The State Grants Commission is required to apply the National Principles issued under the Local Government (Financial Assistance) Act 1995 when making its recommendations for the distribution of the Financial Assistance Grant funding. There are six National Principles that apply to the distribution of the Base Grant funds and one National Principle that applies to the distribution of the Road Grant funds. The National Principles are detailed below.
|National Principles – Base Grant Distribution|
1. Horizontal Fiscal Equalisation
General-purpose grants will be allocated to local governing bodies, as far as practicable, on a full horizontal equalisation basis as defined by the Act. This ensures that each local governing body in the State/Territory is able to function, by reasonable effort, at a standard not lower than the average standard of other local governing bodies in the State. It takes account of differences in the expenditure required by those local governing bodies in the performance of their functions and in the capacity of those local governing bodies to raise revenue.
2. Effort Neutrality
An effort or policy neutral approach will be used in assessing expenditure requirements and revenue raising capacity of each local governing body. This means as far as practicable, policies of individual local governing bodies in terms of expenditure and revenue effort will not affect the grant determination.
3. Minimum Grant
The minimum general-purpose grant allocation for a local governing body in a year will not be less than the amount to which the local governing body would be entitled if 30 per cent of the total amount of general-purpose grants, to which the State or Territory is entitled under Section 9 of the Act in respect of the year, were allocated among local governing bodies in the State/Territory on a per capita basis.
4. Other Grant Support
Other relevant grant support provided to local governing bodies to meet any of the expenditure needs assessed should be taken into account using an inclusion approach.
5. Aboriginal Peoples and Torres Strait Islanders
Financial assistance shall be allocated to councils in a way that recognises the needs of Aboriginal peoples and Torres Strait Islanders within their boundaries.
6. Council Amalgamation
Where two or more local governing bodies are amalgamated into a single body, the general-purpose grant provided to the new body for each of the four years following amalgamation should be the total of the amounts that would have been provided to the former bodies in each of those years if they had remained separate entities.
The overarching principle the Commission is required to apply for determining the distribution of the Base Grant portion of the FA Grant funding among councils is full horizontal fiscal equalisation (HFE). HFE is a reference to the allocation of funds in a manner that:
- ensures that each local governing body in a State is able to function, by reasonable effort, at a standard not lower than the average standard of other local governing bodies in the State; and
- takes account of differences in the expenditure required to be incurred by local governing bodies in the performance of their functions and in their capacity to raise revenue.
The Commission must also ensure that no less than 30 per cent of the general purpose grant funding is distributed to all councils on a per capita basis.
|National Principle - Road Grant Distribution|
Identified Road Component
The identified road component of the financial assistance grants should be allocated to local governing bodies, as far as practicable, based on the relative need of each local governing body for road expenditure to preserve its road assets. In assessing road needs, relevant considerations include length, type and usage of roads in each local governing area.
In applying the National Principles, the Commission has developed its own State Principles that it applies to its decision making and recommendations. These are detailed in Attachment 2 of the State Grants Commission Financial Assistance Distribution Methodology Paper.
A summary of the Commission's methodology is provided in the Overview publication:
Overview of Functions and Methods (265Kb)
Full details of the Commission's current methodology can be found in the State Grants Commission Financial Assistance Distribution Methodology Paper on the Publications page.
Current Assumed Allowances and Component Rates
Underpinning the Commission's methodologies are some allowances and component rates that the Commission uses to help determine the allocation of the the FA Grants. Allowances are added to the calculation of each island council's expenditure requirement in the Base Grant Model as recognition that the cost of providing the service is not adequately captured by the Commission’s standardised expenditure measures. Allowances are designed to increase the recipient councils’ relative need for financial assistance in the Commission’s Base Grant model. As the Base Grant funding pool is not sufficient to fully fund all assessed deficits of councils, the allowance does not result in the recipient councils directly receiving additional funding of the same dollar value as the allowance itself.
Some of the allowance rates are updated annually to ensure they reflect current cost profiles, whereas others are updated periodically as determined appropriate by the Commission.
