Local governments work smart for revenue

CITY of Karratha mayor Peter Long’s comments at a Perth forum have raised eyebrows not just for comparing Western Australia to Russia but for the observations made about the role of local government.

Taking aim at the diminishing representation of regional voices in the state’s upper house, Mr Long recently called for local governments to have more autonomy to generate revenue.

“We now have what they call population inequality, it’s the greatest population inequality on Earth,” Mr Long said of the government’s 2021 removal of upper house representative districts.

“We’re now of the same standard as somewhere like Russia or communist countries, where everything’s dominated by a central organisation.”

Greater ability to generate revenue beyond council rates was pitched as the solution to the problem. “We need to get local governments their own source of income, and then we can build our own homes and a whole range of things,” he said.

“We’ve done some of that in Karratha.

“We’re lucky because we own our own airport and our own tip, and we have a business orientation to what we do.

“A lot of smaller local governments can’t.”

Peter Long says regional voices have been diminished by voting changes in the upper house. Photo: Tom Zaunmayr

The ability for local governments to branch into business in WA is restricted by the Local Government Act 1995, which prohibits them from forming or acquiring incorporated companies.

Unlike in Victoria and Queensland, WA local governments are restricted to setting up regional councils and regional subsidiaries to carry out commercial activities or deliver community services as businesses.

As a result, LGAs are largely beholden to rates for revenue.

That’s a trend broadly reflected by Data & Insights, which shows the top three LGAs by revenue are those with the largest residential populations – the cities of Stirling, Wanneroo and Swan in Perth’s north and north-east, ahead of the City of Perth.

Generally, where population is dense LGA revenue is high, and local government can spend to maintain and improve day-to-day services and deliver on liveability for residents.

In the regions and smaller LGAs, Mr Long argued, it was harder to improve liveability without additional income streams.

He felt the gulf between the haves and have-nots was further exacerbated by the increasingly sparse representation of the country in the houses of the WA Parliament.

Local Government Minister David Michael told Business News there were several financial mechanisms available to local governments.

“The state government offers a range of grants that support those municipalities in the provision of facilities and services to their respective communities,” he said.

“Local governments in Western Australia also receive financial assistance grants from the federal government through the WA Grants Commission.

“In allocating funds, the commission uses a range of cost adjusters that consider a council’s remoteness, population distribution, socio-economic disadvantage and capacity to raise revenue.”

Changes to the rules around LGAs and business were part of the discussion following the 2017 announcement of a review of the Local Government Act 1995.

During the reform consultation period, the WA Local Government Association advocated strongly for a model like that in New Zealand, where local governments can convert existing businesses into council-controlled organisations, which operate independently under company law.

The entities must be majority controlled by one or more local governments, and independently deliver projects and services deemed to be needed by the community.

The first tranche of LGA reform passed through parliament late in May but did not change the status quo for LGAs in business, instead focusing on modernising the voting system ahead of October’s local government elections.

Consultation is continuing on a second tranche of LGA reforms. While laws may restrict the capacity for local governments to form incorporated businesses, through a mix of necessity and opportunity, several local governments around the state are branching into territory beyond their historic domain.

Render of the Exchange Hotel plans. Photo: Hunt Architects

Hospitality income

When the fences come down around a cherished heritage building on Pinjarra’s main street next year the Shire of Murray hopes to become proud owners of a thriving hospitality complex.

The shire bought the heritage-listed Exchange Hotel in 2012, signed off on its reconstruction in 2023, and engaged National Hotel Fremantle operators Karl and Janine Bullers to run the operation earlier this year.

Shire president David Bolt said the venue would create about 50 full-time jobs and generate about $7 million over five years once up and running.

“If we were going to make Pinjarra a liveable and more community-friendly town, you can’t have a derelict building in the middle like that,” he said.

“We expect around 38,000 visitors a year to come and use the venue, so it becomes a place not only for the locals to use but also an iconic regional venue.

“There is the 1866 building at its heart, and then it’s going to be a modern venue for functions.

“And there’s a number of zones, a number of different bars but also a function area for the community to rent and hire.

“We really do think it will be generating quite a lot of unencumbered economic value for the region.”

The Exchange Hotel is expected to become a tourist drawcard. Photo: Shire of Murray 

The Murray shire sources about 45 per cent of its income from rates; extra income streams are crucial.

“You have got to always be looking at ways to bring value to the ratepayers but it is a constant challenge, with costs increasing and making sure that you get that balance right,” Mr Bolt said.

