The future of local government in Tasmania - TCCI Presentations/tcci_local... · Local Government Division, Local Government Sustainability Objectives: Consultant Paper, ... The Changing

The future of local government in Tasmania Discussion paper

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1 Contents

2 Executive summary ........................................................................................................................................ 2

3 Background: The Debate That Had to Happen But Never Did ................................................................... 7

4 Reform pathway – lessons from history ..................................................................................................... 11

5 Reform considerations ................................................................................................................................ 13

6 Structural reform models ............................................................................................................................ 21

7 Evaluating potential reform options ........................................................................................................... 24

8 Other performance enhancement ideas .................................................................................................... 25

9 Appendix 1: Recent inquiries ...................................................................................................................... 27

10 Appendix 2: The regulatory obligations of local government .................................................................... 34

11 References ................................................................................................................................................... 36

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TCCI Local Government Project

Stage 1 – Regional forums with business & local government (complete)

Stage 2 – Discussion paper released & stakeholder comment sought (in progress)

Stage 3 – Financial modelling of options and scenarios by independent advisory firm BDO (in

progress)

Stage 4 – Lobbying for tri-partisan support for reform actions.

2 Executive summary

The aim of this paper is to stimulate discussion and feedback by providing the community, business and

other stakeholders with a critical overview of local government reform considerations and options. This

paper will assess the following:

criteria for reform;

reform options; and

other performance enhancement ideas

The starting point of this discussion paper is the acknowledgment that having well represented local

communities is as important as other economic considerations. We are not proposing to cut the number of

councillors in Tasmania under any of the options.

Furthermore, given that local government operational expenditure is equivalent to 14 percent of State

Government operational expenditure, the drive for cost savings should not be seen as an economic

panacea.

Rather, it is the cost savings plus enhancements to strategy, planning, infrastructure, human capital and

streamlined regulations that will boost productivity and wellbeing. For these gains to be achieved, there

also needs to be better mechanisms incentivising councils to continuously improve and compete for

investment.

The TCCI has taken it upon itself to consult widely in the formulation of its local government policy.

Accordingly, feedback will be sought on this discussion paper from the local government sector, local

chambers of commerce, industry associations and TCCI members (including businesses and not-for-profit

organisations).

This process will feed into a major financial modelling exercise that the TCCI has engaged independent

advisory firm BDO to conduct. The model will be used to evaluate, in detail, various reform options in a

transparent and open manner.

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Recent inquiries

This discussion paper draws heavily on the following recent work (summarised at Appendix 1):

Southern Tasmania Councils Authority (STCA) Independent Panel, Independent Review of

Structures for Local Governance and Service Delivery in Southern Tasmania, 2011.

Deloitte Access Economics, Local Government Structural Reform, 2011.

Australian Centre of Excellence for Local Government (ACELG), Consolidation in Local Government:

A Fresh Look, 2011.

Tasmanian Chamber of Commerce & Industry: Member Survey, 2011.

Auditor-General, Report on Local Government Authorities, 2011.

Local Government Division, Local Government Sustainability Objectives: Consultant Paper, 2011.

Productivity Commission, Business Regulation Benchmarking – Role of Local Government as

Regulator: Consultation Paper, 2011.

TCCI/Concept Economics, Economic Efficiency of the Tasmanian Planning System, 2008.

Background

Over many years in Tasmania and nationally there has been a somewhat ad hoc expansion of local

government from a ‘minimalist’ model providing property-based functions to a ‘maximalist’ model providing

many more human services and ever-widening regulatory responsibilities. This has imposed a large

financial imposition on local governments and ratepayers.

Despite the greater complexity of local government, no changes to the structure of local government have

occurred in Tasmania since 1993, aside from the corporatisation of water and sewerage services in 2008.

Given that Tasmania’s local council sector is among the most disaggregated in Australia, many advocates

of reform suggest that significant economic and social benefits could be achieved through greater

consolidation.1 However, financial sustainability should not be the only driver of reform, as argued by the

Australian Centre of Excellence for Local Government:

“newer evidence about the value of strategic capacity, and that it may be strongly linked to larger units

of local government, means that amalgamations should not be ruled out as an option simply because

other forms of consolidation can yield economies of scale or scope, or because amalgamations have

not been shown to generate significant cost savings or rate reductions.”2

It is vital that well-conceived measures are undertaken, as history shows that a poorly managed reform

process is unlikely to deliver the anticipated gains.3 It is also critical that the benefits of having small

councils are retained.4

1 Deloitte Access Economics, as above

2 Aulich et al, above n 16.

3 Ibid.

4 Helen Fulcher, South Australian Department of Local Government, The concept of community of interest (1991).

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Implementation issues

The reform process can only operate effectively if it is conducted in an environment that fosters mutual

trust and respect between all stakeholders. Unlike the failed 1997 reforms, councils need to be extensively

engaged in this process. Furthermore, reform cannot be successfully implemented without some level of

public support.

