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The commission instituted a new funding formula for the 2001–02 allocations based on each council’s road length (for all surface types) and traffic volumes, using average annual preservation costs for given traffic volume ranges. The methodology also includes a series of cost modifiers for freight loading, climate, materials, sub-grade conditions and strategic routes and takes account of the deck area of bridges on local roads.

The new formula was designed to reflect the relative needs of Victorian councils in relation to local roads funding in accordance with the National Principle relating to allocation of local roads funding. Grant levels fully based on the new ‘network cost’ methodology were phased in over a three-year period to 2003–04.

Traffic volume data

Allocation of local roads grants for 2005–06 was based on traffic volume data that all councils collected during the 12 months to June 2004. Councils were asked to categorise their local road networks according to nine broad traffic volume ranges – four for kerbed roads and five for unkerbed roads.

Victorian councils reported a total of 128 786 kilometres of local roads as at 30 June 2004, an increase of 74 kilometres or 0.06 per cent over the length reported 12 months earlier. Variations are outlined in Table B.6.

Table B.6: Changes in local road length from 2004–05 to 2005–06 – Victoria

Change in length of local roads Number of councilsa Increase of more than 5.0% 4 Increase of 1.0% to 5.0% 16 Increase of up to 1.0% 25

No change 21

Decrease of up to 1.0% 5 Decrease of 1.0% to 5.0% 6 Decrease of more than 5.0% 2

Total 79

Note: a Analysis does not include the Docklands Authority. Source: Victoria Grants Commission

Asset preservation costs

Average annual preservation costs for each traffic volume range are used in the allocation model to reflect the cost of local road maintenance and renewal. ARRB Transport Research developed the initial average annual preservation costs to allocate local roads grants for 2001–02 and 2002–03; they were published in Table 7.1 of the Review of Distribution Arrangements for Local Roads Funding in Victoria:

Appendix B reviewed the underlying asset preservation costs used in the local roads grant allocation model and

the recommendations of that review were adopted for the 2003–04 allocations. These remained unchanged for the 2005–06 allocations (see Table B.7).

Table B.7: Average annual costs used in allocating local road grants for 2005–06 – Victoria

Road type Daily traffic volume range

Average annual cost (base case) $/km Kerbed <500 2 700 500 – <1000 4 000 1000 – <5000 5 500 5000+ 9 000 Unkerbed Natural surface 300 <100 2 000 100 – <500 4 000 500 – <1000 4 900 1000+ 5 400 Bridges Concrete deck $40 per sq metre Timber deck $80 per sq metre Source: Victoria Grants Commission

Cost modifiers

The allocation model uses a series of cost modifiers to reflect differences in circumstances between councils in:

© volume of freight generated by each council

© climate

© availability of road-making materials

© sub-grade conditions

© strategic routes.

Cost modifiers are applied to the average annual preservation costs for each traffic volume range for each council to reflect the level of need of the council compared to others.

Relatively high cost modifiers add to the network cost calculated for each council, and so increase its local roads grant outcome.

The cost modifiers used in allocating local roads grants were not reviewed in 2005–06.

Grant calculation

The commission calculates a total network cost for each council’s local road network. This represents the relative annual costs the council incurred to maintain its local road and bridge networks, based on average annual preservation costs and taking account of local conditions, using cost modifiers.

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The network cost is calculated using traffic volume data for each council, standard asset preservation costs for each traffic volume range and cost modifiers for freight generation, climate, materials availability, sub-grade conditions and strategic routes. The deck area of bridges on local roads is included in the network cost at a rate of $40 per square metre for concrete bridges and $80 per square metre for timber bridges.

Mathematically, calculation of the network cost for a single traffic volume range for a council can be expressed as:

length of local roads in category ×

average annual asset preservation cost for category × overall cost factor **

**Overall cost factor is calculated by multiplying the individual cost factors for freight loading, climate, materials availability, reactive sub-grades and strategic routes.

The actual local roads grant is then determined by applying the available funds in proportion to each council’s calculated network cost.

Estimated entitlements 2005–06

As expected, local roads grant outcomes for most councils have now stabilised following the phased introduction of the network cost allocation formula. In general, where a significant change occurred in a council’s local roads grant for 2005–06, this was due to changed road length and traffic volume data the council supplied to the commission.

A summary of the changes in local roads grants from 2004–05 to 2005–06 is shown in Table B.8.

Table B.8: Changes in local road grant entitlement from 2004–05 to 2005–06 – Victoria

Change in local roads grant Number of councilsa Increase of more than 10.0% 6 Increase of 5.0% to 10.0% 19 Increase of <5.0% 53 Decrease 1

Total 79

Note: a Analysis does not include the Docklands Authority. Source: Victoria Grants Commission

Queensland