A proposal to amalgamate three inner Melbourne municipalities into one mega-council to tackle growing cost pressures has been dismissed by Premier Jacinta Allan as “kite flying” and lashed by the council workers’ union as a “thought bubble” that jeopardises jobs and services.
But the “last resort” proposal to merge the cities of Yarra and Port Phillip into the wealthier City of Melbourne comes as the Victorian Local Government Grants Commission (VLGGC) warns federal government funding “is not keeping pace with the growing needs of Victorian councils”.
In its submission to a federal government inquiry into local government funding and fiscal sustainability over the past decade, the VLGGC, which is responsible for recommending funding allocations to Victorian councils, said the average gap between Victorian councils’ expenditure needs and their revenue-raising capacity has widened by 20 per cent.
Several Melbourne councils have also made submissions to the inquiry, arguing they are caught in a perfect storm of shrinking grants, state-imposed rate capping and cost shifting that is crippling their ability to deliver core council services.
Whittlesea, a fast-growing city in Melbourne’s outer north, said state government grants for local sports infrastructure had been cut from $22 million in 2020-2021 to $5 million.
The 77 per cent reduction coincided with a period of soaring demand due to population growth, resulting in overbooked sports fields, waiting lists for junior sport and a reduced ability to deliver new facilities, Whittlesea said.
The council’s submission also reveals it is paying millions of dollars more than the agreed cost under the 50/50 state and council split for maternal child health.
“Families are presenting with increased complexities like mental health, family violence, etc. requiring more frequent and longer consultations, and greater information sharing requirements,” Whittlesea’s submission says.
“However, there has been no ongoing additional funding to cover the increasing workload, which is making [maternal child health] services gradually unsustainable for [local government areas].”
The City of Hume said it faces an unpalatable choice between cutting services, delaying projects or taking on more debt.
“Traditionally, cost shifting has impacted areas like libraries and the school crossing supervision program. However, it is now encroaching into critical areas such as maternal and child health and building enforcement,” it said.
Port Phillip Mayor Alex Makin said councils face the same mounting financial pressures today that they experienced in the 1990s, when Liberal premier Jeff Kennett cut the number of councils from 210 to 79.
The City of Port Phillip told the inquiry that rate indexation has failed to keep pace with cost growth, resulting in a cumulative revenue shortfall of more than $17 million.
City of Yarra mayor Stephen Jolly called for “an adult conversation” about amalgamating three inner-city councils on Thursday, arguing it should be a last resort option if the state government will not end its decade-long rate capping policy.
Figures provided to The Age by the City of Yarra claim there is $10.5 million in annual cost-shifting from state to council, including $5.3 million for libraries, $2.5 million for maternal and child health and $820,000 for crossing supervisors, among other items.
Jolly said the City of Yarra was one of the fastest growing parts of Melbourne, and that trend would accelerate due to the state government’s policy to concentrate housing in activity centres. State projections forecast Yarra’s population will swell by 25,000 people in the next decade.
“Those people who move in, the first thing they’ll say is, where are the sports facilities in the area, and is there childcare for my kids, and where can I walk my dog so that it can pee on the grass? These are all things that they expect from council and that’s understandable,” Jolly said.
“But how can we deliver those services with a $10.5 million hole? You don’t have to be Einstein to work out something’s got to give.”
Other inner-city councils did not endorse Jolly’s rate capping proposal, but agreed there is a growing gap between rates revenue and the cost of delivering services.
“Like many councils in Victoria, Stonnington is facing growing financial pressures to maintain important assets and services such as roads, footpaths, sports facilities and community infrastructure,” Stonnington Mayor Melina Sehr said on Thursday.
But she said council boundary changes alone would not resolve underlying funding challenges.
Moonee Valley Mayor Rose Iser said the amalgamations of the 1990s had been ugly, and could similarly impact communities today if not done without consultation.
Iser said Moonee Valley had been prudent with its finances, but was still struggling to fund future projects it has identified as important to the community.
Moonee Valley’s draft four-year capital works plan, published earlier this month, includes seven projects which the council says it lacks the funding to complete without external funding support.
The list includes an indoor sports stadium, tennis pavilion in Airport West, community hub in Niddrie, bowls club redevelopment in Buckley Park and a soccer hub.
“These are capital works projects that we know the community wants, and we’ve said that we have no rate availability to deliver those projects,” Iser said.
“Some of them are small projects that we would have probably been able to fund 10 years ago ourselves.”
Premier Jacinta Allan said most councils are operating within a budgeted surplus “and they should be focused on delivering the services by which their local residents expect them to deliver”.
“I think Victorians would expect their local governments to get on and do the job that they’re elected to do … not engage in talk fests and fly kites,” Allan said.
The amalgamation proposal also drew a hostile response from the Australian Services Union.
Victorian and Tasmanian branch secretary Tash Wark said the proposal was a “pathetic, ill thought out idea from mayors who pretend to be friends of workers but sell them out at every opportunity”.
Wark said talk of amalgamation was “a distraction from the urgent need to properly fund local government and the workers who keep Melbourne running”.
“While mayors might be ready to capitulate to a state government that has starved them of funds through the failed rate-capping policy, our members are not. Council workers will stand strong for their communities to fight for their fair share of funding.”
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Adam Carey is senior city reporter (suburban). He has held previous roles including education editor, state political correspondent and transport reporter. He joined The Age in 2007.Connect via X or email.From our partners
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