The design process of structurally reforming councils must take into account contemporary best practice.

Furthermore, consideration must be given to the local context and any reform should reflect the needs of

local ratepayers.

Leadership is always a critical factor, as it is only through a well-conceived process that major disruptions

can be avoided. For this reason, the State Government needs to play a proactive role.

Reform criteria

To gain State and local government support for change there is a real need for the community, business

and other relevant stakeholders to formulate, test and articulate a compelling case for reform.

Drawing on recent inquires and consultation across Tasmania, the TCCI believes that the objectives and

success criteria for any reform should include:

1. Communities of interest (weight = 30)

Retention of strong communities of interest and effective representation, so that Tasmania’s unique

sense of community can be maintained and enhanced into the future.

2. Financial outcomes (weight = 30)

Financially efficient councils, which can effectively carry out their statutory, infrastructure and

community service roles while charging competitive rates, fees and charges. Reform costs are to be

deducted from expected financial benefits. (Subject to detailed financial modelling by BDO.)

3. Planning, development assessment and other regulatory roles (weight = 10)

A consistent, flexible and efficient planning and development assessment system and regulatory

environment that ensures Tasmania has a comparative advantage in attracting private investment.

4. Strategic capacity (weight = 10)

Council bodies with strategic capacity so that resources are channelled into the right opportunities,

cities and regions can attract major industries and events, and effective flexible partnerships can be

formed other governments and the private sector.

5. Regional equity (weight = 10)

A fair and efficient distribution of funding between metropolitan and regional areas.

6. Council human resources (weight = 5)

A local government sector that can attract and retain highly skilled professional labour.

7. Private sector workforce (weight = 5)

Stronger private sector workforce productivity and participation, to improve the competitiveness of our

industries and promote wealth creation.

These outcomes should make Tasmania’s cities and regions a great place to live, work, invest and visit.

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Reform model options

The following broad models for local government reform are explored in this paper.

Greater use of shared services

Service sharing among councils may be a good alternative to amalgamations to realise economies of scale

and scope. However, past experience with ad hoc shared service arrangements in Tasmania have delivered

mixed results. There have been only limited cases where cost reductions have been successfully attained.5

However, there is no reason why service sharing should not be pursued along with other structural reforms.

Amalgamation of metropolitan councils only

This model would involve amalgamating metropolitan councils into larger units, akin the recommendations

of the STCA Independent Panel to create a Greater Hobart City Council. This structure would improve

efficiency levels, and provide a more powerful strategic unit and political voice for Tasmania’s city

gateways.

Smaller outlying councils may fear being left behind. However, the National Urban Policy argues the strong

cities vital to economic development as they act as effective economic gateways to surrounding regions.6

Amalgamate councils into larger regional councils

This would involve a full amalgamation of councils. Electoral wards could be created to maintain local

representation and democracy. Large regional councils could act as advocates and provide a uniform

strategic vision.

One argument against amalgamations is that combining councils that currently deliver different levels of

services with different municipal rates will create inequities within the amalgamated council. However,

existing legislation already allows for differential rating within councils, which could be used to maintain

equity while transitioning to common service levels.

Enhanced common service providers

Under this approach the existing 29 councils could be maintained, but greater efficiency would be sought

by outsourcing functions to either a single State-wide common service provider or three regional service

providers. Alternatively, a common service provider could be established to enhance other structural

changes.

There is a wide range of possible common service provider scenarios, from outsourcing just one function to

outsourcing most functions other than representation and managing local civic assets and events.

By making use of specialised resources to serve their constituents, rather than attempting to operate all

such services on their own, this would allow councils to become ‘champions’ for their municipalities.

Enhancing the role of common service providers does risk increasing overall costs due to greater

complexity and duplication associated with a growing bureaucracy. 7

5 Deloitte Access Economics, above.

6 Australian Government, Our Cities, Our Future – A National Urban Policy for a productive, sustainable and liveable future (2011).


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A final assessment of these reform model options against the criteria will be made on the basis of

outcomes from independent financial modelling and feedback received from this discussion paper (see

section 7.)

Other performance improvement ideas

This paper also proposed that the following performance improvement and governance strategies should

also be pursued (see section 8):

1. Consider State-Local function reassignment.

2. Introduce financial performance incentives.

3. Establish Community Boards & community consultation frameworks.

4. ‘Establish a MyCouncil’ website.

