CHAIR —Welcome. I remind you that, although the committee does not require you to give evidence under oath, the hearings are legal proceedings of the parliament and warrant the same respect as proceedings of the House, and the giving of false or misleading evidence is a serious matter. The committee has received your submission, for which we thank you very much. Would you like to make a brief opening statement before we proceed to questions? Given the very tight time frame, if you are agreeable we might resume this at another stage to give you the opportunity to put forward your case—hopefully when we are in Tasmania.

Councillor Mason —We shall be brief. We would appreciate very much the opportunity that would be provided if you did come to Tasmania, and I know there are other councils down there who would also appreciate that opportunity. At the outset, I think it is important to note that local government in Tasmania has been engaged in partnership processes with our state government—which may put us in a slightly different position from other local government areas in the country. Through the Premier's Local Government Council and through various partnership agreements, we are negotiating a financial relationship study, if you like. At this time we are not certain of the outcomes, but we are examining our financial relationship with the state government, so perhaps we have already progressed some way down the track of considering what cost shifts have taken place.

The overview of the Tasmanian situation is that our population is ageing more rapidly than in other parts of Australia. For local government this is a matter of particular concern. While most areas in Australia are concerned about the changing demographic of the Australian country, in Tasmania it is happening faster. Our revenue sources for local government in Tasmania are therefore suffering, and we are finding it difficult to work out just how we are going to make recompense for an ageing population with a tax system that is based primarily on property.

We accept regionalisation is a reality. Councils are working more closely together, simply because they have to. It is producing some benefits, including a more efficient use of resources. One of our concerns with regionalisation is that a regional body, particularly a government regional body, will become a dumping ground for other roles and functions that are seen as being too difficult for either the state or individual councils. From page 26 in our submission we detail a broad range of responsibilities that have shifted from state to local government. We arrived at that through a survey that was undertaken of Tasmanian councils. We have not actually put costs in there but as the local government association, we have given you a broad range of the kinds of additional responsibilities or direct cost shifts that have occurred in Tasmania.

On the matter of Commonwealth funding, from our point of view this is not just a look at cost shifting but also a look at function shifting. If we start to examine both cost and function shifting, then we have to start thinking about how we are going to recompense the ones who are bearing the increased functions or the additional costs. Our experience of the Roads to Recovery program has been pretty good in every way, and the councils in Tasmania have appreciated the fact that the direct funding has gone from the Commonwealth straight through to councils. Some of the advantages of this have been pretty minimalist administration costs, reasonable criteria for councils to fulfil, a rapid approval process and the fact that councils are committed to a very direct spending and usage program. There has been no linkage of administrative funds to the states. For this reason we would like to see some examination of further efforts by the Commonwealth to pass funds directly through to local government, as we see that as a more efficient way of going about it. Allan, are you happy with that?

Mr Garcia —That is all, because I think the committee would prefer the opportunity to answer questions.

Mr NAIRN —We have asked a number of local government people in various states how national competition policy has worked and whether national competition payments that are made to the states find their way to local government. There were various examples given to the committee about the impact of national competition policy on local government, and it would seem that every state is different. What is the situation in Tasmania in that respect? Or has that aspect been part of this partnership thing you are working on with the state government?

Councillor Mason —No, it has not. It was difficult not to smile as you spoke there because there seemed to be, almost by implication, the idea that we as local government would have borne some of the costs of the implementation of NCP, that we would have got some share of the payments. In the case of Tasmania, it is an issue that we have raised with the state government on many occasions and the answer has been consistently no, you are not getting any. It is a payment directly from the federal government to the state government and there is no way that any share of NCP payments will be passed to local government in Tasmania.

Mr NAIRN —On the issue of unrateable land and state or Commonwealth corporations paying rates or not paying rates, what is the situation in Tasmania?

Councillor Mason —That is part of the examination of the financial relationships that is currently being undertaken and has been on the drawing board for 15 months or so. It is certainly a vexed issue for local government in Tasmania. That particular working paper has been to the Premier's Local Government Council once, and we are expecting that by June next year we will have a resolution of that. The first step, however, was to get agreement that these lands could be valued. The complexities of the issue are slowly been worked through, but the situation at the moment is that while the state government is looking at it, one of the issues for local government is how to then resolve the inequities that will occur for local government.

