local government to continue reporting annually on their assets’ performance, according to the ALGA agreed measures.
These processes will deliver transparency on the magnitude of the challenge and provide credible data on the financial sustainability of local government based on a scalable and consistent methodology.
Shining a light on the issue with actual numbers should bring State, Territory and Federal Governments more into play and encourage them to be more proactive, act on their responsibilities, and use the mechanisms at their disposal to ensure best-practice asset management.
One positive initiative identified in the congress communique is the call for the Federal Government to oversee the development of a National Integrated Asset Management Governance Framework for transport and community infrastructure.
Taking a national approach to the issue would help local government leverage its capacity to enhance the quality of life of our communities.
The adage that you can’t manage what you can’t measure is well applied in this context.
Measurement is necessary for accurately quantifying the issue on a council-by-council basis. At the same time, the framework can catalyse a more rigorous approach moving towards best practice asset management.
As a sector, local government could be better placed financially within existing revenues. Still, other tiers of government – which provide a substantial percentage of local government funding – can help and have a vested interest by ensuring due oversight is provided.
But having a more transparent national picture of financial stability and encouraging best practices from local government is only one step in meeting the challenge.
Then it will be time for a discussion on how to bridge the funding gap and how all tiers of government can collaborate so that local government, which delivers the lion’s share of infrastructure services, can better meet the mounting expectations of the community.