5. LGAT/TCCI joint review of regulation administered by local government.

6. Auditor-General review of regulatory compliance.

7. Service sharing in addition to structural reform.

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3 Background: The Debate That Had to Happen But Never Did

Councils can play a significant role in the lives of Tasmanians through their facilitation of social and

economic development. Indeed, some communities are more engaged with their council than any other

sphere of government.8

Nevertheless, there are a broad range of views about the structure of councils: at one extreme some people

believe all councils functions should be directly managed by the State Government, whilst others believe

States should be abolished in favour of more local government responsibility and power. Most people,

however, believe there is some role for both State and local tiers of government.

In ‘The Debate that Had to Happen But Never Did: The Changing Role of Local Government’, Brian Dollery

and others portray the expansion of local government in Australia from a minimalist model, focused on

services to property (caricatured as ‘roads, rates and rubbish’), into a maximalist model providing more

social and regulatory services. 9

They note that the expansion: ‘has occurred by default in an ad hoc incremental manner with virtually no

debate’.10 While some argue that this shift to a ‘maximalist’ local government model is a reflection of the

services communities want, it is not a reflection of what they are prepared to pay for; as it has come at the

cost of poorer infrastructure maintenance.

Dollery et al suggest an alternative optimalist model, whereby municipalities are ‘champions of their areas’

and take a leadership role in harnessing public, NGO and private resources to promote particular

outcomes, rather than attempt to fund and operate local initiatives on their own’.11 They note that

maximalist models are more prone to organisation failure and place the interests of their ratepayers at

greater risk.12

In Tasmania, the 1962 Local Government Act gave councils a narrow range and responsibilities, limited to

utilities and roads provision.13 This has been considerably expanded under the Local Government Act 1993

(Tas), section 20(1), defining the current roles and functions of councils as being to:

formulate, implement and monitor policies, plans and programmes for the provision of appropriate

services and facilities to meet the present and future needs of the community;

facilitate and encourage the proper planning and development of the municipal area in the best

interests of the community;

manage, improve and develop efficiently and effectively the resources of the council;

develop, implement and monitor strategic plans for the development and management of the

municipal area;

provide for the health, safety and welfare of the community;

represent and promote the interests of the community; and

provide for the peace, order and good government of the municipal area.

8 Local Government Managers of Australia, Local government in Tasmania where to next? (2009).

9 Brian Dollery, Joe Wallis and Percy Allan, ‘The debate that had to happen but never did: The changing role of Australian local

government’ (2006) 41 Australian Journal of Political Science, 553- 567.

10 Ibid, p 553

11 Ibid, 561

12 Ibid, 565

13 Hand, G. J., et al (1996), Roles and Responsibilities of State and Local Government, p. 8.

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In essence, councils have moved away from their traditional narrow emphasis on ‘services to property’

towards a broader ‘services to people’ approach’14 - (see: Figures 1 & 2). In addition, there is a widening

range of legislated responsibilities set by the State Governments (see Appendix 2).

Source: ABS 5512.0 Government Finance Statistics.

As the above chart demonstrates, there has been a steady rise in spending on transport &

communications, as well as in recreation & culture. The sharp decline in housing & community amenities

spending reflects the transfer of water and sewerage services into independent corporations.


As shown above, there has also been rapid growth in local government spending under the social security

and welfare function.

14 Brian Dollery, Joe Wallis and Percy Allan, ‘The debate that had to happen but never did: The changing role of Australian local

government’ (2006) 41 Australian Journal of Political Science, 553, 555.

0

50

100

150

200

250

300

Tota

l sp

end

ing

($m

)

Figure 1. Tasmanian Local Government Sector - Spending by Purpose (Top 5 functions)

Housing and community amenities

Transport and communications

General public services

Recreation and culture

Other economic affairs

0

5

10

15

20

25

30

35

Tota

l sp

end

ing

($m

)

Figure 2. Tasmanian Local Government Sector - Spending by Purpose (Bottom 5 Functions)

Social security and welfare

Other

Health

Public debt transactions

Public order and safety

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0

1,000

2,000

3,000

4,000

5,000

6,000

Op

ex

$'0

00

s

Figure 3. Operational ExpenditureState v Local

State Government Opex Local Government Opex

The evolutions of council functions have placed an enormous financial imposition on councils.15 A series of

reports have highlighted the ever increasing gap between the rapid expansion of local government services

and the comparably slower growth in revenues.16

Worryingly, eleven councils failed to achieve a net operating surplus during the 2011 financial year.

According to the Auditor-General’s report some councils have recorded operating deficits over a number of

years.17 If the current cost growth trends continue, it will come at the cost of further infrastructure

degradation.18

Furthermore, because of small council areas, communities of interest often overlap resulting in inequitable

cross-subsidies between council areas. Launceston City Council, for example, incurs a net deficit of over

$11 million a year maintaining and running the city’s aquatics centre, sports grounds, parks and

museums.19 These ratepayer-funded facilities are being used by not only Launceston City Council

constituents, but by many people from neighbouring municipalities as well.

