B: 1 · 2015. 11. 12. · B: 1 Extra Ordinary Meeting of the Council of the Shire of Dungog, to be held Monday 16 November 2015 commencing at 4.30pm. GENERAL MANAGER Craig Deasey

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Extra Ordinary Meeting of the Council of the Shire of Dungog, to be held Monday 16 November 2015 commencing at 4.30pm.

GENERAL MANAGER

Craig Deasey 1. FIT FOR THE FUTURE – IPART FINAL DETERMINATION EF14/107 Précis: Reporting on IPART’s decision and to determine Councils final response to Government.

********** The “Fit for the Future” (F4F) process has reached a place where the final destiny of Dungog Shire Council rests in the hands of the NSW State Government. The IPART determination of Dungog Shire Council as being “unfit” is of no surprise but to subsequently make a similar determination for Maitland City Council makes the IPART considerations somewhat farcical. The Council now has one final opportunity to “inform” the NSW Government as IPART has completed its task of providing a report to Government. IPART will not be reviewing its assessment of Councils against the F4F criteria. The form of response by Council is by completion of a template by the General Manager which is attached as Annexure ‘A’ for Councillors information. Since the release of the IPART report and the Councils Extra Ordinary meeting, the Council has conducted a series of “drop in” sessions for members of the community. Council has also received additional comments/representations from the community which are enclosed as a separate attachment for Councillor perusal. As Councillors will recall, both the Dungog & Maitland Councils agreed to look at the merger business case in light of the Independent Local Government Review Panels recommendations. There were a lot of discussions held between the officers of both Councils with the consultants of MorrisonLow. The consultants’ analysis highlighted that because both Councils are extremely “lean” organisations from a staffing perspective, they could not rely upon genuine long term savings from wages and salaries in this situation. The IPART analysis highlighted that the NPV from the merger could produce benefits of $5.3Mil over 20 years including the NSW Government’s $5Mil contribution. I note that IPART has said “could” as the benefit from their analysis is really an NPV of $300,000 or less after 20 years, in the context of value for residents of a projected combined population of 109,300 by 2031 it is insignificant. This sum does not reflect any real long term financial benefit to our communities; it is not in the tens of millions like some of the proposed mergers for metropolitan Councils. The basis for IPART’s calculation is the removal of increased staffing levels, which I am at a loss to explain the logic behind that assumption. Merger Business Case: On 10 November 2015 myself and Shaun Chandler (Executive Manager Corporate Services) attended a further session with consultants MorrisonLow and Maitland City Council staff.

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ANNEXURE ‘A’ TO ITEM NO. 1 – GENERAL MANAGERS REPORT

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lbrighton.dunFile AttachmentBPEO16.11.15 Ann A_Redacted.pdf

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The Merger Business Case was re-examined as regards the costs/savings etc. built within the model to analyse in more detail. Adjustments were made in respect of certain factors as it was argued particularly from a Dungog Shire perspective that the operational plant was already “light on” due to this Councils reliance upon external plant hire contractors, therefore disposal of fleet should be discounted despite the consultants experience in other mergers. There were cost risks associated with the merger including employee wage harmonisation, the costs of branding & signage were revisited as well as the cost of the transitional body. Information technology costs were also adjusted upwards based upon the consultants advice and experience. The systems utilised by Maitland are different to Dungog’s accordingly the data integration and cleansing would be an enormous process and this is aside from ensuring suitable bandwidth capabilities for seamless operation. There are elements not currently factored into the Merger Business Case but they are risk exposures that may have a financial consequence for the newly merged entity, including the current legal action against Martins Creek Quarry operators, the outcomes of the Dungog Flood Study and the current Sec 94 liabilities associated with Dungog Shires Sec 94 Plan let alone the influence on the depreciation expense following asset condition harmonisation of standards for the merged entity. The MorrisonLow report highlighted a negative NPV changes to the business case above and making the allowance of the additional $5Mil for community infrastructure results in the position deteriorating further. Rating Structure Discussions were also held in respect of the general rates elements as Maitlands’ current approved rating path is critical for the funding of their communities infrastructure services. The merged entity would not want to see a reduction in the general rates paid by the Maitland community. How the new merged entity would approach the Dungog rating structure, I would envisage that as an interim measure the general rates for Dungog Shire would be increased at a similar rate 7.25% from an equity perspective. This assumption is based upon the combining of the notional yields of both Councils and then applying the increase to the various rating categories. (Refer Annexure ‘B’ as a guide.) The implications as regards domestic waste management charges will differ in view of the service levels and the current waste collection contract in place for Dungog Shire Council, however the costs of waste disposal could well influence the domestic waste management charge in the future as the waste levy that the NSW Government collects from the Maitland LGA is double the price paid by Dungog Shire Council. Clarification as regards the applicability of the waste levy is still outstanding. Summary The previous decision of Maitland and Dungog Councils was to reject the merger proposal as a consequence of the outcomes of the MorrisonLow report, but also as regards the different communities of interest. Maitland Council has worked extensively with their community to achieve a Special Rate Variation through IPART of 63% over 7 years to deliver the infrastructure and services to their community into the future. Obviously they do not want to see that compromised by a merger with a poor cousin. There has always been a spirit of cooperation throughout the Hunter Councils to support one another. You only have to look at what regional cooperation can do, with Hunter Councils and related entities Strategic Services Australia Limited, Local Government Legal, Regional

