Local Governments as 'Place-shapers': Exposition, Critique and Investigations in Australian Politics

Australian local government continues to struggle to find a distinctive role in Australia's federal democracy, being conceptualised as an instrumental, rather than a political institution by both state and federal tiers of Australian government. This thesis argues that, by way of comparative analysis, place-shaping as developed by the Lyons Inquiry into local government in England points the way to a reinvigorated Australian local government sector, entailing not merely instrumental responsibilities and roles of political representation, but also ideational roles in the forms of history, locale and identity which can significantly assist in local government fulfilling it potential. This does not necessary entail that in searching out options for reform, state and federal government ought to pursue all avenues for increased leadership at the local level, nor increased devolution to the local level of political authority. On the contrary: As the analysis of the thesis suggests, there is room for caution, if not conservativism, in this regard. Further, as the thesis demonstrates, reforms to Australian local government have seen it move toward incorporating some elements of place-shaping as a mode of local government reform, as developed here. Nevertheless, it is the ideational and symbolic elements of local government which need to be encouraged if its promise is to be realised

Accounting problems in the valuation of infrastructure assets in New South Wales local government

Local government authorities in NSW manage a significant pool of infrastructure assets in order to serve community needs. These assets usually comprise roads, bridges, the water and sewerage network, stormwater drainage, buildings, and other infrastructure. Infrastructure assets represent a major proportion of the total asset base of every NSW council. All local councils in NSW are required to measure their infrastructure assets at fair value and revalue them every five years. However, there are many problems with the valuation of infrastructure assets in local government. Problems arise mostly as a consequence of the unique characteristics of public sector infrastructure assets; in particular, the assets have long and sometimes uncertain lives, there is no market into which they can be sold and - unlike commercial assets - local government urban infrastructure is not operated to make a profit. This makes the valuation and revaluation of these assets for financial reporting purposes a technically complicated exercise. The aim of this study is to (a) investigate whether NSW local government councils comply with the Australian Generally Accepted Accounting Principles (GAAP) in performing the revaluation of their infrastructure assets and (b) to assess any consequences for the reliability of financial reporting in NSW local government. Using road assets as an example, we analyse the results of revaluations of road assets undertaken by 89 NSW councils as reported in their financial statements during the period from 2013 to 2016. In this analysis we focused on the effect of a change in accumulated depreciation as a percentage of the gross replacement cost of the revalued assets. The analysis revealed that in most cases this effect is significant: 36 councils reported a decrease of between 10% and 53%; 5 councils reported increases of between 10% and 31%; and others fell within a 10% range. In absolute terms, these are substantial changes. However, the accounting and reporting of this effect is strikingly inconsistent between the councils. This forms the rationale for this thesis. Based on the analysis of revaluation of roads, the study finds that the main reason for these significant changes arises from the change in the estimates of the remaining useful life of the assets at the time of revaluation. It is most unlikely that asset condition can have such a significant effect on many councils all at the same time. Furthermore, we concluded that the changes in estimates of the remaining useful life is the result of non-compliance with the requirements of AASB 116 to have the useful life reassessed at the end of each reporting period (i.e. each year). Instead, councils wait five years and undertake the next reassessment of the useful life at the time of the comprehensive revaluation. This leads us to a conclusion that, if material, the effect should be treated as an error based on the requirements of AASB 108. If councils did follow requirements of AASB 116 by assessing the useful life at the end of each year, then the effects would be unlikely to be material at the time of the comprehensive revaluation. Only 12 councils out of 89 reported this effect as an error. However, even these did not fully comply with the requirements of AASB 108 in presenting the effects of the error in the financial statements. All other councils did not report or disclose anything about this effect in their revaluation adjustment, regardless of the significance of that effect. There are two main conclusions of the thesis. First, most councils did not comply with the Australian GAAP in accounting, reporting and disclosing the effects of their asset revaluations. Second, there is a high risk that depreciation expense, operational results and financial ratios were materially incorrect in the years preceding each comprehensive revaluation. The latter makes the financial reporting in NSW local government unreliable for decision-making purposes for the users of financial reports. Our study has examined only roads assets in detail. If similar deficiencies in procedures were to exist in the treatment of other local government assets, then summed over all assets, the unreliability of the financial reports could be significantly greater

The Empirical Analysis of Council Size, Council Performance and Council Amalgamation in Australian Local Government

