POLICY INITIATIVE. Royalties For Regions. OF THE TASMANIAN GREENS MPs. Returning Wealth to Mining Communites.

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1 Royalties For Regions Returning Wealth to Mining Communites Launched by Nick McKim MP November 2009 POLICY INITIATIVE OF THE TASMANIAN GREENS MPs Printed on recycled paper Authorised by Nick McKim MP, Parliament House, Hobart,

2 Contents Executive Summary 3 Royalties For Regions 4 Policy Goals Policy Framework Who Supports Royalties For Regions? The Royalties For Regions Fund Operation of the Royalties For Regions Fund Mining Communities What Can Be Funded? Mineral Royalties What About Forestry? Forestry Dividends Case Study Western Australia Your Greens Representatives in Tasmania s State Parliament State Parliamentary Offices of the Tasmanian Greens Level 1, 162 Macquarie Street, Hobart, 7000 Postal Address: Parliament House, Hobart, 7000 Phone: (03) Fax: (03) greens@parliament.tas.gov.au Page 2 of 9 Tasmanian Greens MPs - Royalties For Regions - November 2009

3 The Tasmanian Greens propose to: Executive Summary Royalties For Regions is a policy initiative from the Tasmanian Greens MPs, designed to ensure mining communities receive direct benefit from the wealth they create. Establish a Royalties For Regions Fund to provide additional capital for projects in Tasmanian mining communities. Royalties For Regions will ensure mining communities benefit directly from the wealth they create The annual amount paid into the Royalties For Regions Fund will be based on projected annual mineral royalties, amounting to either: 50 per cent of projected mineral royalties; or A minimum $10 million. The Royalties For Regions Fund will be operated by a five member Board consisting of: A representative from the Commissioner for Social Inclusion s office; A representative from the Local Government Association of Tasmania; Two community representatives; and A representative from the business community. Projects likely to be funded by Royalties For Regions include: The Fund will receive annually the greater amount of: 50% of mineral royalties or $10 million Water and Sewerage Bill Rebates Improved Road and Rail Infrastructure School Infrastructure Community Housing Permanent GPs Recreational Centres Community Centres Communities to benefit directly from this proposal include: Queenstown Railton Zeehan Beaconsfield Strahan Mole Creek Rosebery The Fingal Valley Waratah The Derwent Valley Tasmanian Greens MPs - Royalties For Regions - November 2009 Page 3 of 9

4 Royalties For Regions The Tasmanian Greens believe communities should benefit directly from the wealth they create Nick McKim MP - Greens Leader A minimum $10 million annually will be set aside for the direct benefit of mining communities Policy Goals: Royalties For Regions is a program designed to ensure mining communities receive a direct benefit from the wealth they create. These communities are built around industry through the necessity of living in close proximity to employment. These communities are most vulnerable in times of economic downturn as investment dries up. Policy Framework: The Tasmanian Greens will: Introduce legislation creating the Royalties For Regions Fund ; Ensure an amount is paid into the Fund: Equivalent to 50 per cent of mineral royalties; or A minimum of $10 million. As in other states, Tasmanian mining communities should benefit from Royalties to Regions The Royalties For Regions Fund will be used to provide capital for projects in addition to projects already planned. This will see a minimum of an extra $10 million annually set aside for the direct benefit of Tasmanian mining communities. Who Supports Royalties For Regions? Western Australia has recently implemented a similar scheme; Various political and community groups in South Australia are debating expanding the current Regional Development Infrastructure Fund, into a similar specific Royalties to Regions scheme; and The CFMEU has called for a Royalties for Regions scheme to be implemented in Tasmania. Tasmanian Greens MPs - Royalties For Regions - November 2009 Page 4 of 9

5 The Royalties For Regions Fund The amount paid into the Royalties For Regions Fund will be based on projected annual mineral royalties. The specific amount will be the greater of either: 50 per cent of the projected mineral royalties; or A minimum $10 million. Table 1 projects the total amount to be contributed to the Fund based on the State Budget. Based on the current Budget, $10 million will be paid to the Fund annually across the s Table 1: Projected Fund Payments (Relative to Total Mineral Roylaties and State Revenue) Actual Budget $m $m $m $m $m Total State Revenue Total Mineral Royalties Royalties For Regions Fund Allocation % % % % % Royalties For Regions Fund to Mineral Royalties Royalties For Regions Fund to Total State Revenue Based on these figures, the amount to be paid to the Fund will be $10 million per year across the s. This represents close to 55 per cent of projected mineral royalties and approximately 0.25 per cent of total State revenue. The Fund s Board will consist of a diverse range of representatives and report to Parliament Operation of the Royalties For Regions Fund The money paid to the Fund will be used to fund specific community support and infrastructure projects in mining communities, in addition to projects already planned. The Fund will be administered by a Board of five, representing: The Office of the Commissioner for Social Inclusion; The Local Government Association of Tasmania; The community (two representatives); and The business community. The Board will be responsible for: Assessing the merit of applications (which can be made by individuals, local councils and community groups) and awarding grants; and Developing application and assessment guidelines. The Board will report to Parliament annually. Tasmanian Greens MPs - Royalties For Regions - November 2009 Page 5 of 9