Rates used in the Base Grant Model
The current Expenditure Allowances, and the recipient councils, that the Commission used for making its 2020-21 Base Grant recommendations, were as follows:
|Allowance Description||Allowance Amount||Recipient Councils|
|Provision of services in support of medical general practitioners (GP practice allowance)||$41 481 per practice|
Central Highlands (x2)
Glamorgan Spring Bay (x3)
Huon Valley (x2)
|Provision of airport services (Island Airport allowance)||$100 000 per airport|
Following a review of the rate that the Commission uses for its Island Airport Allowance in 2019, the Commission increased the rate of the Island Airport Allowance from $70 000 per island airport to $100 000 per island airport, commencing from the 2019-20 Grant Recommendations.
The GP Practice Allowance rate is indexed by the change in the Consumer Price Index (CPI). For the 2020-21 Base Grant Recommendations, the previous year's allowance of $40 831 has been indexed using the rate of change in the CPI (June 2018 to June 2019).
Rates used in the Road Preservation Model
The Road Preservation Model (RPM) the Commission uses to determine asset preservation needs is based on a standardised profile for three Tasmanian road types (urban sealed, rural sealed and unsealed), four bridge types (Concrete, Timber, Steel and Other) and two major culvert types (Reinforced Concrete Pipe and Reinforced Box Culverts).
Based on an assumed asset life for the respective components of the road and the assumed frequency of the road maintenance practices and activities that are undertaken for each road type, the Commission calculates an asset preservation rate per kilometre for each road type. The respective asset preservation rate is then applied to each councils’ reported road lengths by road type. The rates for the annualised costs per road type are indexed annually unless the cost per kilometre is “restruck” following a review of the rates and assumptions underpinning the rates.
The annualised asset preservation costs for council bridges and major culvert assets are based on the annualised life cost per square metre of such assets according to their asset type. The rates for the annualised costs per bridge and culvert type are indexed annually unless the cost per metre is “restruck” following a review of the rates and assumptions underpinning the rates.
The Road rates used in determining the 2020-21 Road Grant distributions are detailed in Table 12 of the State Grants Commission 2020-21 Financial Assistance Grant Data Tables.
The Bridge rates used in determining the 2020-21 Road Grant distributions are detailed in Table 13 of the State Grants Commission 2020-21 Financial Assistance Grant Data Tables.
An Urbanisation allowance is used in the Commission's RPM as recognition that urban roads in the central business districts of councils are significantly more complex, engineered to a much higher standard and have shorter life spans than the standard road profile, and the asset preservation costs are accordingly materially greater.
The Commission applies the allowance by multiplying the eligible road length by a pre‑determined uplift factor, thereby recognising an increased road length for calculating the asset preservation needs of councils for maintaining their road networks. The Commission currently applies a factor of “three times" for such eligible roads, which results in every kilometre of eligible road length being counted as 3 kilometres of urban road length.
The Commission uses an Urbanisation Allowance Checklist, which details both essential characteristics, which requires a 100 per cent satisfaction mark, and other characteristics, for which a 75 per cent satisfaction mark needs to be achieved, in order for a section of road to qualify as eligible for the Urbanisation Allowance.
The Checklist can be used by councils to assess and review sections of roads for eligibility, and can advise the Commission of any changes to their recognised road lengths as and when required in the future.
The Annual deadline for any updates in eligible road lengths for inclusion in the forthcoming year's grant determinations is 31 May.
The total road lengths recognised as qualifying for the Urbanisation Allowance, and the recipient councils that the Commission used for making its 2020-21 Road Grant recommendations, were as follows:
|Council||Recognised Urban Road Length|
|Clarence ||1.322km |
|Hobart ||5.899km |
|Launceston ||9.271km |
The reduction to the recognised Urban Road Length for Hobart reflects the transfer of Davey and Macquarie Streets to the Department of State Growth during the 2018-19 Financial Year.
Urbanisation Checklist download
To download a copy of the Urbanisation Checklist, please click here:
Urbanisation allowance - checklist for CBD roads (68Kb)
The Commission has ceased its triennial review process whereby major method changes were incorporated into its assessments only every three years, with data updates and minor methodological revisions incorporated each year.
Final comments on the Commission's Decision Paper are still open and are due by 31 May 2021. Subject to feedback received, the Commission intends to cease the use of its Regional Responsibility Cost Adjustor and commence the use of the Service Industry Employment Cost Adjustor for the determination of the 2021-22 FA Grant Recommendations, to be made in July 2021.
For information on the Commission's current Work Plan and other reviews and priorities, please refer to the Commission's Current Strategic and Operational Plan, available from https://www.treasury.tas.gov.au/state-grants-commission/publications.