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  Council » Policies and Plans » Hazard and catchment management » Level of Service and Funding Policy » Appendix 5: Relevant Legislation » Local Government Act 1974 Part VIIa (as amended by the Local Government Act 1996)

Local Government Act 1974 Part VIIa (as amended by the Local Government Act 1996)

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The Local Government Amendment Act (LGAAA) came into force in July 1996 and provides a statutory regime for the financial management of local authorities.

The Act:

    • In Section 122B sets out its purposes. The general purpose is to promote prudent, effective and efficient financial management by local authorities.

 

    • In Section 122E proscribes the approach to be followed in determining how expenditure needs are to be funded. Local authorities must:

 

  1. Identify the allocation of costs indicated by the application of such one or more of the principles specified in section 122F of this Act as the local authority determines on reasonable grounds to be relevant to those expenditure needs; and
  2. Determine the extent to which -
    1. Any modification of the allocation of costs identified under paragraph (a) of this subsection; or
    2. Any alternative to the allocation of costs identified under paragraph (a) of this subsection -
      1. is indicated by such one or more of the considerations specified in section 122G of this Act as the local authority determines on reasonable grounds to be relevant to those expenditure needs; and
  3. Consider, having regard to the matters specified in section 122H of this Act, the extent to which it is practicable and efficient to fund those expenditure needs in a way that achieves, or approximately achieves, the allocation of costs determined pursuant to paragraph (b) of this subsection.

 

  • Section 122F lists the principles referred to in Section 122E(1)(a) (which principles are specifically noted as not being ranked in order of priority). The principles are:

 

  1. The principle that the cost of any expenditure should be recovered at the time that the benefits of that expenditure accrue;
  2. The principle that, to the extent that any expenditure -
    1. Is independent of the number of persons who benefit; or
    2. Generates benefits that do not accrue to identifiable persons or groups of persons; or
    3. Generates benefits to the community generally, -
      1. the costs of that expenditure should be allocated in a manner consistent with economic efficiency and appropriate to the nature and distribution of the benefits generated which manner may require the use of rating mechanisms under the Rating Powers Act 1988;
  3. The principle that the cost of any expenditure should be recovered from persons or categories of persons in a manner that matches the extent to which the direct benefits of that expenditure accrue to those persons or categories of persons;
  4. The principle that the cost of any expenditure to control negative effects that are contributed to by the actions or inaction of any persons or categories of persons should be allocated to those persons or categories of persons in a way that matches the extent to which they contribute to the need for that expenditure.
    • Section 122G sets out the considerations referred to in Section 122E(1)(b) (which considerations are again noted as not ranked in any order of priority). The considerations are:

 

  1. The obligation of the local authority to act in the interests of its residents and ratepayers;
  2. The fairness and equity of any allocation of costs;
  3. Any lawful policy of the local authority, to the extent that the costs of any expenditure may be allocated in a way that effectively and appropriately promotes that policy;
  4. Balancing the avoidance of significant adjustment difficulties for any persons or categories of persons arising from sudden and significant changes in the total costs allocated to those persons or categories of persons, with achieving the indicated allocation of costs at the earliest reasonable date.
    • Section 122H sets out the matters referred to in Section 122E(1)(c) which are:

 

  1. The extent to which any funding mechanism or combination of funding mechanisms lawfully available to the local authority can achieve any allocation of costs;
  2. The efficiency, including the costs, of the different funding mechanisms available to the local authority;
  3. The extent to which it is efficient and effective to fund any expenditure need by a funding mechanism that is separate from those used to fund any other expenditure of the local authority;
  4. The extent to which different funding mechanisms lawfully available to the local authority will allow persons or categories of persons to whom costs are allocated to identify the expenditure needs to which those costs relate.

 

  • Section 122I provides Council with discretion in respect of:

 

  1. The extent and detail of information to be considered; and
  2. The degree to which benefits and costs are quantified; and
  3. The extent to which different options are considered; and
  4. The extent and nature of any written record of that consideration,- shall be such as the local authority considers on reasonable grounds to be appropriate, having regard to the purposes specified in section 122B of this Act, the significance of the decision, and the scale of the local authority’s operations.
    1. “(2) In complying with the requirements of this Part of this Act to prepare and adopt any long-term financial strategy, funding policy, investment policy, or borrowing management policy, a local authority shall do so in such manner and include such detail as the local authority considers on reasonable grounds to be appropriate, having regard to-
      1. The purposes specified in section 122B of this Act; and
      2. The significance of the matter; and
      3. The costs and difficulty of obtaining information; and
      4. The scale of the local Authority’s operations.

 

    1. (3) It shall be the responsibility of each local authority to make judgements about the ways in which the principles specified in section 122c (1) of this Act are to be complied with by the local authority, having regard to-
      1. The purposes specified in section 122B of this Act; and
      2. The role of local authorities in making appropriate expenditure and funding decisions which reflect the goals of the communities they serve; and
      3. Such other matters as the local authority considers on reasonable grounds to be relevant to those judgements.

 

  1. (4) Without limiting the generality of subsection (3) of this section, it shall be the responsibility of each local authority, having regard to any relevant submissions received by the local authority,-
    1. To make judgements about fairness and equity; and
    2. To make judgements concerning the extent to which any provision of sections 122F to 122H of this Act is relevant to any particular case,- which judgements may reflect the complexity and inherent subjectivity of any benefit allocation for the specified outputs and the complexity of the economic, social, and political assessments required in the exercise of political judgement concerning rating.

Council has prepared a funding policy in accordance with the requirements of the LGAAA. Council’s proposed overall Funding Policy for Project Watershed is summarised in section 17 of this document.

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