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NSW LOCAL GOVERNMENT MERGERS - PROGRESS REPORT
Professor Percy Allan AM
Percy Allan & Associates Pty Ltd
10th November 2015
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NSW public is divided on mergers
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•48 per agree with the state government that there are too many councils, while 45 per cent oppose a reduction.
•But only one per cent of voters said the issue would determine which party they supported.
•If councils refuse cash incentives to merge voluntarily: 54 per cent of voters opposed forced mergers and 40 per cent supported them.
Source: SMH, Too many councils - and most NSW voters agree, 24 th Nov 2014
Australian councils are big by population
• Based on population, Australian (including Sydney) municipalities are amongst the largest in the world.
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Average Size of Local Government Bodies by Population, 2011
Australia USA Europe0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
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Source: Review Today using data obtained from Wikipedia
Big metropolitan councils don’t cost less
• Sydney metropolitan councils show no significant economies of scale.
• Average council cost per resident has no bearing to council size.
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Smaller rural councils cost more…
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Council Per Capita Expense versus Population Size, 2012-13
Source: DLG, Comparative Information on NSW Councils
R² = 0.4911
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0 5 10 15 20
Tota
l Exp
ense
s pe
r Re
side
nt ($
)
Population Size (thousands of persons)
Group 8-11 Councils, 2012-13
…because they are sparsely populated
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Bigger councils charge higher rates
• Larger councils in NSW generally charge higher rates than smaller to medium sized councils.
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Source: Review Today using DLG rates data and ABS population estimates
Council Average Rates versus Population Size, 2012-13
Source: DLG, Comparative Information on NSW Councils
R² = 0.5772
0
200
400
600
800
1,000
1,200
1,400
1,600
1 10 100
All NSW Councils, 2012-13
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Information Age demands Speed not Size
• The information revolution unlike the industrial revolution requires speed not size.
• Amalgamating councils into a monolithic behemoth won’t encourage flexibility and agility.
• Nor will it solve the two key problems:Prolonged underfunding of essential infrastructure assets; and
Politicised council planning and development approvals processes.
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Making already big councils bigger makes them fatter not fitter
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Fit for the Future
•IPART Final Report –Recommendations & Council Reactions
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Fit for the Future – Background
• ILGRP (Prof Sansom) Final Report released for comment in Jan 2014
• NSW Govt Fit for the Future Reform Package released in Sept 2014
• Fit for the Future submissions from councils due 30 June 2015
• IPART Assessment of Council Fit for the Future Proposals, Oct 2015
• Council merger responses to IPART Report, November 2015
• Government Decision on Council Mergers, Dec 2015?
The Case for Mergers• For infrastructure and ‘back-office’ services, increased
scale brings efficiencies and cost savings• Existing regional cooperation has failed to deliver
widespread shared services to member councils. • Mergers provides greater ‘strategic capacity’ to plan,
advocate and negotiate on behalf of communities.• Community Boards and place management enable
retention of local representation and identity.
Source: ILGRP Final Report, page 73
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The Case Against Mergers • There is no direct, general relationship between council
size and the efficiency of service delivery; • Mergers will fail to produce worthwhile cost savings; • Regional cooperation and shared services can deliver the
desired outcome; and• Local identity and representation will suffer.
Source: ILGRP Final Report, page 73
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ILGRP Merger Proposals
Professor Sansom’s Review Panel recommended:
• 33 inner-Sydney councils merge into 9 super-councils (see next slide)
• 9 outer-Sydney councils remain the same (Blacktown, Blue Mts, Camden, Campletown, Hawkesbury, Penrith, Sutherland, The Hills and Wollondilly)
• 24 of the 110 non-Sydney councils merge, with the rest joining regional Joint Organisations (JOs).
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IPART Final Report
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Scale was the Overriding Test
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IPART, Assessment of Council Fit for the Future Proposals, page 28
IPART’s Assessment Criteria
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Fit for the Future – CriteriaOnly after passing the Scale & Capacity test was a Council judged on whether it met Financial Targets over 10 years:
1. Sustainability • Operating Performance Ratio (>0%)• Own Source Revenue Ratio (>60%)• Building and Asset Renewal Ratio (>100%)
2. Infrastructure and Service Management• Infrastructure Backlog Ratio (<2%)• Asset Maintenance Ratio (>100%)• Debt Service Ratio (<20%)
3. Efficiency• Real Operating Expenditure per capita (Trending Down)
IPART Report Card (as portrayed by NSW Govt.)
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IPART Map of Fit and Not Fit Regional Councils
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IPART List of Fit Regional Councils
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IPART List of Unfit Regional Councils
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IPART’s Finding on Regional Councils
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IPART Map of Fit and Not Fit Sydney Councils
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List of Fit and Not Fit Sydney Councils
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IPART’s Findings on Sydney Councils
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IPART’s Findings on Sydney Councils
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Conclusion It’s clear that IPART judged the fitness of a council on its capacity to merge with a neighbouring council/councils, and only if it passed that test did its financial sustainability count.
• If a council was recommended for merger by the ILGRP (Sansom) report, but refused to do so it was considered unfit in terms of scale. If it agreed to merge it was deemed fit.
• If a council was already large enough, but was financially unsustainable it was unfit (e.g. Blacktown and Hornsby).
The overriding criteria was not whether an existing council had strategic capacity, but whether there was scope to merge with a neighbour to give it greater population and geographic scale.
The ability to become fatter, not fitter was the acid test.
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The End
• Professor Percy Allan AMPrincipalPercy Allan & Associates Pty LtdE: ap.allan@bigpond.net.au
T:02 9810 6346 W: www.percyallan.com.au
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