Financial viability remains a matter of acute concern for Australian local government. Efforts to improve local government sustainability in Australian local government have focussed principally on structural change - primarily through forced amalgamation – which is directed at generating savings by exploiting economies of scale. However, empirical evidence on the existence of substantial scale economies across the range of municipal functions is mixed and inconclusive. In general, in debates over structural reform in Australian local government, claims by proponents of amalgamation that significant economies of scale will inevitably emerge as a consequence of larger merged councils are typically not accompanied by econometric modelling or indeed any other empirical evidence. This thesis argues that much of the existing empirical literature relating to the optimal size of local government is plagued by methodological flaws. Accordingly, it cannot be used to justify compulsory consolidation programs based on increasing the population size of local government entities. This conclusion is reached after examining the implications of these flaws on the question of optimal size in Australian local government. Recent innovations in the empirical analysis of municipal size and performance are considered. Using these developments, it is argued that future structural reform programs must be assessed by employing a range of techniques that take account of regulatory priorities, citizen preferences and projected outcomes

Local Government Amalgamation in Queensland: A Case Study of the Moreton Bay Regional Council

Local government in Australia has been the subject of significant reform since the early 1990s. New local government legislation has been introduced, the types of services provided by councils have changed, and local government financial sustainability has been the subject of debate at both state and national levels. Whilst these changes have been significant, it has been structural reform of local government that has transformed the political landscape at the local level through involuntary amalgamations. This thesis reviews the various policy approaches to local government reform in Australia, with a particular focus on forced amalgamation as a method of structural reform. State and territory governments appear to be inextricably drawn to the idea that 'bigger is better' in local government. This thesis considers the merits of this proposition from theoretical and empirical viewpoints, and critically evaluates the Queensland experience of involuntary amalgamation in 2008

An Empirical Analysis of Scale Economies in Administrative Intensity in the Paraná State Local Government System in Brazil

A substantial empirical study has investigated scale economies in local government functions, most notably in local transportation, water, and wastewater provision. By contrast, relatively little effort has been directed at the empirical analysis of economies of scale in municipal administration, including in Brazilian local government, despite its significance for public policy on structural reform in local government. In order to address this gap in the literature, we investigate administrative scale economies in the Paraná state local government system in Brazil over the period 2006 to 2018. We find that there was a 'U-shaped' scale effect between council size by population and administrative intensity after controlling for a range of economic and social variables. Various public policy implications are considered

An Analysis of Private School Closings

We add to the small literature on private school supply by exploring exits of K-12 private schools. We find that the closure of private schools is not an infrequent event, and use national survey data from the National Center for Education Statistics to study closures of private schools. We assume that the probability of an exit is a function of excess supply of private schools over the demand, as well as the school's characteristics such as age, size, and religious affiliation. Our empirical results generally support the implications of the model. Working Paper 07-0

The Empirical Analysis Of Fiscal Illusion

This paper examines the empirical analysis of the five main hypotheses subsumed under the generic term fiscal illusion. After placing these hypotheses within a common theoretical framework, the paper attempts to evaluate empirical research into the revenue-complexity hypothesis, the revenue-elasticity hypothesis, the flypaper effect, renter illusion, and debt illusion

Fiscal illusion and the Australian local government grants process: How sticky is the flypaper effect?

It has been argued that evidence supporting the widely documented flypaper effect is a statistical artefact; more specifically that previous studies are compromised by the use of inappropriate functional forms and the endogeneity of intergovernmental grant programs. Whilst the first issue may be resolved with careful econometric testing, the second requires the incorporation of institutional constraints into governmental expenditure equations. Combining Australian local government expenditure equations and intergovernmental grant parameters, the flypaper controversy is analysed. Empirical results confirm the sensitivity of the flypaper effect to specification, and tests of fit unambiguously favour one functional form. That specification yields no evidence of a flypaper effect in the Australian institutional milieu

The Debate on Australian Federalism: Local Government Financial Interrelationships with State and Commonwealth Governments

The nascent debate on Australian federalism has hitherto focused almost entirely on Commonwealth-state interrelationships to the virtual exclusion of local government. Since Australian local government employs around 156,000 people and spends in excess of $10 billion this neglect is unfortunate. In an effort to at least partly remedy this oversight, the present paper seeks to assess various unsettled questions in local government financial relationships with both Commonwealth and state governments, especially the issue of financial assistance grants and their efficiency consequences

Tax complexity and fiscal illusion: An empirical evaluation on of the Heyndels and Smolders approach

In a pioneering paper on the revenue-complexity hypothesis, Heyndels and Smolders (1995) demonstrate that the conventional employment of the Hirschman-Herfindal index (HHC) in the empirical analysis of fiscal illusion introduces an arbitrary restriction without theoretical foundation. They propose instead the more general Hannah and Kay index (HK). In this paper we extend this approach to 1991 data drawn from forty six local government areas in Tasmania, Australia. Our results are in broad agreement with those produced by Heyndels and Smolders using local government data from Flanders, Belgium. We find that the HHC may involve sizeable misspecification bias and our results provide further support for the use of HK instead of HHC