“Community look to local government to make sure that their locations are liveable.”

The shire’s other diversified income sources include a calendar of tourist-attracting events and the Neerabup food innovation precinct.

Mr Bolt said the shire had backed the precinct to create jobs and new industry.

Stop and stay

When the Shire of Wiluna was told building a caravan park was deemed too “complex” by firms looking at the tender last year, it decided to take on the project management itself.

Access to tradespeople and transport to the remote town were stumbling blocks for outside companies but the shire pressed on with a project it believed would boost business in town.

Shire chief executive Gary Gaffney said demand was strong for the tourist facility.

“A lot of tourists are coming through but there are no facilities for people to stay, except we have an overnight free-camp type situation,” he said.

“We have also got quite a bit of mining interests and things like that looking for overnight stops.

“People will stop overnight, and local businesses will get a bit of that remit in that economy.”

The red dirt outpost sits 750 kilometres north-east of Perth on the edge of the Gibson Desert and is the gateway to one of the last great adventures for hardened outback explorers.

Once complete, the caravan park will house a mix of chalets, caravan and camping sites and amenities for tourists seeking a last stop before tackling the famed Canning Stock Route or Gunbarrel Highway.

So, at the start of 2023 the shire backed itself to project manage the build and have the facility operational by the end of the year.

“We have basically been able to get it into the ground, get all the works done, completing all the civil works done and getting the roads in,” Mr Gaffney said.

“Within six months of us taking on we’ve actually got the first part of the caravan park completed, the camp kitchen construction will start over the next month and by December the amenities block will be delivered.”

While the timeline is on track, the budget process has not been smooth sailing due to the cost of bitumen nearly doubling in the past year.

The project has sparked interest in the tourism sector.

Mr Gaffney said people planning their next red dirt adventure were already asking how far off a hot shower was at the end of the trip.

Bridging generations

Not all out-of-the-box thinking is based on boosting rates.

In the Wheatbelt farming community of Pingelly, a novel program inspired by an ABC TV show is being run by the shire to build relationships between young and old.

The program, Age is Just a Number, brings the town’s older residents into the schoolyard where they hang out, teach and learn from primary students.

Inspired by the show, Old People’s Home for 4 Year Olds, the program was initially funded for a year by Holyoake but, such was the success, the shire has committed funds for another three years.

Shire chief executive Andrew Dover recently told WALGA programs like this helped build community cohesion.

“It is a fantastic initiative … that has been very well received by the community,” he said.

“Local government’s role is to keep the community engaged, and I suppose fill in the gaps as to where the other layers of government are not involved.

“We need to make sure our community is together and cohesive, and this is one of the programs that brings all of the different generations in our community together.”

Laundry, landing strips

As the last stop in WA before crossing the border into South Australia, the Shire of Dundas, in the Goldfields-Esperance region, has long felt a pressing need to fend for itself.

The 94,000sqkm shire made up mostly of mining and pastoral leases counts about 750 residents, half of whom contribute to a $3 million rates base.

Shire chief executive Peter Fitchat said state-owned properties not paying rates and population decline due to the fringe benefits lure of a fly-in, fly-out life left the jurisdiction’s finances in a precarious position.

“For us, it was quite important to look at a business strategy to commercialise our current business practices,” he said.

“We now own the laundromat, the IGA, the post office, and we own a small FIFO airport that brings in quite a lot of revenue.

“That’s what we did because nobody came running to help.”

The move has paid off, according to Mr Fitchat, who said Dundas’ budget had grown from $4 million in 2018 to $16 million today, with no borrowed money.

Tough decisions have still been made.

Key roles have not been replaced, with the shire saving about $700,000 by instead relying on a core staff to do the legwork for consultants to sign off.

But the running of commercial assets has enabled Dundas to invest heavily to ensure a locum GP services Norseman after its former doctor requested an extra $300,000 on top of an already-lucrative deal.

Like most local governments which have looked beyond roads, rates and rubbish for revenue, Dundas has experienced a backlash.

From community members blaming the shire for the GP’s departure to concerns over the purchase of the IGA, Dundas councillors and staff have faced criticism for their financial management.

“You get to a point when you spend more than what you put in where it’s not recoverable, and that is the only time the state government comes in now, if you fold,” Mr Fitchat said.

“By looking at all the problems that could come out of running at a deficit, and with council’s permission, we were quite happy to say that we have turned it around.

“For all the ones frowning on council owning businesses ... this is to have better footpaths, better roads, better facilities and more community events.”