There is some community concern about whether 29 councils are needed to provide contemporary best

practice in local government services given their evolving role and changing technology and expectations.

3.1 The current situation in Tasmania

Tasmania is currently divided into 29 municipalities with the six largest councils serving more than half of

the State’s population. In terms of geographical size, Tasmania’s councils are the smallest in the nation.

Tasmania is the only Australian State or Territory where all councils service a population smaller than

75,000 people.20

As shown in Figures 3 & 4 below, total local government sector operational expenditure (‘opex’) is

equivalent to 14 percent of State Government opex. In the decade to 2009-10 it grew by 56 percent, while

State Government opex grew by 77 percent.


15 Local Government Managers of Australia, above n 8.

16 Chris Aulich et al, Australian Centre of Excellence for Local Government, Consolidation in local government: a fresh look (2011).

17 Auditor-General, Parliament of Tasmania, Local Government Authorities (2011).

18 Dollery, Wallis and Allan, above n 14.

19 Launceston City Council (2011), Financial Statements, Year Ended 30 June 2011, p. 68.

20 Ibid.

0

100

200

300

400

500

600

700

800

Cap

ex

$'0

00

s

Figure 4. Capital ExpenditureState v Local

State Government Capex Local Government Capex

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However, the local government sector plays a much more prominent role in infrastructure, as show in the

capital expenditure (‘capex’) figures. State Government capex increased markedly in 2009-10 due to

federal stimulus spending. Historically, capex by the local government sector has matched or exceeded that

of State Government. However, as the Auditor-General has found, the asset replacement programs of many

councils remain deficient.21

Given that Tasmania’s local council sector is among the most disaggregated in Australia, some advocates

of reform suggest that significant economic and social benefits could be achieved through greater

consolidation.22 It is nevertheless vital that well-conceived measures are undertaken, as history has

demonstrated that a poorly managed reform process is unlikely to deliver the anticipated gains.23 It is also

critical that the benefits of having small councils are retained, as ‘the most responsive municipality is one

which is securely rooted in a well established community’.24

21 Auditor-General, p. 8

22 Deloitte Access Economics, as above

23 Ibid.

24 Helen Fulcher, South Australian Department of Local Government, The concept of community of interest (1991).

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4 Reform pathway – lessons from history

In 1993, Tasmania’s 47 councils were reduced to 29. The Local Government Review Board subsequently

found: ‘that considerable benefits arose …. evidenced by reductions in the levels of indebtedness, an

increase in the level of reserve funds held and by reductions in the level of administrative expenses,

despite the broadening of managerial and other professional skills available to councils.’25

Tasmania’s last significant attempt to implement council amalgamations was in 1997, when the State

Government attempted to reduce the number of councils from 29 to 11, on the advice of a review by the

Local Government Board that found: “the financial benefits of the proposed reduction in the number of

councils will be widespread and will directly benefit the vast majority of residents and businesses.”26

This attempt at reform failed after three councils (Devonport City, Central Highlands and Southern

Midlands) mounted a legal challenge. The Supreme Court of Tasmania held that regulations establishing a

local government election, through which the structural reforms would be implemented, were invalid, as

they referred to councils that did not yet exist.27 The State’s minority Liberal Government indicated an

intention to appeal the Supreme Court’s decision if it remained in office, but was voted out at the

subsequent State election.

The Local Government Board Review and the subsequent legal challenges came at substantial cost to

taxpayers, for no gain.

Arguably, the Government relied on regulations under the Local Government Act rather than enacting

separate transitional legislation because of expected difficulties in passing legislation through Parliament.

Opposition parties and key members of the Legislative Council, many with strong ties to local government,

were opposed to the reforms.28

A recent important step in the evolution of councils was in 2008, when the State Government instituted

water and sewerage reform by creating four corporations owned by councils to deliver water services under

the regulation of the Office of the Tasmanian Economic Regulator. Council themselves are now reviewing

the four-corporation structure, with a possible view towards more consolidation.

What key lessons can be learned from past attempts at reform?

4.1 Justify the need for reform and consult with all relevant stakeholders

The public need to be made aware of the objectives and realistic outcomes expected from a structural

reform of local government. These objectives must be based on a sound and balanced evidence base. The

public needs to be made aware of:

the motivations for considering reform or change;

the merits of each options available; and

the desired outcomes of the reform process.

25 Tasmanians for reform, Briefing on structural reform of local government in Tasmania (2011).

26 Deloitte Access Economics, p. 10.

27 See Devonport City Council, Central Highlands Council and Southern Midlands Council v Farrell, David (Chief Electoral Officer)

[1998] TASSC 92.

