Overview

The Western Australian Local Government Grants Commission (the Commission) is a statutory body established by State legislation, the Local Government Grants Act 1978.

Its principle function is the making of recommendations to the State Minister for Local Government on the allocations of "General Purpose Grants" amongst 138 local governments in WA. These General Purpose Grants are the State's cash entitlement for financial assistance from the Commonwealth Government, paid in equal quarterly instalments for a financial year, under the Australian law, Local Government (Financial Assistance) Act 1995.

The distribution of Commonwealth Government Financial Assistance Grants is for local government purposes, to achieve equitable levels of services, by reasonable effort.

The current membership of the Commission is:

Chairman	Linton Reynolds, Mayor City of Armadale
Deputy Chairman	Brad Jolly, Executive Director of Governance and Legislation from the Department of Local Government
Member	Pat Hooper, President for the Shire of York
Member	Ian Carpenter, Commissioner for the City of Greater Geraldton
Member	Sheryl Froese, Mayor City of Nedlands

The Role of the Western Australian Local Government Grants Commission

The Western Australian Local Government Grants Commission consists of, a chairperson, a deputy chairperson and three elected members from local government. The Commission is supported by staff employed by the Department of Local Government.

The Financial Assistance Grant funding to be provided to local governments ($245 million in 2010/11 and $254 million in 2011/12) is untied, i.e. there are no conditions on how these funds should be spent. Western Australia received approximately 11.8% of the national grant allocation in 2011/12. This amount is divided into two parts, a general purpose component and a local roads component.

The funding provided to local governments is allocated on the basis of horizontal equalisation, to ensure that each local government in the State is able to function at a standard not lower than the average standard of other local governments. All local governments are entitled to receive at least the minimum grant. That minimum grant cannot be less than 30% of what the local government would receive if all grants were allocated on a per capita basis.

The Balanced Budget approach has been used to calculate General Purpose Grants since 1994. The Commission calculates the equalisation requirement of each local government by assessing the revenue raising capacity and expenditure need of each local government. Eight categories (called standards) have been used to calculate revenue raising ability and seven categories have been used to establish expenditure need. The equalisation requirement is the difference between the assessed expenditure need and the assessed revenue raising capacity of each local government. A range of disability factors have been developed by the Commission, e.g. location, population dispersion and climate, and these are applied to the standards to recognise the additional costs a local government faces due to its physical or demographic characteristics.

In determining the local road funding for local governments, the Commission has established the Asset Preservation Model. This model is used to assess the cost of maintaining a local government’s road network and takes into account annual and recurrent maintenance costs and the costs of reconstruction at the end of a road’s useful life.

The Grants Commission is required to keep up with the changing face of local government to ensure that its methods reflect the operations of the industry. As part of this process, the Commission visits approximately 30 local governments each year to hold Public Hearings. This visiting programme provides a valuable opportunity for local governments to inform the Commission of the issues they are facing. The Commission also receives submissions from local governments each year seeking modifications to the grant determination process so that it will reflect their needs more effectively.

Methodology Review

The Commission is currently reviewing the methodology used to calculate General Purpose Grants. The grants for 2011/12 have been pegged at 2011/12 levels, with an escalation factor applied, equivalent to the percentage increase in the total WA pool for 2010/11 after the minimum grant local governments were deducted from the funding pool. Local governments that received a minimum grant in 2011/12 had their grant calculated on a per capita basis in accordance with the Minimum Grant Principle established under the Local Government (Financial Assistance) Act 1995.

Road grants will continue to be calculated using the Asset Preservation Model and as such there will not be any change to the manner in which road grants are determined.

In recent years, local governments have raised a number of issues in their submissions and public hearings with the Commission. All these issues are being considered as part of the review.