Mr NAIRN —Has that been accentuated in recent years with a lot of land going into national parks and reserves and things like that as part of forestry changes? Or was that land not rateable anyway before those sorts of things occurred?

Mr Garcia —There has been no change really. Fundamentally, it is always been crown land and as such has not been rated. But, to add to what Lyn has indicated, in terms of that crown land which is either in state-owned corporations or in government business enterprises, an issue for us is that it is being dealt with within the confines of this financial reform process, which has a revenue neutrality factor around it. So whether or not we inherit squillions of potential rateable capability through those operations, the bottom line is that we need to come to an agreement on a line. To the extent that the government needs to conform with its national competition policy obligations, it has an opportunity to establish a suite of arrangements for tax equivalents and the like. So we will possibly get so far with reform, to the extent that will be able to rate certain government authorities, but it will not go all the way.

Mr ALBANESE —In your submission you use airports as an example of cost shifting. You say:

At least four councils in the State have taken over ownership of local airports. While funded by the Commonwealth for initial upgrading, ongoing support for maintenance has not been forthcoming.

Why should it be?

Councillor Mason —I can speak to this one, because up until tomorrow night I am still mayor of an island council which had its airports handed over to it under the local airport ownership program. I will still be a councillor, but I will not be mayor after tomorrow night.

Mr ALBANESE —Commiserations.

Councillor Mason —Yes, it is awful! The situation with the airports was that when Flinders council reluctantly had to take ownership of its airport it was given the amount of $1.2 million, of which set amounts had to be used for upgrading of the terminal building and so forth. At the end of that time we had approximately $700,000 left. We have had to spend some more of that because we had no sealed runways and we had to seal a runway. We are still running on Piper Chieftan aircraft and if we going to have any kind of upgrade of the air service, we have to get out of piston engine aircraft into turbo aircraft, and they will not land on unsealed runways. That cost half a million dollars—we got $200,000 from the Commonwealth, $100,000 from the state government and we had to put $200,000 in ourselves.

One way or the other that pool of money that we started off with has now diminished down to about $350,000. Of that, the interest, at five per cent, goes some way towards offsetting the costs of the airport but without depreciation—and this is talking about a rate base where our rates income comes to about half a million dollars—the cost of running that airport in sheer, cold, hard cash costs the ratepayers an extra $120,000 a year. That is not allowing for depreciation, and that is with only one sealed runway.

This cost was originally borne by the Commonwealth. We are not getting any state assistance, because the state says that it has nothing to do with them and that is it is our transport. Unfortunately, from our point of view, we live on an island in the middle of Bass Strait and it is the only way on and off. As far as we are concerned, that is a classic cost-shifting exercise where we are not getting any assistance from either level of government and it is expensive.

Mr ALBANESE —To go back a step, why did the handing over of the airport occur?

Councillor Mason —Under the local airport ownership program we had no choice; we were given the airport. We were given it with the money, but the money is constantly diminishing.

CHAIR —Given the time frame, we would welcome another opportunity to meet with you. Before I wind up, I welcome Senator Crossin and thank her for coming along. To the Tasmanian Local Government Association, I say that I am sorry to cut you a bit short, but to do justice to the amount of work that you have put into this I think it would be better to have another go at it. But given the time constraints I think we might wind it up there.

Resolved (on motion by Ms Gambaro):

That this committee authorises publication, including publication on the parliamentary database of the proof transcript of the evidence given before it at public hearing this day.

CHAIR —Again, thank you very much for coming along. One of the things that has come out of today's hearing is the point that the first achievement of this inquiry is really happening already—that is, there is a real focus on the extent to which cost shifting on to local government has been going on. From that perspective, the committee is very pleased to see what is happening. I believe we have achieved quite a bit so far, before we have even had the opportunity to report back to parliament. Thank you again to everyone who came before the committee today, and thank you to my committee.