28 Marcus Haward and Ivan Zwart, ‘Local government in Tasmania: reform and restructuring’ (2000) 59 Australian Journal of Public

Administration 34.

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Regard must also be given to differing local contexts. As noted in the Australian Centre of Excellence for

Local Government’s report into structural reform, many ratepayers would find enhanced service delivery

more appealing than a reduction in their council rates.29

4.2 Role of State Government

Across Australia, local government reform has been implemented through both compulsory and voluntary

arrangements. Presently the Tasmanian Government holds a policy of no forced amalgamations and has a

16 step procedural process designed to assist councils considering voluntary mergers.30 While

acknowledging the rationale behind this position, the Local Government Managers of Australia highlight a

number of potential difficulties with this approach as it does not ensure:

that all councils that may wish to participate in discussions about reform are included; or

the inclusion of councils which do not wish to participate in discussions, but should be involved in

a rational undertaking.

Furthermore, the Local Government Board added there is only a limited potential for success of voluntary

merges and that vested interest within the council sector may contribute to the possibility of failure.31

Notably, no proposed mergers have been put forward since the amalgamation proposal by the Break O’Day

Council and the Glamorgan-Spring Bay Council was reviewed.32

The State Government, therefore, needs to play a proactive role in the reform process. It is only through

working together that the State Government and councils can create a shared vision for local government

in Tasmania.33

However, given that local government rates are among the most efficient forms of taxation, the rationale for

cross-subsidisation by the State Government, other than one-off incentive payments, is weak.

4.3 The design process

The design process of structurally reforming councils must take into account local conditions and

contemporary best practice so that efficiencies and other desired gains can be maximised.

The design process should be undertaken by independent experts in a manner that is consultative and

fosters local government engagement. This process needs to incorporate a careful design of governance,

incentives and risk management structures to ensure the benefits of reform are maintained into the

future.34 Some suggested performance improvement strategies are contained later in this report.



31 Local Government Board, above.




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5 Reform considerations

While the local government sector has many disparate representatives, they generally contend that the

sector is supportive of change. The STCA Independent Panel’s recent study confirms this, although we are

yet to see outcomes delivered. This has, in turn, opened the door for a much broader evaluation of potential

structural reforms at a local government level.35

While councils in each region are considering their future directions, external support is also necessary to

implement change. Many have thus called for the State Government to drive this process with tri-partisan

support. To gain State Government support there is a real need for the community, business and other

relevant stakeholders to formulate, test and articulate a compelling case for reform.

In order to gain a greater appreciation of council and business perceptions about the future of local

government in Tasmania, the TCCI conducted a series of State-wide forums in Hobart, Devonport and

Launceston. The following reform criteria arose from those forums.

5.1 Communities of interest

Retention of strong communities of interest and effective representation, so that Tasmania’s

unique sense of community can be maintained and enhanced into the future.

While much of the motivation for council reform is based on economic efficiency, matters of community

interest, local values and democratic representation must also be central.36

The strong connection that regional Tasmanians hold with their local area means that it is critical to

consider ‘communities of interest’ when assessing potential structural changes to local government. In a

local government context, ‘community of interest’ can be seen along the following dimensions:

perceptual – a defined sense of belonging to an area or region;

functional – the community’s physical and human services are met with reasonable economy;

political – a democratically elected body represents the interests of all its constituents.37

Whilst it is inevitable that disagreement will exist as to where the boundaries of communities of interest lie,

it is ultimately up to these communities themselves to voice their preferences.

There is a concern among regional communities in particular that their sense of identity will be weakened if

council amalgamations are undertaken. In urban centres this sense of tight community identity is not as

pronounced, particularly for younger generations who have a more global or ‘virtual’ sense of community.

This is evidenced by the fact that if one asks a resident of Bellerive, Taroona, or Rosetta where they live

they are likely to say: ‘Hobart.’ On the other hand, somebody from a regional community such as Oatlands,

Bicheno, or Nubeena will generally answer with the name of their township.38

The existence of tight regional communities of interest should not be seen as a barrier to the reform

process, as many service delivery reforms could occur while maintaining representative structures intact.

35 Allan Garcia, ‘The momentum Train’, LGAT News (Hobart), December 2011, 4.


37 Fulcher, above n 24.

38 Munro, Eslake and Hains, above n 79.

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5.2 Financial outcomes

Financially efficient councils, which can effectively carry out their statutory, infrastructure

and community service roles while charging competitive rates, fees and charges. Reform

costs are deducted from financial benefits.

The Auditor-General found that a number of councils continue to incur deficits and “action is needed to

increase revenues or reduce costs to the point where all costs are covered from normal operating

revenues”.39 On a consolidated basis, Tasmania councils only generate 80 percent of their own revenue.

