The Municipal Association of Victoria (MAV) has hit at the $24.4 million black hole created following a ‘technical correction’ by the Australian Government’s financial assistance grants.

 

President of the MAV, Cr Bill McArthur, said he has written to the Federal Minister for Local Government, Simon Crean, expressing his grave concerns about the timing and consequences of the changes.

 

“Councils have already set their budgets for 2012-13 and could be forced to cut some of their promised initiatives or increase their debt levels to plug the shortfall,” Cr McArthur said.

 

“To only just find out about this loss of revenue will make it hard for some smaller shires to deliver all their budgeted capital works and community services for this year.”

 

“For some smaller municipalities who rely heavily on federal financial assistance grants, the funding cut represents almost five per cent of their total rate revenue. This is a huge blow for rural communities who can least afford it.”

 

Cr McArthur said the funding reduction appeared to be the result of relatively neutral inflation in the year to March 2012 and a technical correction to Victoria’s population figures following the 2011 Census.

 

“On top of the funding blow, councils remain frustrated by governments’ reliance on formulas that use consumer price movements, rather than the cost drivers facing local government,” Cr MacArthur said.

 

Cr MacArthur has called for reform to better match core funding of the country’s local government sector so that councils will not be forced to ‘go cap in hand’ to ratepayers whenever grants decline and service demands rise.

 

“We’ve also requested the Australian Government reinstate the funding indexation factors for 2011-12 and 2012-13 so that councils won’t be out of pocket $24.4 million this year,” he said.