Royalties for the Regions Report

Transcription

1 Royalties for the Regions Report Report prepared by: Andrew Drysdale (Regional Groups Collective), Cameron O Neil (Queensland Murray-Darling Committee), Paul McDonald (SEQ Catchments) and Geoff Penton (Queensland Murray- Darling Committee) October 2014

2 Executive Summary A delegation of Queensland Natural Resource Management Body officers travelled to Western Australia to review that government s Royalties for Regions programme with the intent of identifying opportunities which may be used to enhance Queensland s Royalties for the Regions (R4R) programme. Whilst the delegation members were interested in the programme in its entirety, they were particularly interested in those aspects that pertained to natural resource management. The following are three key recommendations the delegation have identified for consideration by the Queensland Government to be applied to this state s Royalties for the Regions programme. 1. The Queensland Royalties for the Regions programme needs to be embedded into legislation stipulating that: a. a set percentage of total royalties received by the Queensland Government be allocated to the Royalties for the Regions programme; and b. an independent oversight committee, similar to the Western Australian Regional Development Trust, be established to monitor that programme objectives are being delivered. 2. A stream of funding is made available for sustainable agricultural development and natural assets management activities that underpin much of our economic and social well-being. 3. Mechanisms such as the development of regional blueprints should be considered. Such blueprints would focus on the implementation of planning instruments such as statutory regional plans, planning schemes and non-statutory plans such as the Regional Natural Resource Management Plans. Background The Queensland Regional Groups Collective (RGC) supports the Queensland s Government s commitment to growing a four pillar economy mining, agriculture, tourism and construction. In doing so, the government has identified the Royalties for the Regions (R4R) program as a key mechanism to deliver on that commitment. The four pillars, like all structures that last, are built on solid foundations. The foundation for all four pillars are our natural assets: clean water, clean air, outstanding natural beauty, productive landscapes, bountiful resources and raw materials and the expertise and knowledge which goes with it. As with any foundation, a management and maintenance regime is needed to ensure the foundations are not eroded or irrevocably damaged. It seems logical that this aspect of delivering on the potential of the four pillars becomes another focus for investment. With the revenue generated through royalties predicted to increase as additional coal seam gas (CSG) production comes on line, now appears to be a good time to review the purpose, structure and delivery of the R4R program. The context within which the Regional Groups Collective (RGC) provides recommendations will be to enhance the program to support the foundations of the four economic pillars, including more productive agriculture, nature based tourism, efficient and productive use of natural resources and efficient and sustainable use of construction materials and techniques based on enhancing the condition and extent of the natural assets upon which the pillars rely. Royalties for the Regions Report, RGC delegation,

3 To help identify where the existing Queensland R4R program can be enhanced, a delegation of Regional Natural Resource Management (NRM) body staff travelled to Western Australia (WA). The purpose of the study tour was to: gain an appreciation of how the Royalties for Regions program in WA came about; gain an understanding of the magnitude, structure and delivery of the WA Royalties for Regions framework; investigate how investment priorities are determined; identify aspects of the WA s Royalties for Regions program that are easily transferable to the Queensland situation, and what aren t and why; identify if the program is hitting its intended mark as determined by government and recipients of funding; determine which aspects of the program can be improved, modified or dropped; identify what measures of success are in place for the program and how often are they monitored, and by whom; and determine specific roles/value adds which NRM groups provide and how they relate with local and State government. The delegation interviewed a number of people who have or had a role in the design, delivery or were recipients of the program. These people included politicians, past and present departmental staff, the current Chair of the Royalties for Regions Western Australian Regional Development Trust (Trust), members and staff of the Regional Development Commissions, Local Governments and Regional NRM Bodies. Now that the Queensland Government has released the Queensland Plan, the importance of regions and growing regional economies and populations has an increased importance and strategic focus. The aim to have 50% of Queensland population living and working outside South East Queensland is strongly supported and will require deliberate strategies, some of which can be modified from WA and its experience with the Royalties for Regions program. Royalties for the Regions Report, RGC delegation,

