The most important principle in the distribution of funds to local government is horizontal fiscal equalisation (HFE). This means that the Commission must ensure that the distribution of funds it recommends is sufficient to enable a municipality to function, by reasonable effort, at a standard not lower than the average standard of other municipalities within the State.

The Commission operates a triennial review policy whereby major methodological change is incorporated into its assessments only every three years, with data updates and minor methodological revisions incorporated each year.

The 2009-10 distribution is the first major revision of the distribution models since introducing the triennial review policy. The major changes incorporated into the 2009-10 methodology are as follows:

Base Grant Model

‘Net’ AAV – the application of the definition of assessed annual value within The Valuation of Land Act 2001.
Water and Sewerage – the removal of all water and sewerage revenue and expenditure and the application of a general rate revenue adjustment to enable a balanced budget at a state level.
Cost Adjustors – examined all base grant cost adjustors and made adjustments where necessary.

Costs and Performance Standards – updated the standard costs of road construction and maintenance with the assistance of an independent consultant. Updated the performance standard of various road types with the assistance of the Tasmanian branch of the IPWEA.
Roads and Bridges Split – The data collected by the Commission indicated that the proportion of expenditure on roads relative to bridges had increased from 90/10 to 95/5.