Local government in Victoria has identified a significant shortfall in the amount of funding required to meet its infrastructure requirements. With limited capacity to raise the revenue needed to replace and maintain ageing infrastructure, some local governments are looking at alternative options, including PPPs, to fund capital programs.
Local governments in Victoria and other state jurisdictions in Australia have undertaken few PPP projects to date. A major investment bank has expressed interest in using the partnership model to develop local government assets.
Councils have the power to borrow money to enable them to perform their functions. However, before entering into a partnership they are required to receive approval from the Minister for Local Government and the Treasurer..
Because there is no guidance material that specifically covers local government and PPP projects, local government needs a framework that ensures a high degree of transparency, probity and integrity. In particular, the costs for the council over the life of the project and the risks to be transferred need to be transparent.
Both the local and state governments need to carefully weigh the cost and benefits of using these complex alternative funding arrangements.