Local Government Finance Amendment Standard (No. 1) 1998 (Qld)

Queensland Subordinate Legislation 1998 No. 142 Local Government Act 1993 LOCAL GOVERNMENT FINANCE AMENDMENT STANDARD (No. 1) 1998 TABLE OF PROVISIONS Section Page 1 Short title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2 Standard amended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 Amendment of s 2 (Definitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 Replacement of s 65 (Depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 65 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 Insertion of new pt 8A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 PART 8A—COMMERCIALISATION Division 1—Preliminary 68A Object of pt 8A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 68B Application of pt 8A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Division 2—Commercialisation Subdivision 1—Matters affecting commercialisation 68C Matters affecting commercialisation . . . . . . . . . . . . . . . . . . . . . . . . . 4 Subdivision 2—Full cost pricing 68D Application of full cost pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 68E Different charges for commercial reasons . . . . . . . . . . . . . . . . . . . . . 5 68F Total costs of carrying on activity . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 68G Administrative and overhead costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 68H Cost of resources used in carrying on activity . . . . . . . . . . . . . . . . . . 6 68I Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2 Local Government Finance Amendment (No. 1) No. 142, 1998 68J Return on capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Subdivision 3—Treatment of community service obligations 68K Extra cost for community service obligations to be treated as revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Subdivision 4—Annual performance plan 68L Annual performance plan for each commercial business unit . . . . . 7 6 Replacement of s 77 (Depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 77 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 7 Replacement of s 98 (Depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 98 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

s1 3 s5 Local Government Finance Amendment (No. 1) No. 142, 1998 ˙ Short title 1. This standard may be cited as the Local Government Finance Amendment Standard (No. 1) 1998 . ˙ Standard amended 2. This standard amends the Local Government Finance Standard 1994 . ˙ Amendment of s 2 (Definitions) 3. Section 2— insert— ‘ “commercialisation” , for part 8A, see section 458CH 1 of the Act.’. ˙ Replacement of s 65 (Depreciation) 4. Section 65— omit, insert— ˙ ‘ Depreciation ‘ 65.(1) Depreciation of an asset used in carrying on an activity must be based on the deprival value of the asset allocated over its useful life. ‘ (2) However, a local government may decide not to base depreciation of an asset on its deprival value allocated over its useful life, but to use instead an amount decided by the local government to be appropriate in the circumstances.’. ˙ Insertion of new pt 8A 5. After part 8— insert— 1 Section 458CH (Meaning of “commercialisation”)

s5 4 s5 Local Government Finance Amendment (No. 1) No. 142, 1998 ‘ PART 8A—COMMERCIALISATION ‘ Division 1—Preliminary ˙ ‘ Object of pt 8A ‘ 68A. The object of this part is to state requirements for commercialisation for chapter 7A, part 5 of the Act. ˙ ‘ Application of pt 8A ‘ 68B. This part applies to a local government’s implementation of commercialisation for its significant business activities under chapter 7A, part 5 of the Act. ‘ Division 2—Commercialisation ‘ Subdivision 1—Matters affecting commercialisation ˙ ‘ Matters affecting commercialisation ‘ 68C. The matters affecting commercialisation are— (a) full cost pricing; and (b) treatment of community service obligations; and (c) elimination, or taking account, of advantages and disadvantages of public ownership; and (d) matters mentioned in the local government’s annual performance plan .

s5 5 s5 Local Government Finance Amendment (No. 1) No. 142, 1998 ‘ Subdivision 2—Full cost pricing ˙ ‘ Application of full cost pricing ‘ 68D. In deciding charges to clients for goods and services provided in carrying on an activity, a local government must ensure the projected total revenue from carrying on the activity is enough to cover the projected total costs of carrying on the activity for the local government’s financial year. ˙ ‘ Different charges for commercial reasons ‘ 68E.(1) A charge may be decided for the provision of specific goods or services in carrying on an activity that is, for commercial reasons, an appropriate charge for the goods or services provided. ‘ (2) For subsection (1), a charge is, for commercial reasons, an appropriate charge if it is a charge that could reasonably be charged if the goods or services had been provided by an entity carrying on the activity with the primary object of making a profit from carrying on the activity. ˙ ‘ Total costs of carrying on activity ‘ 68F. For this subdivision, the total costs of carrying on an activity include the following— (a) operational costs incurred in carrying on the activity; (b) administrative and overhead costs; (c) cost of resources used in carrying on the activity; (d) depreciation; (e) equivalents for Commonwealth or State taxes the local government is not liable to pay because it is a local government; 2 (f) equivalents for the cost of funds advantage the local government 2 See section 458CO of the Act (Commonwealth and State tax equivalents).

