Financial assistance grants indexation freeze cost council $1m over two years

OUT OF POCKET: THE City of Greater Bendigo lost just over $1 million in two years following an Abbott-government decision to freeze indexation on local government grants.

OUT OF POCKET: THE City of Greater Bendigo lost just over $1 million in two years following an Abbott-government decision to freeze indexation on local government grants.

THE City of Greater Bendigo lost just over $1 million in two years following an Abbott-government decision to not factor inflation into local government grants, meaning some smaller capital works projects may be compromised.  

The three-year indexation ‘freeze’ on Financial Assistance Grants, announced in the 2014-15 federal budget, is believed to have cost Victorian councils $200 million, but it is unclear if the Liberal government will ‘unfreeze’ the grants in its May budget. 

City of Greater Bendigo finance manager Travis Harling said the city had not factored for a Consumer Price Index increase on the grants in its 2017/18 budget.

“It could mean one or two capital projects don’t get done. A footpath doesn’t get fixed or a drain doesn’t get renewed for 12 months because it gets put back in the program,” Mr Harling said.

Last year the City of Greater Bendigo received $15.2 million in federal financial assistance grants.

Reserve Bank of Australia figures show CPI in the December quarter last year was 1.5 per cent. 

However, population growth is factored into the distribution of the federal grants, and Mr Harling said the city has factored a 1.5 per cent increase for their 2017/18 budget.

“Sometimes you get the same (budget allocations for services) as last year and have to do more with less,” he said.

Mr Harling said the $1 million loss equated to more than 1 per cent of the city’s forecast rate income in 2017/18 ($895,000).

The City of Greater Bendigo issued rate rise of 2.5 per cent in the 2016/17 budget, due to the Victorian Government's cap on rate rises. 

Municipal Association of Victoria president Mary Lalios said the grants were are a vital source of funding for councils, helping to deliver more than 100 local services and maintain $80 billion worth of community infrastructure. 

“This loss of funding has been a significant hit on council budgets, particularly in rural areas where communities can least afford it. Councils with small populations and large geographic areas are far more vulnerable to any loss of revenue as they have limited alternative funding sources,” Ms Lalios said.

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