Funding Local Government Futures: Amidst population and property trends.
Updated: Apr 2, 2019
The funding of a nation's cities of the future, is a reflection of today's population and property trends.
Australia is currently progressing through the creation of nine city deals. The most recent City Deal is proposed by the Australian Government for southeast Queensland (SEQ). The focus is on: connecting infrastructure, regional jobs and skills, liveability and sustainability, housing and planning, digital and governance and leadership.
Population and property trends are a significant determinant of a city's possible futures.
The effect of population change directly affects revenues through property rates. Rate returns change with the amount of rate revenue a city charges – including for management of the environment, rural fire and community services, water and waste. As property density lowers in a region, property rate revenues decrease, and Government grants must increase, or regional, and city infrastructure will decline. Local Governments raise on aggregate, about 90% of their revenue, from property rates (DIRD 2017).
Another 10% of Local Government revenue is raised from government grants, private industry grants, and payment for Local Government services. Cities that have higher property densities must remain efficient to balance their revenues with expenses – this is why densification of resources around CBDs and residential hubs creates affordability, as there is less infrastructure to deliver per square kilometre of commercial and residential properties.
As densification builds, and savings accrue, the city becomes more economically sustainable. Cities can leverage their efficiencies by adding features and if successful, become more attractive to residents, visitors and investors, creating security. More sustainability features in a city reduces vulnerability to Government grant cut-backs.
Property is also seen by local governments and consumers, as a commodity and so property rates are affected by commerce (with significant shifts of investment into other sectors), fiscal policy and direct demand in the marketplace for properties e.g. units, houses and shops. More people knowing that governments rely on property revenues adds to the security that people have in the property market and drives a self-fulfilling prophecy of progress under conditions of macro-economic stability – driven by domestic mortgage lending prices, tax incentives and the relative value of other investment products aside from property. Over the past 25 years, Australian mortgages for investment purposes have grown substantially (35%).
A city's grant funding increases by making attractive business cases to State Government about future opportunities for additional State revenue, that comply with or improve upon the State's regional plans, and priorities. Local success of visions and strategies is driven by illuminating what local communities want and demand to develop the growth and lifestyles they need. I have consulted communities, engaged stakeholders, presented to Mayor’s, CEO’s, Executives and strategy leaders of Futures visioning initiatives of numerous Australian cities, and regional areas. I have researched outcomes and plans following these initiatives and have found that these initiatives have been forerunners to phenomenal growth and change. This change results because local identification of needs and creation of strategies affords projects the strongest chance of success (PC 2017). Stakeholder participation in Futures visioning is where Futures thinking workshops become extremely viable and valuable to cities and their State Governments. City futures projects have become an essential means of aligning stakeholder, community and business preferences, values and needs, with emerging challenges, business models, by applying alternative futures thinking. Long-term visioning of city futures also brings about awareness of the side-effects of growth, in particular, as populations grow and decline.
A city’s ability to increase the probability of consistent or accelerated population growth, is driven by strategies like the following:
Local identification of needs and creation of strategies.
Lifestyle attractors – high happiness index etc. inspired by excellent infrastructure, entertainment and culture, services and products for each demographic, e.g. family-friendly values demand social stability, schools and sporting facilities, while older demographics require tertiary education facilities, city infrastructure and restaurants.
A consistent supply of jobs in different categories for different skill levels.
A steady immigration policy that does not destabilise residency visa’s, but directs population growth to regional centres where growth is needed.
Domestic demand for properties as the property market shifts, e.g. from overpriced city centres to lower-priced cities and regional areas, for owner-occupiers, renters and investors.
Coordinated sharing of resources, collaboration between cities and regional areas, and seconding staff from neighbouring city Councils.
Another indicator of long-term property numbers is the total population projection. Australia’s population is projected by the ABS, to increase from 25 million in 2019, to 28.5 million by 2030, and to 35 million by 2043, +- 5 million. Projected median housing prices in Australian Cities in 25 years ago were $110,000, but by 2043 they could be $2.9 million. This is based on seeing the same capital gains growth per year that we have seen over the past 25 years.