In 2004, the MAV commissioned PricewaterhouseCoopers to investigate and assess the feasibility of establishing a central borrowing authority for local government and to look at approaches for addressing infrastructure replacement. The report concluded that there was no unmet demand for funds by councils in Victoria. It also reported that the market for council borrowings was largely competitive, the current level of demand for council finance was being met, and that a separate central borrowing facility was not required. The report recommended an advisory service for councils be established to leverage the current competitive market for council financing in Victoria.402
The Committee understands that the MAV developed a supply agreement with a major international financial consulting firm in 2005403 to provide specialist financial advisory services on infrastructure financing the non-metropolitan councils in Victoria.404
The Committee understands that a few local governments in Victoria have considered or are pursuing the PPP model:
• Cardinia Council was proposing a PPP arrangement that included the development of new civic offices and commercial development of the shire's land in the Pakenham central business district.405 This was to be undertaken by a consortium of architects and financiers led by Rothschild's Bank. The withdrawal of a major co-tenant has meant that it is no longer financially feasible for the council to continue as the sole lessee of the building, and the project will now not proceed.406
• Melbourne City Council is a partner with the Victorian Government in the PPP project for the Melbourne Convention Centre development and associated commercial works. The council will contribute $43 million to develop the precinct and build a footbridge linking the north and south banks of the Yarra.407 Since the contract covering this project has still not been released, the full extent of council involvement is unknown.
• Banyule Council is looking at a PPP arrangement to undertake a redevelopment at its civic offices that will involve commercial and residential developments with new community facilities. The council will contribute $35 million and the state government $12.8 million towards the $85.4 million project.408
• Geelong Council is considering various funding options, including the PPP model, to build a convention centre.
One academic indicated that common PPP applications in local government could include:409
• property development including local government offices;
• car parks, land swaps and mixed development, for example, residential, commercial and community;
• waste collection and management;
• waste water treatment;
• child care and play group facilities, libraries and community education and community services;
• marina and special purpose facilities;
• public buildings;
• franchising of public transport including light rail, buses, monorail and interchange facilities
• roads and road maintenance;
• information technology;
• social housing and aged care; and
• street lighting.
The Committee is aware that at least one investment banker, Macquarie Bank, has indicated its interest in pursuing community partnerships with local government. This would involve the PPP model being used to undertake development or redevelopment on sites such as civic buildings, swimming pools, sporting arenas, golf courses, and caravan parks that are controlled by councils.410
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 councils using these complex alternative funding arrangements.
__________________________________________________________________________________________________
402 Referred to in an article by A Beresford-Wylie, G Watts and V Thurairaja, Financing local government infrastructure: the Australian experience, p.12
403 Ernst & Young
404 Referred to in an article by A Beresford-Wylie, G Watts and V Thurairaja, Financing local government infrastructure: the Australian experience, p.12
405 Quoted in an article in Infrastructure and privatisation, 11 July 2006.
406 Manager of Governance and Communication, Cardinia Council, email, received 24 August 2006
407 Partnerships Victoria website, Melbourne Convention Centre Development: Project summary see: www.partnerships.vic.gov.au, accessed 2 September 2006
408 Banyule Council Greensborough Project Launch, August 2006.
409 Profession M. Regan, Australian Centre for Public Infrastructure, University of Melbourne, quoted in a presentation entitled 'Are Public Private Partnerships Successful in Local Government?'
410 Referred to in an article by A Beresford-Wylie, G Watts, and V Thurairaja, Financing local government infrastructure: the Australian experience, p.13