4 Western Australia s Royalties for Regions Aspects The key aspects of Western Australia s Royalties for Regions program are as follows. Purpose Core purpose under the Royalties for Regions Act 2009 is to support economic, social and business development in regional WA. To create a decentralised population in WA and provide equity across all of WA. One well explained example was offered: Given pensioners in Perth and surrounds benefit from free and subsidised public transport, the program has established a $500 per annum payment from Royalties for Regions (the fuel card) for pensioners in the regions to provide an equitable as well as a constant reminder of the importance of the Royalties for Regions program in regions (one Ministerial advisor describing it as political gold ). To facilitate wider investment by providing a wide range of physical and social infrastructure and recreation, cultural, sporting, health facilities as well as place making particularly in resource rich areas such as the Pilbara. One of the stated aims was to de-risk private sector investment in regions. Design Royalties for Regions has three objects: economic, business and social outcomes. The program is created by legislation. The program is based on hypothecation of 25% of onshore mining royalties for the Royalties for Regions program (which results in 25% of royalties must flow into Royalties for Regions fund). Royalties for Regions is overseen by an independent Trust which ensures that the program is being delivered in accordance with the Act. The Trust reports to Parliament annually and is ministerially appointed. Initially, the program was confined to regions outside Perth. The program funding is set legislatively at 25% of royalties generated per year and there is a $1 billion cap that on a net creates spill over back to Consolidated Revenue Fund. This apportionment reflects the demographics of WA where 75% of population resides in the greater Perth area and 25% in regional WA. In addition there has been an expenditure limit of $1 billion per annum applied to assist Royalties for Regions to support the debt position of the State. The funding streams to drive the initial program were The Country Local Government Fund, The Regional Community Services Fund, and the Regional Infrastructure and Headworks Fund. The Country Local Government Fund has since been allocated $0 and a new fund, the Regional Development Fund, established which also has $0 allocated to it. Initially the program concentrated on getting projects going in regional WA focusing on road, social and community infrastructure such as flood mitigation, hospitals, schools, sporting, town beautification and recreation facilities. Now investment will largely be directed by Regional Development Blueprints and is intended to be more strategic in nature. There has been considerable planning and capacity constraints and many recipients raised this as a key issue, so now, local governments and others have to deliver corporate plans, asset management plans and create strategic asset forward programs in order to satisfy program funding and overcome the shortfalls created by these constraints. There have been many projects behind schedule due to capacity of regions, local government and contractors to deliver given the competing pressures created by the Royalties for the Regions Report, RGC delegation,

5 mining boom. This is related to employment and construction capacity being highly resources sector based. In WA, around 90% of the royalties funds go to both State and local governments for delivery with only small amounts being delivered through other community based entities. Around 80% of funding goes to State government agencies. The risk of cost shifting primary agency responsibilities into the Royalties for Regions program is one of the major concerns of the Trust. The program is one of the most scrutinised State programs with quarterly reporting and annual audit as well as the subject of at least three major audits by the Auditor- General. All final projects above $20,000 are submitted to Cabinet for approval based on business cases. The state has been divided into nine development regions with each region having a Regional Development Commission (RDC) with a Board, the members of which are Ministerial appointments. The role of RDCs is to facilitate regional development and create the Regional Development Blueprints. The RDCs are separate to the Australian Government formed Regional Development Authorities but in some cases are based together. The main NRM associated program funding lies with flood mitigation and the Regional Water Initiative ($19.2m for NRM in out years, however, a business case for how this is to be allocated is yet to be developed). $40 million has gone into expanding irrigated agriculture. The Royalties for Regions program has identified and created nine SuperTowns based on good planning to activate important parts of regions. Delivery The whole program, with 150 staff, is managed by a newly created central agency the Department of Regional Development (the department). The department suggested possible NRM outcomes to include: total water cycle management programs; capacity building; waste management; energy efficiency and supplementation; low cost housing; biodiversity links connected to strong tourism outcomes and good coastal projects; and storage to support renewables. The department stressed the critical importance of tying everything to economic development outcomes. Only a small portion of projects go to NRM Bodies. For example, the Wheatbelt NRM is doing some work on stormwater re-use as well as recycled water under the program given issues with groundwater in the region. The Wheatbelt RDC had a discretionary fund to administer of around $5 million from the Royalties for Regions program which is now down to around $1 million per annum. The Wheatbelt RDC expressed concerns with the approvals process which added about seven extra months to the process: The Royalties for Regions funds the RDCs. Strengths and Opportunities The Queensland delegation has identified the following strengths and opportunities based on their observations of the Royalties for Regions at work and information received by a cross section of stakeholders interviewed. 1. The program is a significant investment into regional WA with the additional security of being embedded in an Act. This provides continuity and certainty for investors and communities beyond political cycles. Royalties for the Regions Report, RGC delegation,