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ANNEXURE ‘B’ TO ITEM NO. 1 – GENERAL MANAGERS REPORT

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lbrighton.dunFile AttachmentBPEO16.11.15 Ann B.pdf

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Procurement, Local Government Training Institute all operating as a consequence of regional cooperation. Maitland has never been predatory as regards boundary adjustments in the past and throughout this entire process Maitland Council has left it to Dungog Shire Council to determine its position. The Dungog Shire is continuing to grow, the proximity to the employment markets of the lower Hunter, coupled with the rural lifestyle, cultural heritage and natural environment are the key selling points for the area. Whilst the communities will gradually evolve as a consequence of growth they will hopefully maintain that sense of place as rural communities. This is potentially at risk should a merger take place. What weighting will the Dungog Shires community aspirations (reflected through the Community Strategic Plan & Local Environment Plan) receive in the decision making process of a merged Council? This is an unknown determinative as the potential/probable loss of local representation will impact upon advocacy for the local communities. I understand wholeheartedly that Councillors will have mixed feelings as regards the decision they have before them. I have been proud to have worked at Dungog Shire Council for 16 years and the staff of Dungog Shire Council has continued to work with limited resources and yet still continue to deliver for the community of Dungog Shire. In the end the decision is Councils either:

i) Defiant of the State Governments threat and make them force their hand or; ii) Succumb to what is being touted as the inevitable.

IMPLICATIONS Financial- General (merged entity) $5Mil was originally offered by the NSW Government for regional Councils that resolved to merge. The Government has now also offered a further $5Mil for community infrastructure to the newly formed merged entity. This additional offering is really inequitable as the population size does not come into the equation, there is greater financial advantage for smaller communities to merge but $5Mil spread amongst a population of some 83,000 people it is not going to provide a significant financial incentive. If both Councils reject the merger proposal again and the Government determines to merge the two LGA’s there is the risk that no funding would become available to the merged entity. Further risks relate to certain funding elements including: 1. The distribution of the Financial Assistance Grant, as the NSW Grants Commission

pays the levels that apply to both LGA’s for four years after the merger before assessing as a single entity. At the present moment the equalisation component of the grant equates to $157.16 per head of population in the Dungog Shire and $70.05 per head in Maitland. The potential negative financial impact at year 5 is in the order of $800K. (refer Annexures ‘C’ & ‘D’)

2. The distribution of the REPAIR grant as a consequence of the manner in which the

grant across the region is distributed by RMS and the influence of Benefit/Cost/Ratios which is particularly likely to impact upon the area of the Dungog LGA. (Currently capped at $250K p.a)

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ANNEXURE ‘C’ TO ITEM NO. 1 – GENERAL MANAGERS REPORT

Comparative Analysis Value of Financial Assistance Grant per head of population

Based on 2015/2016 FAGS OLG 2013/2014 Group 10 Councils

General Purpose Component Rank

2014/15 Council Pop'n

ERP 2013

Pop'n ERP 2014

Pop'n Movement

(%age)

FAG 2014/5

FAG 2015/6 %age change

Value per head pop'n

2014/15

Value per head

2015/16

%age change

1 Dungog 8884 9,108 2.52% $1,423,115 $1,431,407 0.58% $160.19 $157.16 -1.89% 2 Uralla 6287 6,408 1.92% $1,370,665 $1,396,554 1.89% $218.02 $217.94 -0.04% 3 Blayney 7259 7,409 2.07% $1,609,712 $1,617,154 0.46% $221.75 $218.27 -1.57% 4 Kyogle 9877 9,531 -3.50% $2,330,044 $2,356,293 1.13% $235.91 $247.22 4.80% 5 Glenn Innes Severn 9311 8,966 -3.71% $2,331,796 $2,361,871 1.29% $250.43 $263.43 5.19% 6 Liverpool Plains 7965 7,819 -1.83% $2,000,457 $2,053,516 2.65% $251.16 $262.63 4.57% 7 Cootamundra 7729 7,749 0.26% $2,008,149 $1,998,983 -0.46% $259.82 $257.97 -0.71% 8 Gloucester 5181 5,065 -2.24% $1,356,525 $1,390,584 2.51% $261.83 $274.55 4.86% 9 Oberon 5438 5,327 -2.04% $1,472,493 $1,496,001 1.60% $270.78 $280.83 3.71%