Furthermore, in 2008-09, ten councils recorded capital expenditure on existing assets below the

benchmark ratio of 100 percent of depreciation. Worryingly, this included key urban councils such as

Hobart, Glenorchy and Kingborough. However, as a positive step forward LGAT is implementing a

framework for long-term financial and asset management planning.

It must be acknowledged that the average operating expenses for Tasmania councils is the second lowest

in Australia, at $1,527 per capita.40 Tasmania council rates are 5 percent higher than the national average,

while user charges are 22 percent below that national average.41

Given that local council operating expenditure is equivalent to 14 percent of State Government operational

expenditure, council savings should not be seen as an economic panacea for the State.

Nevertheless, ratepayers are under increasing cost pressure generally, especially from utility costs.

Councils must therefore ensure that rate increases are minimised. This is critical for improving the

attractiveness of Tasmania as both a place to live and invest.

Across many functions the provision of local government services in Tasmania exhibit economies of scope

and scale. Councils servicing larger populations generally incur lower per-capita operating expenses.42

However, interstate experience shows that increasing the size of councils alone is unlikely to reduce rates

unless regulatory rate controls are established, which may come at the cost of reduced services or

infrastructure maintenance.

Accordingly, reforms need to be seen as a driver of medium-to-long term efficiency gains, to improve

infrastructure, improve the quality of services, and to constrain the growth in municipal rates. For these

gains to be achieved there will need to be strong mechanisms incentivising councils to develop and

implement strategies that improve productivity continuously.

It is also vital that any reform assessment takes in account the costs of reform. It is only through weighing

these costs against the potential benefits that an accurate and realistic assessment of the options can be

made.43

Among the financial costs of reform are reform project group costs, independent advisory services,

redundancy payments and job placement assistance.

39 Auditor-General, above n 17.

40 Deloitte Access Economics, p. 26.

41 Munro, Eslake and Hains, above.



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5.3 Planning, development assessment and other regulatory roles

A consistent, flexible and efficient planning and development assessment system and

regulatory environment that ensures Tasmania has a comparative advantage in attracting

private investment.

A critical issue for business is the planning and development assessment system. While the State

Government sets the regulatory framework, it is implemented by councils. The system is a critical part of

conflict resolution and, according to the Productivity Commission:

“...a prime field on which conflicting community preferences for the cities and local neighbourhoods are

played out. Preferences vary among citizens, between citizens and businesses, businesses with each

other, councils and their constituents, and councils with their state.”44

While there are current reforms underway to harmonise planning schemes in Tasmania, the planning task

is becoming ever more complicated as planners are asked to address a wider range of issues, as illustrated

below.

Source: Productivity Commission (2010); Performance Benchmarking of Regulation: Planning, Zoning and Development Assessment

44 Productivity Commission, The Role of Local Government as Regulator, p XXII.

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As the Productivity Commission found: “Because some important policy issues are not fully resolved during

strategic and structure planning, de facto policy-making occurs during development assessment and

rezoning where significant discretion is exercised.”45

Business issues that arise include the complexity of the system, inconsistency between council areas, the

propensity for third-party appeals and high levels of approval uncertainty. Indeed, in a recent Supreme

Court case the Judge observed:

“In order to determine how the scheme operates...it is practically essential to have a law degree,

decades of experience in interpreting legal documents, a talent for understanding gobbledygook and

misused words, a lot of time, and a very strong capacity for perseverance”46

Councils point to the fact that the majority of planning applications are processed within the 42-day

statutory timeframe, excluding certain ‘stop the clock’ delays. In spite of this, the planning and

development assessment process is continually raised by large and small businesses, and residential

property owners alike, as a costly barrier and major frustration.

Given the rising complexity of the planning task, questions also arise as to whether there remains a strong

rationale for councils to maintain their function as planning authorities and whether development

applications should be assess by independent expert panels. Elected members often do not have the

required expertise to make decisions in the modern complex planning environment.

Wider reforms to the planning system can run parallel to the local government reform, indeed they are

strongly interlinked issues. The State’s planning and development process can be improved by:

further strengthening strategic planning, in order to formulate a better framework for governmental

decision making;

ensuring councils have sufficient resources to administer the planning scheme; and

providing the public with a clearer definition of the roles and responsibilities of the State and local

governments.47

Furthermore, there needs to be greater competition between councils to attract developments and

investment. Consolidating council functions gives opportunities to improve the planning and development

assessment processes through greater financial and human resources and by creating a less parochial

approach.

In addition to land use planning, local councils exercise a wide range of regulatory responsibility on behalf

of the State Government, as shown below:

45 Ibis, p XXVI

46 AAD Nominees Pty Ltd v Resource Management and Planning Appeal Tribunal [2011] TASFC 5, 4 47 Andrew Worthington and Brian Dollery, ‘An analysis of recent trends in Australian local government’ (2002) 15, The International

Journal of Public Sector Management, 496.

