KI Traveller's Levy Economic Impact Assessment - Kangaroo Island ...

Commercial-in-Confidence
KI Traveller’s Levy
Impact Assessment
1.3 WHY CONSIDER A TRAVELLER’S LEVY FOR KI
A Traveller’s Levy has been under consideration for some time by KI Council as one of a
number of options for improving Council’s financial position and ensuring that local
infrastructure – and hence the quality of the KI tourism experience and the amenity of locals
– can be maintained and enhanced. Revenue shortfalls, coupled with a large road network
and commensurately high road maintenance bill – reflecting, in part, the level of road usage
by tourists who visit the Island – have led to consideration of a levy on travellers to the
Island.
Council’s fiscal position
KI Council has identified a need to consider alternative sources of revenue in light of pending
budget shortfalls and a fundamentally unsustainable financial position. In 2007-08, the
Council posted an operating deficit of $3.36 million or 32% of operating revenue, while the
budget for 2008-09 projects an operating deficit of $2.8 million (27% of operating revenue). 5
Despite residents paying above-average rates relative to comparable councils 6 ($489 per
capita in 2005/06), the Island’s fiscal position is a challenging one due to the combination of
its limited ratepayer base, the large land area that it governs (443,000 hectares) and the
significant local road network associated with this (1,316km). Further, by the very nature of
the area on an island, Council incurs higher costs of delivery for most services compared
with other councils. It also bears the cost of maintaining roads which, under other
circumstances, would likely fall under the jurisdiction of other levels of government. In
particular, as JAC Comrie Pty Ltd note, Council are responsible for some roads that it
considers have characteristics that elsewhere may result in them being classified as arterial
roads and therefore be the responsibility of the State.
Though Council’s Long Term Financial Plan sees its operating budget returning to surplus by
2017, this is only achieved by significantly restraining outlays, and in particular, by reducing
infrastructure spending below that which is required for satisfactory up-keep of Council
facilities. Indeed total Council expenses are projected to grow by just 0.8% annually, in real
terms, over the eight years to 2017 in order to achieve the budget target. In addition, it is a
plan predicated on the Council securing additional sources of revenue.
The significance of tourism to the Island
KI Council is by no means unique among local governments in experiencing fiscal
challenges. However, one of the defining characteristics of the KI situation is the significant
level of tourism activity – and by extension, the reliance of the regional economy on tourism.
Indeed, as noted above, tourism expenditure on KI was estimated at around $82 million in
2007, resulting in the industry accounting for some 15% of employment on the Island.
With such levels of tourism, however, come additional costs to local infrastructure. In
particular, extensive road usage by tourists contributes to the Island’s sizeable road
maintenance costs. Determining the proportion of total road usage which is accounted for by
tourism is not possible due to an absence of recent data. Though research undertaken by
Council in the early 1990s identified residents as the greatest road users, tourism numbers
have grown significantly since this time. Anecdotally, the layout of the Island and the
5 Kangaroo Island Council, Long term financial plan, 2009-2019.
6 Compared with 18 Councils with similar characteristics – see JAC Comrie Pty Ltd (2008).
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