6 2. Whilst the initial investment wasn t all that strategic, it has resulted in the program being very conspicuous and appreciated by regional communities. The move to have the program priorities now being identified and reflected through the Regional Blueprints is considered a positive aspect. 3. The level of governance surrounding the program is very robust. The establishment of an independent watch dog by way of the Trust is well supported. All of the Trust advice is made public to ensure transparency. Given members of the Trust are Ministerial appointments, there may be concerns about their independence. Safeguards which allow the Trust to act independent of the prevailing Minister/Government would be considered to be a positive thing. It may be prudent to first seek community nominations for Trust membership to create a pool from which Ministerial appointments could be made in order to deal with concerns about the independence of the Trust. 4. The level of program reporting and acquittal appeared to be excessive, particularly for projects down to $20,000, a view which was supported when speaking to project proponents. Whilst the need to have clear lines of accountability and transparency reflected in the governance systems is essential, it appeared the right balance between accountability and workability is yet to be struck. 5. Many stakeholders identified the inherent risk of having 80% of the program delivered through government agencies and the associated risk of agencies using Royalties for Regions investment to fund their core responsibilities and activities. Whilst the risk was acknowledged, the delegation members saw little evidence of how this risk was being managed and mitigated. The independent Trust maybe the logical body to do this but need real and perceived independence for this to happen. It should be noted that once an infrastructure project by a state agency was finished the long term maintenance was then that agency s responsibility, ensuring more base funding being spent in regions in the long term. 6. The establishment of Regional Development Commissions and their role as the keepers of the Regional Development Blueprints is considered a very positive initiative. The possible conflict of being the developers of the Blueprints and also recipients of project money needs to be carefully managed although these risks are somewhat mitigated by fact that the RDCs play no role in the assessment process. 7. The duplication of having State-funded RDC and Commonwealth-funded Regional Development Authorities was well appreciated by the WA Government. It is hoped that the WA Government will continue to work with the Australian Government to remove this duplication and move to the establishment of one regional development organisation which represents the interest of both State and Commonwealth governments. 8. It became very evident to the delegation members that the project delivery space was very crowded, made evident by one example where a project recipient was delivering a storm water management project in a town with another project recipient delivering a water recycling project, neither aware of each other s project. The RDCs, in close collaboration with the department, could have the extra role of more active coordination along with developing an annual regional project report/score card which would result in a knowledge resource of all projects being delivered in a particular region. 9. Whilst the primary focus of the program is economic development a more purposeful link towards natural asset management and maintenance underpinning most if not all Royalties for the Regions Report, RGC delegation,

7 economic development would be a very positive thing. The NRM bodies could play an important role in developing regional asset management and maintenance plans or plan elements within the regional blueprints. These plans may need to form part of the overall statutory planning system, preferably implemented at the local government scale to ensure an integrated approach to economic development in a region. 10. It became evident that the magnitude of investment being made into regional WA was severely testing the capacity of organisations such as local governments to deliver this investment in a skill constrained environment. This coupled with a perceived inflexibility of the program is placing many proponents at legal and financial risk. There appears to be scope for the program to be designed so that this risk is evenly shared between the government and project proponents through mechanisms such as a portion of the project funds being set aside as a contingency fund and appropriate (real) project management costs being allowed to be built into project cost. Several examples of the effects of lack of contingency in project design were offered during the visit. 11. The comment was made that the biggest shift to the program for it to be successful will be from the infrastructure catch-up phase to the creating an aspirational future phase is strongly supported. This will be extremely challenging to achieve whilst the paradigm that investing in infrastructure will provide the greatest opportunities for economic development and community well-being, rather than investing in enhancing the social capital of regional communities along with enhancing, maintaining or protecting the natural assets upon which liveability and economic prosperity is built. Royalties for the Regions Report, RGC delegation,

