The fund, which was closed to new members in 1993 and moved from state to commonwealth regulations in 1998, is underfunded by $450 million.

The recommendations involve government, fund and employer reforms to reduce the current and future liabilities facing councils, said Municipal Association of Victoria president Bill McArthur.

“Among the key reforms identified were access to cheaper borrowing rates, reviewing the methodology and budget allocations for shortfalls, waiving ancillary government costs on shortfall payments, regulatory reforms, and greater awareness of wages and investment returns that can influence the liability," he said.

“While the taskforce has not identified a silver bullet, the priority reform areas aim to ease the financial effects of shortfalls on councils, reduce future liabilities, and improve information on fund performance.

“The Australian and Victorian governments can assist by helping councils to access cheaper borrowing rates; plus removing WorkCover liabilities and the 15 per cent contributions tax to save councils over $82 million.

“However, local government can also progress other solutions such as increasing employer and employee contributions; more frequent monitoring of LASF’s performance and salary movements; and annual allocation of shortfall funds in council budgets to smooth payments over time.” 

Bendigo council were told in August this year they need to find $10.3 million to top up the fund. Since 1997 they have had to find $21 million, with the constant shortfalls causing local projects to be delayed or deferred.

“We welcome any actions to help change the current situation and council will consider the MAV taskforce’s position to ensure that it achieves this objective,” City of Greater Bendigo director of organisation support Marg Allan said.

Cr McArthur said a combination of shared solutions would be the best way forward for Victorian councils to protect their communities.

“Returning the LASF to an unfunded scheme, similar to other public sector schemes, was also examined in detail by the taskforce. This option may help to smooth the future funding impacts on employers but more work was needed to investigate any proposed regulatory regime and the potential taxation impacts," he said.

“Our shared priority is to achieve changes to the Vision Super defined benefit scheme that minimise the costs of the current shortfall, as well as future shortfall risks facing councils and their communities.”

The taskforce will continue working in 2013.