s5 6 s5 Local Government Finance Amendment (No. 1) No. 142, 1998 obtains over commercial rates of interest because of State guarantees on borrowings; 3 (g) return on capital. ˙ ‘ Administrative and overhead costs ‘ 68G. The local government must make a reasonable allocation of its administrative and overhead costs to each activity to which commercialisation is applied. ˙ ‘ Cost of resources used in carrying on activity ‘ 68H.(1) If resources are provided by or to a local government for carrying on an activity, the cost of resources used in carrying on the activity includes an equivalent cost. ‘ (2) If the resources have an identifiable cost, the cost of the resources may be taken to be the equivalent cost. ‘ (3) If subsection (2) does not apply and the resources are readily available on the open market, the price at which they can be obtained in the market may be taken to be the equivalent cost. ‘ (4) If subsection (3) is applied, the local government must ensure the terms on which the cost is based are similar to the terms on which they are made available in carrying on the activity. ˙ ‘ Depreciation ‘ 68I.(1) Depreciation of an asset used in carrying on an activity must be based on the deprival value of the asset allocated over its useful life. ‘ (2) However, a local government may decide not to base depreciation of an asset on its deprival value allocated over its useful life, but to use instead an amount decided by the local government to be appropriate in the circumstances. 3 See section 458CP of the Act (Guarantees by State).

s5 7 s5 Local Government Finance Amendment (No. 1) No. 142, 1998 ˙ ‘ Return on capital ‘ 68J.(1) The amount for the return on the capital used in carrying on an activity must be decided using the rate at which, in the opinion of the local government, a comparable private sector entity carrying on the activity would be able to obtain the capital in the market, having regard to the split the local government considers appropriate, for the type of business, between equity and loan capital and the return appropriate to each. ‘ (2) Despite subsection (1), the amount for the return on the capital used in carrying on an activity for the first year in which commercialisation applies to the activity may be the amount the local government decides. ‘ (3) In this section— “capital used in carrying on an activity” means the total value (using an accepted accountancy method) of the assets used for the activity less the liabilities attributable to the activity. ‘ Subdivision 3—Treatment of community service obligations ˙ ‘ Extra cost for community service obligations to be treated as revenue ‘ 68K. If community service obligations are carried out as part of an activity, for deciding charges for goods and services provided through the activity, there must be treated as revenue for the activity an amount equivalent to— (a) the cost of carrying out the obligations; less (b) any revenue arising from carrying out the obligations. ‘ Subdivision 4—Annual performance plan ˙ ‘ Annual performance plan for each commercial business unit ‘ 68L.(1) The annual performance plan for a commercial business unit (a “CBU” ) must include the following matters— (a) the CBU’s financial and non-financial performance targets for its activities;

s5 8 s5 Local Government Finance Amendment (No. 1) No. 142, 1998 (b) the nature and extent of the CBU’s community service obligations; (c) the costings of, and funding for, the CBU’s community service obligations. ‘ (2) A CBU’s annual performance plan must also include the following matters— (a) the CBU’s objectives and functions; (b) the nature and scope of the CBU’s main activities and undertakings; (c) the CBU’s notional capital structure and treatment of surpluses; (d) the CBU’s proposed major investments; (e) the CBU’s outstanding and proposed borrowings; (f) the CBU’s policy on the level and quality of service consumers can expect from the CBU; (g) the delegations necessary to allow the CBU to exercise management autonomy and authority in its commercial activities; (h) the type of information to be given in reports. ‘ (3) However, a CBU is not required to include in its annual performance plan a matter, or an aspect of a matter, mentioned in subsection (2) if the CBU’s local government is satisfied that the matter or aspect is not materially relevant to the CBU or its activities. ‘ (4) Subsections (1) and (2) do not limit the matters that may be included in an annual performance plan. ‘ (5) A matter in the annual performance plan of a CBU may be omitted from the copies of the plan to be made public if— (a) the matter is of a commercially sensitive nature to the CBU; and (b) a full statement of the matter is given to each councillor of the local government. 4 ’. 4 Under s 198(2) of the Act, a person who is or has been a local government councillor must not release information that the person knows, or should reasonably know, is confidential to the local government and the local government wishes to keep confidential.

s6 9 s7 Local Government Finance Amendment (No. 1) No. 142, 1998 ˙ Replacement of s 77 (Depreciation) 6. Section 77— omit, insert— ˙ ‘ Depreciation ‘ 77.(1) Depreciation of an asset used in carrying on an activity must be based on the deprival value of the asset allocated over its useful life. ‘ (2) However, a local government may decide not to base depreciation of an asset on its deprival value allocated over its useful life, but to use instead an amount decided by the local government to be appropriate in the circumstances.’. ˙ Replacement of s 98 (Depreciation) 7. Section 98— omit, insert— ˙ ‘ Depreciation ‘ 98.(1) Depreciation of an asset used in carrying on an activity must be based on the deprival value of the asset allocated over its useful life. ‘ (2) However, a local government may decide not to base depreciation of an asset on its deprival value allocated over its useful life, but to use instead an amount decided by the local government to be appropriate in the circumstances.’. ENDNOTES 1. Made by the Minister on 12 May 1998. 2. Notified in the gazette on 15 May 1998. 3. Laid before the Legislative Assembly on . . . 4. The administering agency is the Department of Local Government and Planning. © State of Queensland 1998