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
Deputy Chairman	Brad Jolly, Executive Director of Governance and Legislation from the Department of Local Government
Member	Pat Hooper, Councillor for the Shire of York
Member	Ian Carpenter, Mayor for the City of Greater Geraldton
Member	Sheryl Froese, Company Director

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 2011/12 and $267 million in 2012/13) is untied, i.e. there are no conditions on how these funds should be spent. Western Australia received approximately 11.9% 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. Five categories (called standards) have been used to calculate revenue raising ability and six 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 socio economic advantage), and are applied in the calculation of 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 completed its review of the methodology used to calculate General Purpose Grants in the first quarter of 2012. For 2012/13, grants have been calculated using this method, with maximum increases and maximum decreases in place to phase in changes to local governments grants.

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.