6 Mining Communities Mining communities that will directly benefit from this proposal include: Tasmanian mining communities deserve to benefit directly from the wealth they create This additional funding will be made available for a wide range of community projects What Can Be Funded? Projects likely to be funded by Royalties For Regions include: Water and Sewerage Bill Rebates; School Infrastructure; Permanent GPs; Community Centres; Improved Road and Rail Infrastructure; Community Housing; Recreational Centres; And more Tasmanian Greens MPs - Royalties For Regions - November 2009 Page 6 of 9

7 Mineral Royalties The State Government receives royalties for all mining activity conducted within Tasmania pursuant to Division 5 of the Mineral Resources Development Act (1995). Table 2: Projected Mineral Royalties - Budget Actual Budget $m $m $m $m $m Mineral Royalties The current figures are based on a Budget framed in the midst of a global economic downturn It is worth taking into consideration that the above figures are drawn from a Budget framed in the middle of the Global Financial Crisis. Because of the ensuing fall in commodity prices, estimated revenue was dramatically revised down for Budget Table 3 shows mineral royalties under the Budget. These figures have been included as a useful point of reference for projected future market recovery. Table 3: Projected Mineral Royalties - Budget Actual Budget $m $m $m $m $m Mineral Royalties Once the market recovers, the amount paid to the Fund will likely be much greater Tasmanian Greens MPs - Royalties For Regions - November 2009 Page 7 of 9

8 What About Forestry? Forestry is an important Tasmanian industry, but Forestry Tasmania is not currently profitable enough, to be included in this proposal at this stage. Forestry communities, like mining communities, deserve to directly benefit from the wealth they create. Under the current structure, the Tasmanian Government does not obtain sufficient direct income through Forestry Tasmania s operations for a similar scheme to adequately benefit forestry communities. Forestry Tasmania did not pay a dividend to the State in The Tasmanian Greens will ensure forestry contributes to the Royalties For Regions scheme once Forestry Tasmania is profitable enough. Forestry Dividends As a Government Business Enterprise, Forestry Tasmania is directed to pay a dividend to the State Government upon the advice of the Treasurer pursuant to Part 11, Division 2 of the Government Business Enterprises Act (1995). In order to determine the amount paid as a dividend or indeed if one is to be paid at all the Treasurer looks to the financial position of the Enterprise. Despite Forestry Tasmania recording a $32 million profit for , the following table shows projected dividends across the forward estimates: Table 4: Projected Forestry Dividends - Budget Actual Budget $m $m $m $m $m Forestry Tasmania Royalties For Regions will include Forestry communities once Forestry Tasmania is profitable enough to contribute to the Fund The Tasmanian Government did not receive a dividend from Forestry Tasmania in and no dividend is factored into the current Budget. The Tasmanian Government is forecast to only receive $4.3 million in total from Forestry Tasmania until The ideal model would involve a combination of mineral royalties and forestry income being directed to the Fund, with projects funded in both mining and forestry communities. Tasmanian Greens MPs - Royalties For Regions - November 2009 Page 8 of 9

9 Case Study Western Australia Royalties for Regions was established by the new Western Australian Government at the end of The core aim of the program is to ensure WA s regional areas receive the equivalent of 25 per cent of the State s mining and onshore petroleum royalty receipts. Western Australia is currently implementing a similar scheme The Program is housed within the Department of Regional Development and Lands, focussing on building communities in regional areas through funding projects achieving six policy objectives: Building capacity in regional communities Retaining benefits in regional communities Improving services to regional communities Attaining sustainability Expanding opportunity; and Growing prosperity. Contributions are made to the Royalties for Regions Fund, with funding distributed through three specific purpose funds, being the: The State has allocated a significant amount to projects in regional areas Regional Infrastructure and Headworks Fund; Country Local Government Fund; and Regional Community Services Fund. Western Australia s royalty receipts totalled $2,348 million in , with an estimated $2,577 million in a projected $10,892 million across the s. Accordingly, $2,723 million has been allocated to the Royalties for Regions Fund across the period to of which 93 per cent has been allocated to regional and state-wide initiatives. Some of the key projects funded through this initiative include: The Pilbara Revitalisation Plan; Regional housing; and Contributions towards construction of the Albany and Kalgoorlie hospitals. Tasmanian Greens MPs - Royalties For Regions - November 2009 Page 9 of 9