The Scandal of Local Government.

In mid 2002, the State Government issued a discussion paper dealing with the implications of the [Brodie v Singleton Shire Council] High Court ruling. This decision leaves road authorities open to claims for compensation from allegations of failure to maintain roads to an appropriate standard. There is no doubt that the impact of this decision will fall most heavily on large rural municipalities that have extensive road networks, much of which are maintained at minimal standards. The decision extends a road authority's liability for damages arising from malfeasance (doing something badly) to nonfeasance (doing nothing at all).

The High Court's decision will impose a significant burden on councils, and as the Discussion Paper acknowledges, rural councils in particular. Statistics demonstrate that rural councils are not in a position to bear this burden. Funding of Local Roads under the present arrangements is grossly unfair to non-metropolitan ratepayers. For example, while the rate revenue expended on roads by Greater Dandenong Council is less than $5.00 per person, East Gippsland Shire spends $162.00 per head of rate revenue on roads and Yarriambiack Shire spends about $320.00 per person on roads. (See Chart 2.). Any 'solution' of the problems arising from this decision should address the fundamental flaws in the present fragmented system of road funding.

The government may simply legislate to remove the liability for nonfeasance. This will not address the fundamental issue highlighted by the Brodie decision, namely, the inadequate level of funding for the maintenance and construction of roads to an acceptable standard. Governments ought to respond to the High Court's decision not only by legislating but by also by putting in place a realistic formula that ensures adequate funding. This formula ought to be based on the fact that, with the development of motor vehicles and changing lifestyles and patterns of economic development, we all have an interest in well-maintained roads, wherever they may be.

The community will not gain if, in the effort to achieve road standards necessary to comply with the High Court's decision, roads or bridges are closed or other services cut, to pay for the increased level of inspections necessary to ensure roads structures meet arbitrary standards at all times.

The options that are discussed in the paper do not and cannot meet the situation confronting rural municipalities. Restoring the nonfeasance defence would not be likely to succeed unless everyone is required by law to accept responsibility for their own actions. That should include the observance of warnings such as load limits on bridges. There are limits of various kinds on all roads, including speed and load limits, both in gross weight and dimensions. There seems logic in a lower limit being set on a small portion of road that also happens to be a bridge if the bridge is not suitable for heavier roads. The nonfeasance rule has concealed the fact that the system of funding roads is archaic and ignores changes in the usage of roads over the past 150 years.

The preferred option proposed in the discussion paper (option 3) for the State government to articulate standards for the inspection, maintenance and repair road maintenance is also unacceptable. For the State or Commonwealth governments to impose standards on rural municipalities without providing the money to enable them to comply would force the closure of many country roads. Many such roads may well be vital in the case of bushfires or other emergency.

At the conclusion of this submission, a relatively simple change that solves the problem at no overall additional cost to road authorities is proposed. It is not intended to address the vexed question of overall funding for roads but to reapportion the current road funding equitably in accordance with the benefit received. The solution to the problem lies in a single authority having responsibility for all roads.

The decision of the High Court reflects the fact that changes have taken place in the use of roads since they were first defined in this country. Governments have failed to modify the methods of funding roads in line with these changes. As stated in the Discussion Paper, a "highway" is not limited to paved roads.

The Colony of Victoria separated from New South Wales in 1851 and by the 1860s the massive task of surveying the State to divide it up into counties, parishes and allotments had been largely completed. This was an essential step towards making land available to individuals who were owner/operators of their own properties by breaking up large areas taken up by squatters before the new Colony was established. In the process, a network of reservations for roads was also laid out to provide access to every allotment. The reservations were not made with the construction of paved roads in mind. Motor vehicles were a quarter of a century in the future.

Nevertheless, the reservations have proved to be largely adequate for that purpose. Rates were collected for the purpose of constructing the primitive bridges required and for minimum construction and maintenance of trafficked surfaces.

The places where the reservations were not adequate have been in and around the big cities. In the second half of the 20th century, vast sums were spent on acquiring land and building freeways at taxpayers, not ratepayers, expense because the existing roads were no longer capable of carrying the traffic, not because of loads or quality of pavements, but because of speed limitations brought about by the sheer volume of traffic.

The original reservations were designed, not for motor vehicles, but for horse or bullock drawn vehicles and the movement of stock. They were one, two or three chains (20, 40 or 60 metres) in width depending on the quantities of livestock expected to use them. For over a century, large mobs of cattle and sheep (in earlier days, horses, pigs and turkeys also) were driven to market along these roads. They were used extensively by farmers to move stock both to market and between properties. This reduced vegetation on roadsides, reducing the fire hazard in the process.

Movement of livestock 'on the hoof' has virtually been eliminated and the roads are now expected to carry large stock transports, wheat trucks and milk tankers. They need to carry heavy loads of fertilizers, feed for stock, petrol tankers etc. They need to carry school buses and children safely to schools.

It is constantly argued that the city is more efficient because of economies of scale. If that is so, the metropolitan area should be able to fund its own roads and the country should receive taxpayer support. Most country areas are producing exportable commodities that provide foreign exchange so that Australians can buy what we cannot produce for ourselves.

