Methodology

​​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 in Attachment 1 of the State Grants Commission Financial Assistance Distribution Methodology Paper ​and reproduced in Appendix 1 of the 2018-19 Annual Report.

The overarching principle the Commission is required to apply for determining the distribution of the FAG funding among councils is full horizontal fiscal equalisation (HFE). HFE is a reference to the allocation of funds in a manner that:

  1. 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
  2. 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.

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.

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 FAGs. 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 FAG 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 2019-20 Base Grant recommendations, were as follows:

Allowance DescriptionAllowance AmountRecipient Councils
Provision of services in support of medical general practitioners (GP practice allowance)$40 831 per practice

Central Highlands (x2)

Glamorgan Spring Bay (x3)

Huon Valley (x2)

Kentish (x1)

Tasman (x1)

Provision of airport services (Island Airport allowance)$100 000 per airport

Flinders

King Island


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 2019-20 Base Grant recommendations also reflect the commencement of indexation of the GP Practice Allowance rate.  This change in process was foreshadowed in the Commission’s 2017-18 Annual Report.  For the 2019-20 Base Grant Recommendations, the previous year’s allowance of $40 000 has been indexed using the rate of change in the Consumer Price Index (June 2017 to June 2018).  

Rates used in the Road Grant Model

The Road Grant Model 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 2019-20 Road Grant distributions are detailed in Table 12 of the State Grants Commission 2019-20 Financial Assistance Grant Dat​a Tables

The Bridge rates used in determining the 2019-20 Road Grant distributions are detailed in Table 13 of the State Grants Commission 2019-20 Financial Assistance Grant Data Tables. ​

Urbanisation Allowance

An Urbanisation allowance is used in the Commission's Road Preservation Model (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 elligible 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 2019-20 Road Grant recommendations, were as follows:

CouncilRecognised Urban Road Length
Burnie 
4.291km
Clarence 1.322km
Devonport 6.300km
Glenorchy 
2.896km
Hobart 
6.906km
Launceston 
9.271km

 

Urbanisation Checklist download

To download a copy of the Urbanisation Checklist, please click here:

  Urbanisation allowance - checklist for CBD roads   (68Kb)

Triennial Reviews

The Commission adopts a triennial review process whereby major method changes are incorporated into its assessments only every three years, with data updates and minor methodological revisions incorporated each year.

The current triennium spans the years 2019-20 to 2021-22. The 2019-20 distribution is the first year of the 2019-22 Triennial Review. Typically this would result in only data updates being adopted in making the FAG recommendations.
 
While the Commission’s methodology change to phase out its Tourism Cost Adjustor over two years first applied in making the 2018-19 Base Grant recommendations, with the second phase scheduled to apply for determining the 2019-20 Base Gant Recommendations, the Commission has now determined it appropriate to suspend its previous plan to phase out its Tourism Cost Adjustor.
 
The Commission is currently reviewing the impact that non-residents have on councils more broadly.  Tourists represent one type of non-resident which are argued as having an impact on council expenditure needs.  In light of the current non-resident impact review, the Commission has now determined it appropriate to suspend its previous plan to phase out its Tourism Cost Adjustor, pending the outcome of the Commission’s broader review into the impact of non-residents o​n councils. 

Details of the methodology changes implemented for determining the 2019-20 distributions are explained in Section 5 of the State Grants ​Commission 2018-19 Annual Report, including 2019-20 Financial Assistance Grant Recommendations.

The Commission also periodically publishes its work plan to detail which aspects of its methodologies it expects to review over the current triennium, as well as reporting on the status and progress of any reviews. Councils are encouraged to provide input and feedback to the Commission on the content and priorities in its work plan.​ These publications are available on the Publications page.​



Contact

The Executive Officer
State Grants Commission
GPO Box 147
HOBART TAS 7001
Phone: 03 6166 4274
Fax: 03 6173 0219
Email: SGC@treasury.tas.gov.au

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