5.5.2 L A C UARTA S EMANA C ATÓLICO – S OCIAL EN Z ACATECAS

A key responsibility of local government is to provide, develop and maintain infrastructure necessary to provide people with access to economic and social facilities and services. Local government infrastructure includes local roads, bridges, footpaths, regional aerodromes, water and sewerage (Queensland, regional NSW and Tasmania), stormwater drainage, waste disposal, public buildings, parks, and recreational facilities.

The local government sector in Australia is responsible for approximately $170 billion in assets (depreciated replacement cost), as of 2003-04. The estimated breakdown of this asset base is:39

• land: $50 billion

• buildings: $12 billion, and

• other construction infrastructure, including local roads: $103 billion.

There is a significant challenge in calculating a precise estimate of the value of local

government infrastructure, as a large proportion of councils’ asset registers are not regularly indexed or re-valued. The majority of local government assets are still in their first generation of life and have yet to be renewed. Hence, councils have limited experience with major renewal and many do not fully understand the importance of asset management planning.40

Of the infrastructure requirements of local government, the maintenance of local roads is one of the most capital intensive. There are approximately 810,000km of public roads in Australia, of which around 80% (650,000km) are local roads. Around 33% of these roads are sealed, with the remaining unsealed.41 Routine maintenance of unsealed road costs $1,100/km, whilst an urban sealed road costs approximately $1,400/km and a rural sealed road costs around $3,300/km.42 Beyond regular basic maintenance, roads have significant periodic renewals expenditure requirements, such as resealing a sealed road, which costs around $20,000 – $22,000/km and is required every 15-20 years. 43 It is estimated that councils are currently spending $3.8 billion on road maintenance per annum, which is almost 10 times the annual sum of $384 million allocated in the recent R2R funding package for the four years to 30 June 2009 ($1.54 billion, including $308 million supplementary funding).

The review of the R2R Program showed that the majority of the R2R funding was spent on the existing asset, with approximately half being allocated to renewal and the other half to upgrading the existing road to a higher standard.44

39

DOTARS 2006, 2004/05 Report on the Operation of the Local Government (Financial Assistance) Act 1995, p. 77.

40

Jeff Roorda & Associates 2006, Independent Inquiry into the Financial Sustainability of Local Government: The Present Condition and Management of Infrastructure in NSW Local Government, p.15.

41

DOTARS 2005, 2003/04 Report on the Operation of the Local Government (Financial Assistance) Act 1995, p. 76 42

NSW Grants Commission estimate of standard road maintenance costs, 2006. 43 _{MAV Life Cycle Asset Management Database, accessed at}

http://www.algin.net/mav/Public%20Section/background.htm 44

DOTARS and ALGA 2003, Report on the Roads to Recovery Program, February 2003, p.9.

The problem for local government is two-fold characterised by:

• a shortfall in funding to meet increasing community expectations, and

• the need to maintain and renew the existing road network.

It is clear from the information provided by councils that the R2R funding is used primarily to address the second shortfall as this is where councils see the majority of the backlog of works.

Text Box 6: One perspective on the drivers of infrastructure backlogs Administrator of Warringah Council – why maintenance renewals backlogs develop

“This week’s media carried reports of a NSW Auditor General’s report that identified that the Roads and Traffic Authority (RTA) has not been spending sufficiently on road maintenance. This startling revelation would certainly come as no surprise to anyone driving on our roads. To be fair, the same thing could be said about most councils in regard to their road maintenance.

Of course this is the very issue behind our recent introduction of a new special rate levy to increase expenditure on infrastructure. The problems caused by such under-spending are not limited to roads maintenance. In recent times we have all read about the problems in our schools, public housing and hospitals, as well as the well-documented problems with our ferries and rail infrastructure.

This raises the obvious question of “Why Does It Happen?”

The answer, in my opinion, is very simple. Politics. Political factors intersect with budget considerations on many levels. In most cases the input of elected representatives into decisions about resource allocation are both legitimate and appropriate. Who better to decide between national parks and extra police? In such cases the politicians answer to the people if they get it wrong.

With maintenance expenditure it is not nearly so clear-cut. While some maintenance is essential to perform on a regular basis, much of it fits into a class of being able to be deferred for a year (or two, or three, or …). In most of these cases the consequences are not immediately visible. It is my experience that many politicians, when faced with having to make a ‘hard’ decision, one that is likely to have negative political consequences for themselves, will take the politically easier way-out.

In many cases this easier way-out involves either not allocating enough for maintenance, or switching maintenance funds to cover a shortfall somewhere else in their budget. They choose to do this because three and four year election cycles mean they are unlikely to be held accountable for the consequences of under-spending on maintenance.

In my experience this is a feature of all governments regardless of political persuasion. It is unfortunate that it is usually far more expensive to deal with asset maintenance if regular maintenance has been under-funded. I know many readers were unhappy to have their rates increased above inflation. I hope people take some comfort from knowing that the special rate funds will only ever be spent on infrastructure, and cannot ever be diverted to cover other budget or service problems.”