The VGC figures prove that, if the metropolitan area paid the same average rate as non- metropolitan Victoria, it could pay the losses on Melbourne's public transport currently carried by taxpayers. This would free up about $800,000,000 annually that could be used to help the State's needy instead of boosting real estate values mainly benefiting the wealthiest.

Local Government

Local government in Victoria, in the form of Roads Boards, was established during the 1860s for the purpose of building roads and bridges, using these reservations. Soon changed to Shire Councils, they collected rates, recognizing the fact that roads and bridges enhance the value of real estate. It was appropriate that some portion of the value added to real estate should be returned to the public. At that time, both the landowners and the users of roads were overwhelmingly local people. In fact, even in the mid 20th century, some country Councils kept separate "Riding" accounts to ensure that rates were spent locally.

Long distance transport of freight and passengers was principally by means of railway, which was funded by the State government, although at some stage there was also a rating element. With the advent of the motor vehicle, it became apparent that there was a need for a statewide road authority to construct a network of roads linking the various municipalities and covering the whole State. Victoria established the Country Roads Board for this purpose in the second decade of the 20th century.

Funding of this Board was a controversial issue for many years because of constitutional problems in imposing a "user pays" system. A tax on fuel was seen as the fairest method of raising a contribution from users but this was denied the States as it was ruled as being an excise exclusively the right of the Commonwealth under the Constitution.

Motor registration fees were the principle method of funding and, for heavy commercial vehicles, a very complex system of taxing was also imposed for a period of time. Motor registration fees were paid to the Country Roads Board. The Melbourne and Metropolitan Board of Works, funded by ratepayers of that area, was responsible for metropolitan roads and bridges although a government contribution was made where it was part of the Statewide network.

In the late 1960's, the Country Roads Board was given responsibility for metropolitan roads and bridges but no addition source of revenue. This resulted in the diversion of a huge amount of money to the metropolitan area for the construction of very expensive freeways. The principle that the user or beneficiary should pay, at least a substantial part of the cost was abandoned and taxpayers funded the total amount.

Councils in the metropolitan area have their rating base enhanced very significantly by the subsidies on public transport and the building of freeways but make no contribution to their cost. They also benefit substantially from parking fees that are directly related to the use of the roads.

In many cases, freeways were constructed parallel with rail and tram routes, also heavily subsidised by the taxpayer. The justification for this subsidy was to reduce the demand for even more freeways. What was not stated was that the subsidies for public transport in Melbourne far exceeded expenditure on all roads in the State by Commonwealth, State and Local Governments.

This huge diversion of funds to the metropolitan area stimulated the growth of the metropolis draining population from country municipalities leaving fewer people to pay the rates needed to maintain country roads. Meanwhile, the popularity of four wheel drive vehicles and a growing interest in ecotourism means that there are few roads that are used only by adjoining ratepayers.

In fact, the movement of stock on the hoof between parts of a farmer's property has been severely restricted and the droving of stock to market has been totally eliminated in the last couple of decades. This removed the occasional grazing of roadsides that kept the level of vegetation down, increasing the fire hazard. Instead, the rural councils now incur the expense of mowing these wide road reserves. Councils have the responsibility of ensuring that private landowners remove fire hazards but are faced with the impossible task of preventing roadsides becoming firetraps.

For many years, these roads were used as firebreaks, the paved roads being used as a base for burning off. In the "national interest", many roadsides have been planted with trees. Mowing or slashing is confined to a very narrow swathe for the safety of motorists but it has no value as a firebreak. Firebreaks, where they are now put in place are at the expense of private landowners when it is in the public interest that they should be created.

The whole basis on which rating was originally introduced for funding local roads has therefor changed quite dramatically. Landowners no longer have the same rights of access for stock and the wide road reservations are no longer used for the droving of livestock and firebreaks but have become part of the nation's stock of forested or public land. In almost every case, particularly in eastern Victoria, they provide access to Parks, reserves or other public land of one kind or another.

Amalgamation of municipalities

The financial burden of maintaining roads and bridges on a number of large municipalities with small population was a significant factor leading to the amalgamation of municipalities in 1995. These Councils did not have the rating base to maintain viability. They were amalgamated with other shires that had basically the same problem but were not yet unviable. It is difficult to see any logic in that process. It transferred the responsibility from municipalities with a very large problem to ones with a not so large problem, while excluding municipalities in the city with no problem. Now rates paid by rural ratepayers may be spent on roads 200kms or more away and they are deemed to be "Local" roads. Only city people can see logic or justice in this concept.

Commonwealth grants

Despite all the claims by Commonwealth and State governments of assistance granted to local government for roads through the Grants Commission and VicRoads, the end result is the state of country roads today. All over rural Australia, there are bridges with load limits on them and roads that are in a deplorable state of repair and below an adequate standard. For decades, country municipalities have been trying to tell governments of the looming crisis but the need of political parties to win votes in marginal metropolitan electorates rates far higher than justice and common sense or even the long term good of the nation.