10 Wellington 8875 9,054 2.02% $2,456,770 $2,490,918 1.39% $276.82 $275.12 -0.61% 11 Junee 6298 6,297 -0.02% $1,767,787 $1,759,086 -0.49% $280.69 $279.35 -0.48% 12 Snowy River 8188 8,069 -1.45% $2,324,768 $2,314,224 -0.45% $283.92 $286.80 1.01% 13 Forbes 9748 9,759 0.11% $3,013,108 $3,037,101 0.80% $309.10 $311.21 0.68% 14 Upper Lachlan 7559 7,761 2.67% $2,349,894 $2,405,286 2.36% $310.87 $309.92 -0.31% 15 Temora 6216 6,050 -2.67% $1,963,070 $1,970,343 0.37% $315.81 $325.68 3.12% 16 Murray 7319 7,466 2.01% $2,520,430 $2,594,040 2.92% $344.37 $347.45 0.89% 17 Berrigan 8644 8,413 -2.67% $3,026,149 $3,018,620 -0.25% $350.09 $358.80 2.49% 18 Tenterfield 7071 6,980 -1.29% $2,610,190 $2,675,083 2.49% $369.14 $383.25 3.82% 19 Narromine 6841 6,854 0.19% $2,562,140 $2,582,038 0.78% $374.53 $376.72 0.59% 20 Gwydir 5425 5,080 -6.36% $2,186,482 $2,344,153 7.21% $403.04 $461.45 14.49% 21 Warrumbungle 9778 9,786 0.08% $3,949,406 $4,035,224 2.17% $403.91 $412.35 2.09% 22 Narrandera 6280 5,961 -5.08% $2,608,459 $2,718,815 4.23% $415.36 $456.10 9.81% 23 Wentworth 7120 6,884 -3.31% $3,400,034 $3,607,272 6.10% $477.53 $524.01 9.73% 24 Walgett 7235 6,840 -5.46% $3,761,804 $3,874,170 2.99% $519.95 $566.40 8.93% 25 Bland 6410 5,994 -6.49% $3,837,107 $4,058,797 5.78% $598.61 $677.14 13.12% 26 Cobar 5178 5,111 -1.29% $3,242,636 $3,448,851 6.36% $626.23 $674.79 7.75% 27 Lachlan 6844 6,775 -1.01% $4,628,093 $4,925,674 6.43% $676.23 $727.04 7.51%

Maitland 73447 75,170 2.35% $5,290,247 $5,265,505 -0.47% $72.03 $70.05 -2.75%

Merged Entity Dungog 9,108 $1,431,407 $157.16 Maitland 75,170 $5,265,505 $70.05 Total 84,278 $6,696,912 Potential Funding Loss 9108 $793,410.20 $87.11

lbrighton.dunFile AttachmentBPEO16.11.15 Ann C.pdf

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ANNEXURE ‘D’ TO ITEM NO. 1 – GENERAL MANAGERS REPORT

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lbrighton.dunFile AttachmentBPEO16.11.15 Ann D.pdf

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Financial – DSC ratepayer Irrespective of the outcome the ratepayers of the Shire will be paying more for general rates, Council has operated as a lean organisation for many years and there are very few services provided outside the core functions of a local government entity. The legacies of cost shifting, increased heavy vehicle mass weight limits, deferral of funding for increased maintenance intervention levels, have come home to roost. The majority of these factors have been outside the control of the Council. Community As previously highlighted within the Merger Business Case local representation is an issue for the communities of Dungog Shire within a newly merged entity, irrespective of how the elected Council is structured in relation to Councillor numbers the community may achieve representation of only one individual from the entire Dungog LGA. Consultative The NSW Government has been advertising extensively of late as regards the process. Councillors have been in attendance at community drop in sessions in the last week, the Merger Business Case has been presented to the communities in August 2015. Statutory a. Council staff

Sec 218CA covers the maintenance of staff in rural centres as a consequence of amalgamation. Further elements are captured through Chapter 11 Part 6 of the Local Government Act (NSW) 1993. b. Amalgamation

Reference is Chapter 9 of the Local Government Act (NSW) 1993. RECOMMENDATION For Councillors determination.

Documents

B: 1 · 2015. 11. 12. · B: 1 Extra Ordinary Meeting of the Council of the Shire of Dungog, to be held Monday 16 November 2015 commencing at 4.30pm. GENERAL MANAGER Craig Deasey