8 Queensland s Royalties for the Regions Program Aspects The key aspects of Queensland s R4R program are detailed below. Purpose The existing program contributes to building community capacity and economic sustainability through: o infrastructure that improves the liveability and amenity of regional communities, making places more attractive for people to live and work; o economic development and resilience of regional communities; o development consistent with Queensland regional economic or planning priorities; and o increased private sector investment in resource communities. Design It is a $495 million program delivered over four years. The program is not set in legislation. All Local Governments, except those within South East Queensland, are eligible to apply for funding. Funding for projects must respond to critical community infrastructure needs that have resulted from resources sector activity. R4R can provide funding for all types of infrastructure projects. However, priority is given to core, community infrastructure projects that are essential to the functioning and quality of life of communities in regional Queensland. Only eligible local governments may apply and if a consortium is involved, local government must be the lead partner and be responsible for project delivery. Applications for funding for floodplain mitigation projects will be considered under the Queensland Disaster Mitigation and Resilience Funding Application Package. Ineligible projects include: o works constructed on non-council or non-government owned land or applications for funding for flood mitigation projects; o feasibility and planning studies; and o projects that would normally be funded through an existing Queensland Government program. Royalties for the Regions program will be embedded in the Regions Q Framework. Delivery The program is delivered through Local Governments with the Department of State Development, Infrastructure and Planning overseeing the program. The process for determining where investment is to be targeted is essentially a local government budget/application based process. Royalties for the Regions Report, RGC delegation,

9 Strengths and Opportunities The following aspects of the Queensland Royalties for the Regions program have been identified as being particularly positive or areas where opportunity for improvement may lay. 1. Whilst the Queensland R4R program is relatively small compared to WA, it is pleasing to see that the size of the investment into the program is proposed to increase in the out years. While a degree of uncertainty now exists regarding the future of the program given the State Government s current RegionsQ initiative, these comments and recommendations apply nonetheless. 2. The Queensland program is relatively simple in design and delivery compared to WA given it is delivered through only one group of project proponents: local government. This results in lower transaction costs and avoids possible duplication of effort and the need for greater coordination. It is recommended that whilst the size of the investment remains as is, local governments continue to be the delivery agent. If the investment and scope grows significantly, then additional delivering agents should be considered based on skills and abilities. 3. Irrespective of the size of the program, the WA model of establishing an independent Trust to monitor the delivery of the program is seen as a major success factor and should be implemented in Queensland. 4. By legislating the R4R program in Queensland, a greater degree of security for possible co-investors and regional communities who have, or may benefit from this program will be achieved. This security will be further enhanced if a percentage of total royalties received and identified for the R4R program is identified in its own head of power. As for the WA model a set, fixed percentage with an eventual upper limit that can be allocated, may also be considered. (The WA program set 25% of royalty revenue capped to $1 billion per year.) In the past four years, the program has approved 3,500 projects, for around $4.2 billion with around $2 billion acquitted so far. 5. Whilst the Queensland program has areas of priorities for investment it isn t as definitive as the WA model which uses a streaming approach to allocating its Royalties for Regions investment. It is suggested that one of these streams should target investment into sustainable agricultural development and natural assets management activities that underpin much of Queensland s economic and social well-being. An example of possible activities under this stream would be those that improve water quality. 6. With a significantly smaller R4R program in Queensland servicing a larger population compared to WA, it is paramount that investment is strategically delivered, maximising return on investment for the people in each region. For this reason mechanisms such as the development of regional blueprints should be considered. Such blueprints need to encompass or feed into other planning instruments such as statutory regional plans, planning schemes and non-statutory plans such as the Regional NRM Plans (which need to be interpreted into natural asset management and maintenance plans). These may be achieved by a close look at the recent set of local government plans. This may be a mechanism to achieve closer links with Queensland regional development authorities through one set of regional priorities. Royalties for the Regions Report, RGC delegation,

10 Reference documentation Queensland Government Royalties for the Regions (pdf link) - Queensland Plan - Regional Groups Collective - Western Australian Regional Development Trust - ttrust/pages/default.aspx Western Australian Royalties for Region (pdf link) - e_2011.pdf Royalties for the Regions Report, RGC delegation,

11 Contacts Andrew Drysdale, Regional Groups Collective Chief Executive Officer PO Box 4608 Toowoomba East Q 4350 Phone: / andrewd@rgc.org.au Cameron O Neil, Queensland Murray- Darling Committee NRM Regional Development Coordinator PO Box 1078 Roma Q 4455 Phone: / camerono@qmdc.org.au Paul McDonald, SEQ Catchments Manager, Natural Assets Solutions PO Box George Street Q 4003 Phone: Geoff Penton, Queensland Murray- Darling Committee Chief Executive Officer PO Box 6243 Toowoomba West Q 4350 Phone: / geoffp@qmdc.org.au Royalties for the Regions Report, RGC delegation,