Commonwealth assistance to Local government is through the Victoria Grants Commission. Although the Grants Commission keeps detailed records of rate revenue and Capital Improved Value of every municipality, it does not appear to measure the impact of rates on property owners by calculating the rate in the dollar levied by each council. It is difficult to comprehend how the Commonwealth government can have any idea of this impact without such a calculation. The Department of Victorian Communities does not keep this information either. Neither level of government can assess the comparative impact of municipal rates on ratepayers in the respective municipalities without this information. They load more and more responsibilities on local government in blissful ignorance of what this is doing to country communities.

The Department for Victorian Communities is not interested in making comparisons between municipalities on the basis of the rate in the dollar they need to impose on their ratepayers but compares them on the basis of 'community satisfaction'. It is beyond belief that the government is unable to comprehend the link between the two. An obvious example is an individual who retires to a seaside resort in the country. These people find that their rate bill is two or three times the amount they paid on their suburban home of the same value but the services they receive are of a far lower standard. It is not surprising that they are dissatisfied with their local council.

The Victoria Grants Commission has comprehensive figures from which the impact of rates on ratepayers in each municipality can be quickly calculated but does not appear to make this calculation even though its role is to balance out inequities. This may be because the Act under which it operates inhibits any real attempt to redress inequities in road funding.

The Act requires one third of its funding to be allocated on a population basis. That means some municipalities get Grants Commission funding whether they need it or not. To confirm that this is the intention of the legislation, the grants are not 'tied' to road expenditure and can be spent on other activities, perhaps to reduce the impact of rates in that municipality.

As one third of the funds are allocated on a per capita basis, it is reasonable to consider what is spent on roads out of rate revenue on a per capita basis. These figures can also be calculated from statistics collected by the Victoria Grants Commission but that body does not appear to do so. It bases its allocations on the total amount spent by each municipality, not on a per capita basis.

Chart 2 demonstrates the bizarre results of a comparison between the per capita expenditure on roads by each municipality and the Grants Commission allocation. The City of Greater Dandenong spent less than $5.00 per head while Yarriambiak spent over $300.00. The Commonwealth and State governments must change their policies before they bankrupt most country communities.

All roads for all people

The solution is for the State government to take over responsibility for road funding entirely. It would cost $216 million approx.,(see Victoria Grants Commission figures) compared with the subsidy for metropolitan public transport of $720 million (DOI figure - see Economic Development Committee Report to State Parliament, May 2002) or $1,400 million (see Auditor General's Report on Ministerial Portfolios June 2000).

In 1998/99, $216 million was the total amount being spent from rate revenue on roads by every municipality in Victoria calculated from figures provided by the Victoria Grants Commission. A Victorian Roads Fund should be set up to fund all road works in the State, including "local" roads currently funded by municipalities. According to figures provided by the Victoria Grants Commission, the total amount spent from rate revenue on roads by all Council in 1998/99 amounted to $216,022,692. To recoup this amount from Local Government, the State government would need to collect a uniform levy of .0005 cents in the dollar on the capital improved value of all municipalities, which in 2001 totaled $449 billion. This would make the proposed changes revenue neutral for the government. Councils would no longer be responsible for funding road works.

Funds for roads currently provided from State and Commonwealth governments should also be directed to the Victorian Roads Fund and the State government then should be responsible for funding all road works within the State and be liable for nonfeasance. Local government could still be responsible for prioritizing road works within each municipality and supervision of works as at present.

This proposal embraces the concept that all roads are for all people and the degree to which property owners benefit from road construction and maintenance is reflected in the value of real estate. A levy of just .0005 cents in the dollar of rate revenue over the whole State will recoup the amount needed to fund local roads to their present standard. A small percentage increase would not be a disaster for rural Councils.

The State government and it alone would then be accountable for the condition of every road throughout the State. At election time, the voters throughout the State will have a democratic right to pass judgement on the government's performance, without the confusion of responsibilities as at present. The Commonwealth and State governments have turned road funding into a shameless "pork barreling" exercise that is intolerable in any fair-minded and just society.

The public transport system and freeways substantially serve the same purpose, namely to get people in and out of the Central Business District and therefor must be considered as one item. The extent to which the subsidy for public transport enhances property values should also be assessed and a levy imposed to recoup these losses. The Community Service component should be a maximum of 10%.

Conclusion

The High Court decision has focused attention on an archaic system of road funding that has not been updated in accordance with changes in road use. That has only taken place in and around the cities, where the government has taken over the full cost of building very expensive freeways even though they claim that cities are more efficient and prosperous than rural areas.

It seems strange logic that roads used by hundreds of thousands of people every day should be built at no cost to ratepayers whose property values are enhanced significantly but a few ratepayers living on an unsealed dusty road, with a minimal level of publicly provided facilities, must pay through their rates. The only help they can expect is from other ratepayers, some of whom also live on dusty unmade roads one hundred kilometres or more away, but not from city people with the very best roads and bridges. They need to be sheltered from the traffic on the nearby freeway by noise barriers funded in part by those same country people, through their taxes.

This submission proposes a simple, logical and fair solution.