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SOURCE: Productivity Commission (2011), Business Regulation Benchmarking – Role of Local Government

There are increasingly tight standards being set be Commonwealth and State agencies, in waste, water,

public health, that councils must comply with. As the public face of enforcement, councils often get the

blame for such ‘red tape’ created by the State Government.

Furthermore, local governments enact their own laws designed to:

strengthen or complement State laws;

address issues common to all communities, which are not covered by State laws; and

address issues specific to a local community.

There is likely to be a link between lower-cost regulation and aggregation of councils functions. The

Productivity Commission found that the cost of regulation rose when there is complexity in the application

or approval process, inconsistency in interpretation and application, and inconsistency in regulatory

frameworks across councils.48

5.4 Strategic capacity

Council bodies with strategic capacity so that resources are channelled into the right

opportunities, cities and regions can attract major industries and events, and effective

partnerships can be formed other governments and the private sector.

Sound strategic planning enables local governments to focus their resources on the activities and

opportunities offering the community the greatest long term benefit.49 This should include a cohesive

regional planning system linked to a region’s overall land use strategy, as well as a regional or city

economic development framework.

Furthermore, Tasmania’s urban centres - in particularly Launceston and Hobart - are under rising pressure

to manage growth and change. The Australian Government’s move to promote better metropolitan planning

through the National Urban Policy has added to this pressure. The NUP recognises that: “Cities are not only

centres of economic activity...they are also gateways for the important economic and cultural contribution

48 Productivity Commission, Business Regulation Benchmarking – Role of Local Government as Regulator: Consultation paper, 2011.


18 | P a g e

of regional Australia”.50 Tasmania must ensure its urban areas meet national goals for productivity,

sustainability, liveability and governance.

The Australian Centre of Excellence for Local Government placed great importance on strategic capacity,

arguing:

“...newer evidence about the value of strategic capacity, and that it may be strongly linked to larger

units of local government, means that amalgamations should not be ruled out as an option simply

because other forms of consolidation can yield economies of scale or scope, or because amalgamations

have not been shown to generate significant cost savings or rate reductions.”51

A key to implementing successful strategies is the ability to provide a strong political voice and a simple,

flexible, administrative interface been the councils and State and Commonwealth Governments. Likewise,

having fewer administrative bodies to deal with would lower transaction costs for large investors.

In Tasmania, while improvements are being made in respect of planning and development generally, work

still needs to be done in respect of strategic planning. There is a strong view that greater strategic capacity

can be achieved through the consolidation of councils into larger units.52

5.5 Regional equity

A fair and efficient distribution of funding between metropolitan and regional areas.

While acknowledging that reform may stimulate efficiencies in the larger urban centres, there is some

concern that the interests of non-metropolitan councils may be overlooked.

However, there is evidence suggesting that by establishing stronger metropolitan councils, enhanced

linkages between the cities and surrounding regional areas can be achieved.53 For example, there is a

symbiotic link between the success of tourist attractions – such as Port Arthur, the Tahune Air Walk or

Freycinet – and the number of people seeking accommodation in Hobart.54

A key point made in the STCA Independent Panel’s report is that larger metropolitan councils have the

opportunity to nurture wider regional economic development because of the enhanced capacity of councils

to work strategically with business and the State Government.

Owing to their small pool of ratepayers and geographic location, some councils may never be financially

self-sufficient. Whilst we should aspire for all regions to be self-sufficient, it should be recognised that these

communities may require on-going financial subsidies.55

50 Australian Government, Our Cities, Our Future – A National Urban Policy for a productive, sustainable and liveable future, p 2


52 Ibid.

53 Ibid.

54 Ibid.


Question: What are the market failures that local Government strategic planning should aspire to

overcome?

19 | P a g e

5.6 Council human resources

A local government sector that can attract and retain highly skilled professional labour.

Tasmanian councils face significant challenges in attracting and retaining suitable staff, including planners

and other professionals. In some case, this is impeding the ability to achieve the most basic regulatory

requirements. For example, eight councils failed to meet their financial reporting deadlines in 2008-09.56

Consolidating local government functions can provide a broader base of expertise to draw upon.57 Larger

councils can also be more attractive to staff, as they can offer career pathways and commercially justifiable

higher wages. This confers a significant advantage on larger entities by allowing them to efficiently

accomplish a wider range of complex tasks.58

Dollery and others highlighted the weakness of small councils by comparing them to state governments:

“within Australian State governments distinct tasks have been bundled into dedicated organisational

units that are either self-standing or largely autonomous divisions of a given department. By contrast,

councils do not enjoy the luxury of having large specialised units to deal with each of their services.

