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Lord Mayors: bypassing state government

By Stephen Jones - posted Monday, 13 August 2007


The Lord Mayors of our capital cities are offering the Prime Minister a new deal they believe will help secure new economic development opportunities for local councils.

The mayors have lost hope with state governments and want to go into partnership with the Commonwealth. They argue that this is their only way of finding the cash they need for infrastructure projects that will encourage economic growth and create better city environments for the future.

What a sad picture this makes in a time of budget surpluses and a booming economy. Our wealthiest local councils still do not have the financial resources to undertake projects that they see are vital to the future of our cities.

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Can we speculate on the likely consequences of such an arrangement? Will their proposal provide the solution to the desperate situation the mayors argue our major cities face because of long term neglect and lack of money? Will they get what they are looking for?

The main elements of the mayors’ argument are: over the last decade there has been a lack of investment in city infrastructure; we need to invest in our capital cities because they play an important role as major drivers of our economy; if we continue to neglect our capital cities we face the threat of missing major investment opportunities that will promote economic growth; and they want a direct line to the money and the power by establishing a capital city unit in the PM’s department.

While the main focus of the partnership would involve investment in infrastructure projects to promote economic development, the mayors are also concerned about environmental sustainability, tourism and security issues.

Cost shifting by both the Commonwealth and the states has contributed to the Lord Mayors’ dilemma by reducing their capacity to undertake new initiatives and projects. By ignoring the state governments and placing more reliance on the Commonwealth Government, there is a serious risk that they could be worse off as a result of the proposed partnership.

While Prime Minister Howard has shown little interest to be involved in such “urban” matters he does have an inclination towards centralism. In bypassing the state governments with this proposal, the mayors provide the Commonwealth with another opportunity to reduce the policy making role of the states as well as local governments.

The last time the Commonwealth became involved with similar projects to those the mayors are proposing was in the early 1990s. Hawke and Keating, as part of their “new federalism” initiatives, established the Building Better Cities program in conjunction with the states and local governments to show they could co-operate on urban issues and micro-economic reform.

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The various evaluations of Better Cities judged most of the projects to be successful. Where public funds served as a catalyst, through seed funding and tax incentives, private dollars followed and real improvements happened like public transport in Melbourne; a university campus in Geelong; a rail link in western Sydney; land decontamination in South Australia; and the redevelopment of old industrial areas into new housing in East Perth and Brisbane, to name a few. Despite this success, Howard made it an election commitment in 1996 to get rid of the program.

The experience of the Better Cities program and Howard’s response to it have some important messages for the Lord Mayors to consider in their push for project funding and the partnership with the Commonwealth. The success of the Better Cities program was based on some very important aspects that experience shows will be incorporated into any new policy initiatives the Commonwealth will pursue.

First, the successful outcomes will be largely determined by the level of co-ordination and co-operation between the three spheres of government. The complexities of the projects undertaken require contributions across government agencies. The considerable costs for major infrastructure will also require contributions from Commonwealth as well as state governments.

Second, the objectives of programs will be established on Commonwealth terms; it’s their money so they determine the conditions. The Commonwealth maintains tight control over the funding and has the final say in which projects go-ahead. What would appear at first glance to be a co-operative arrangement could really be another means of coercion by an increasingly centralist Commonwealth government.

Third, funding will more than likely be through competitive specific purpose payments (SPPs). This is one of the classic ways used by the Commonwealth to determine the policies and expenditure commitments of the other spheres of government. Projects need to meet the criteria of the program as there is only so much money to go around. Experience shows that with such programs it is the money that becomes the goal and the project is an incidental by-product.

Fourth, projects will require changes to traditional planning and regulatory approval arrangements. Development corporations and redevelopment authorities are used as a means to overcome obstructions and parochial interests. The East Perth Redevelopment Authority, the Southbank Corporation, the Urban Renewal Taskforce, and the Docklands Redevelopment Authority were established to remove the influence of local government from the planning process.

Fifth, projects will be required to establish a master plan or development control plan that takes precedence over local government town plans. These are high cost projects and the Commonwealth doesn’t want meddlesome local councillors getting in the way and slowing things down.

Finally, there will most likely be a social cost. Urban renewal projects have proven to be a boost for developers often at the expense of the less fortunate in the community in Brisbane, for example, where low cost inner city housing was replaced by expensive apartment complexes as part of the urban renewal program in areas like Southbank and Fortitude Valley.

The lessons for the Lord Mayors from project based programs like Better Cities, are that they need to be prepared:

  1. to co-operate with both the Commonwealth and state governments;
  2. for the Commonwealth to dominate;
  3. for local issues to be less important than the objectives of the program;
  4. to compete for a limited amount of money;
  5. to lose their power to control the planning of these projects; and
  6. for developers to reap the rewards, often at the expense of the disadvantaged and local community’s interests in general.

It is rather surprising that the Lord Mayors wish to establish a partnership without involving the state governments. It appears the reason they are pursuing the Commonwealth is that they can no longer rely on the states. How they intend to undertake such significant projects without the involvement of the states is most curious.

Most concerning is that what the Lord Mayors propose may even further reduce their autonomy to undertake project initiatives. What seems to be missing is anything that would help promote their financial independence.

Rather than creating a situation that shifts their reliance from the states to the Commonwealth it would make more sense for the mayors to lobby for an allocation of national taxation revenue.

The Australian Local Government Association has been calling for a 1 per cent share of national taxation revenue to be allocated to local government. Such an arrangement would permit greater certainty and flexibility for all local councils in determining their own priorities.

Surely the Lord Mayors could more effectively turn their ideas into reality if they had more of their own money to bring to the bargaining table.

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About the Author

Stephen Jones is a Perth based writer and policy analyst.

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All articles by Stephen Jones

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