Source: Dick Persson AM, Administrator of Warringah Council, see www.warringah.nsw.gov.au Council operated airports and aerodromes

A number of rural councils own and operate airports or aerodromes. These small airports generally cater for a low volume mix of private and commercial aviation operators and their passengers. Councils provide these facilities as they are seen as integral for better

connecting their local residents to essential capital city services and attracting business and tourism investment. For many isolated or remote councils, their airport is often operated and retained to facilitate faster medical evacuations and support better access for other

emergency-related services following natural disaster events.

Some state governments attempt to provide smaller rural towns with more service stability, route development and continuity of services in air services by regulating competition.

For example, in NSW intrastate air routes (to/from Sydney Kingsford Smith Airport) with an annual passenger volume of less than 50,000 are regulated, with such routes being allocated to one operator under five-year licences with potential for opening a competitive tender process at licence expiry.45

The landing fees generated from such facilities are often insufficient to cover the costs of the maintenance program required to keep the runway in a safe working condition to meet Civil Aviation Safety Authority (CASA) requirements. Hence most small council owned and operated airports have a cash operating deficit which can place such councils under financial pressures, which then requires scaling back of other services. Some state based local council associations have been seeking new or enhanced subsidies from both state and federal governments to improve the viability of services to smaller regional centres.46 Local government believes that aviation security is a national security issue and as such security upgrades for regional airports, including any ongoing maintenance or staffing requirements, must be fully funded by the federal government and not passed on to councils. In this regard, DOTARS has established a range of programs to improve the security of regional aviation and airports.47

At the other end of the spectrum there are some larger council owned and operated airports, typically those which are a tourist area gateway, where the airport is a stronger business that can support the provision of a wider array of council services (eg Sunshine Coast Airport and Coffs Harbour Airport). However, these larger airports are also generally facing large capital expenditure programs to improve terminals, runways or security, which also can place the owning council under financial pressures.

Some of the key issues encountered by councils in operating airports and retaining air services are explored in the case study text box below, which examines the experiences of Inverell Shire Council.

Text Box 7: Inverell Shire Council Airport and Services Inverell Shire Council Airport and Services

Inverell Shire Council had annual cash operating costs of $96,000 (in 2005-06) to maintain the airport whilst total income (mainly from terminal leases) provides less than $3,000 per annum. The airport also has a depreciation cost of $40,000 per annum. Like most small airports, Inverell has a range of upgrading needs. For example ideally the airport would have an Automatic Weather Station (capital cost $65,000), however this item was omitted from the capital works list for 2006-2007 due to insufficient funds. For major upgrade needs, many smaller councils often need DOTARS support to fund the required works. In December 2005 Inverell Airport obtained $294,000 via a grant to fund upgrading of basic security measures (eg fencing, lighting, CCTV and access control).

The loss of air services has become a major concern for country towns that depend on a regular flight to Sydney. A large number of towns such as Kempsey, Cootamundra, West Wyalong, Forbes and Cowra have had periods (or are still) without air services when their airlines cease operations.

The commercial viability of providing airline services to Inverell has often been marginal. In 1998 the then operator (Tamair) went into receivership reportedly owing Inverell Council over $100,000. Some other operators sporadically serviced the route until services again ceased. Qantas withdrew flights to Inverell and Taree in 2003, which led to efforts by these communities to have their services restored and it opened the door for small airlines to fill the gaps.

45

NSW intra-state routes with annual passenger volume above 50,000 are deregulated (eg Kingsford Smith) Airport to: Albury, Armidale, Ballina, Coffs Harbour, Dubbo, Port Macquarie, Tamworth, Wagga Wagga and Williamtown). All other intrastate air routes not linked to Sydney Kingsford Smith Airport are also deregulated. For more information see: www.transport.nsw.gov.au

46

For example see: http://www.lgsa.org.au/www/html/314-aviation-and-airports.asp 47

For example see: http://www.dotars.gov.au/transport/security/aviation/regional/index.aspx

Following the loss of air services to Gunnedah and Inverell, private investors from these two communities, with support from the two Shire Councils and businesses in the region, combined to establish Big Sky Express (BSE) in 2004. BSE sub-contracts air operations to Transair, a Brisbane based airline which holds the CASA air operator certificate. To improve the viability of airline services, Gunnedah and Inverell Councils waived landing fees ,which in turn increases the airport operating deficits. BSE currently has two 19-seater aircraft (both Fairchild Metros) to service two triangular routes Sydney-Taree-Grafton and Sydney-Gunnedah-Inverell. BSE has expansion plans into other towns of NSW. It also formerly operated to Brisbane and Coonabarabran but has ceased these services. A key challenge for an airline servicing towns like Inverell is that passenger volumes are light and parts of the community will prefer to commute to larger nearby towns (eg Armidale, Moree, Tamworth) so as to access larger planes with more regular services and also potentially cheaper fares. However, the commitment of local investors with the support of councils and business should hopefully see BSE continue to provide a viable, value for money and high quality local air service linking Gunnedah, Inverell, Taree and Grafton to Sydney.

Source: Inverell Council website http://www.inverell-online.com.au/dir205/InvOnline.nsf; Factiva Press Reports and Big Sky Express website https://www.bigskyexpress.com.au/solrs_FlightSearch.aspx.