National Principles
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 is a basis that ensures each local governing body in the State or 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 or Territory. 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, that policies of individual local governing bodies in terms of expenditure and revenue effort will not affect 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 or 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, which 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 on the basis of the relative needs of each local governing body for road expenditure and 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 1 of the State Grants Commission Financial Assistance Distribution Methodology Paper.
Distribution Methodology
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 methodology are a number of allowances and component rates that the Commission uses to help determine the allocation of the FA Grants. Allowances are added to the calculation of each council's expenditure requirement in the Base Grant assessment in 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 assessment. 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 assessment
The current expenditure allowances, and the recipient councils, that the Commission used for making its 2023-24 Base Grant recommendations, were as follows:
| Allowance Description | Allowance Amount | Recipient Councils |
| Provision of services in support of medical general practitioners (GP practice allowance) | $48 311 per practice | Central Highlands (x1) Glamorgan Spring Bay (x3) Huon Valley (x2) Kentish (x1) Tasman (x1) |
| Provision of airport services (Airport allowance) | $200 000 per airport | Flinders King Island |
The medical general practice allowance recognises the financial burden faced by some councils in attracting and retaining the services of general practitioners The GP practice allowance rate is indexed by the annual change in the Consumer Price Index (CPI).
Airport allowances are applied to Flinders and King Island Councils in recognition that they cannot avoid a heavy reliance on air transport and the requirement to maintain airport facilities.
Rates used in the Road Preservation Model
The Commission uses an asset preservation model to calculate a councils share of the road grant. This is referred to as the Road Preservation Model (RPM). The Commission recognises three road categories (urban sealed, rural sealed and unsealed) and bridge and culvert assets in the RPM.
The Commission does not prescribe dimensions for the three road categories. Annual preservation cost estimates are applied to the three road categories on a per kilometre basis to calculate the cost for councils to maintain their road networks.
The Commission assumes that all bridges and culverts are constructed from concrete regardless of the type of material used, while also applying a single preservation rate to these assets on a per m2 basis.
From 2024-25, the Commission has adopted the asset preservation cost estimates and annual indexation method recommended by the consultant in the following report:
Annual Asset Preservation Cost Estimates for the Tasmanian State Grants Commission - 17 June 2024 (PDF 436Kb)
Urbanisation Allowance
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 2024-25 Road Grant recommendations, were as follows:
| Council | Recognised Urban Road Length |
Burnie
| 4.291km |
| Clarence | 1.322km |
| Devonport | 6.300km |
Glenorchy
| 2.896km |
Hobart
| 5.899km |
Launceston
| 8.077km
|
Urbanisation Checklist download
To download a copy of the Urbanisation Checklist, please click here:
Urbanisation allowance - checklist for CBD roads (68Kb)
Reviews
The commission implements methodology changes when it determines appropriate.
The Commission continuously monitors council practices with the objective of making its methods for distributing both the Base Grant and Road Grant funding both contemporarily and equitably across councils.
Any methodology changes are implemented following a structured process after considering all relevant matters and following a consultation process with councils.