Hence the wider they throw their service net, the less speciality they must become, and so the greater

the risk of failure.”59

Some view shared services as cost-effective means for councils to share expertise and resources without

the need for structural reform.60 However, the success of this approach is dependant of a number of

factors, including the commitment of both the political leadership and the executive management.61

5.7 Private sector workforce

Stronger private sector workforce productivity and participation, to improve the

competitiveness of our industries and promote wealth creation.

Tasmania’s heritage, natural resources, climate and natural beauty provide us with significant natural

advantages. Despite this, Tasmania has the lowest income per capita of any State and is reliant on a GST

revenue lifeline from the Australian Government.62

Tasmanian needs urgent economic reform to maintain wealth generation and our way of life. This includes

implementing regulatory simplification to foster innovation and investment.

As part of any efficiency-improving reform, there are likely to be redundancies as workforce needs evolve.

The average cost per employee is $69,000, so workforce redesign is a source of significant potential

savings.63

56 Auditor-General, p. 19.

57 Brain Dollery and Lin Crase, ‘Is bigger local government better? An evaluation of the case for Australia municipal amalgamation

program,’ (2004) 22 Urban Policy and Research (2004), 265.


59 Ibid p 566

60 Brian Dollery et al, ‘Shared Services in Australian Local Government Rationale, Alternative Models and Empirical Evidence’ (2009)

68 The Australian Journal of Public Administration, 208.




20 | P a g e

Facilitating a mobile and flexible workforce is critical for improving the competitiveness of Tasmania’s

industries. Furthermore, retaining unproductive jobs in any part of the public sector is simply unsustainable.

While few employees would welcome a redundancy at the time, there is a strong appetite in the private

sector for new skilled staff. A reallocation of skilled labour is a positive for the economy because it provides

the opportunity to shift skilled council employees into the productive private sector and also keep the skills

of those employees relevant in an increasingly competitive economy.

Furthermore, much of the downsizing associated with restructuring could be absorbed into ordinary levels

of staff turnover, given the ageing populations of local government staff.64

Private sector productivity can also be influenced by curbing growth in municipal rates to attract

investment, and through restructuring local government activities to provide greater involvement by local

small businesses in delivering services otherwise delivered in-house.


Question: Have any key considerations that should guide local government reform been omitted?

21 | P a g e

6 Structural reform models

This paper suggests the following broad alternatives available to local government:

no change to the 29 councils;

greater use of service sharing;

amalgamate metropolitan councils only, while leaving rural councils largely untouched; and

amalgamate the 29 councils into three or more larger regional councils.

Furthermore, any of these options could be enhanced by outsourcing functions to one or more common

service providers.

It is emphasised that under all of these options, it is proposed that there is no change in the number of

elected councillors or diminution of democratic representation.

6.1 Greater use of shared services

Service sharing among councils is increasingly argued to be a good alternative to amalgamations to realise

economies of scale and scope. In the UK, research has shown some instances of shared services to

generate very strong savings. However, in other instances shared service arrangements have found to be

much less productive than even average practice.

Indeed, Aulich et al found that: “Experience suggests that shared services should not be regarded as a

panacea.”65 One of the major barriers identified is that the incentives to protect local authority autonomy

are strong. It also found that in Australia service sharing only appears to be ‘scratching the surface’ in the

majority of cases.

Past experience with ad hoc shared service arrangements in Tasmania have delivered mixed results. There

have only been limited cases where cost reductions have been successfully attained.66 Given the lack of a

consistent track record of shared services outcomes, it is difficult to presume with confidence that they can

in the future.

There is no reason why service sharing should not be pursued along with other structural reforms. Indeed,

there may be greater service sharing opportunities if the local government in Tasmanian were more

consolidated as there would be more authorities with the critical size to achieve specialist excellence.

Question: Is there any reason why resource sharing arrangements should not be pursued in addition to

structural reform of local government?

6.2 Amalgamation of metropolitan councils only

This model would involve amalgamating small metropolitan councils into larger units, similar to the STCA

Independent Panel’s proposed Great Hobart City Council model. There may also be merit an re-assessing

boundaries near Launceston and Devonport, on the basis of where ‘communities of interest’ exist.

65 Aulich et al above, Vol 2 p 21.


22 | P a g e

This process would provide metropolitan areas and surrounding districts with a more powerful voice. Having

large councils in Launceston and Hobart in particularly would give these cities a greater presence at a

national and international level. Regional councils would also be able to retain their independence and

identity. The main benefits of this structure are therefore:

enhanced city advocacy;

simpler local government structure; and

Cost savings through improved efficiency and less duplication.67

On the other hand, ratepayers in areas affected by the boundary changes may feel the loss of their

independent identity.68 There is also a fear among rural communities that gains derived from the reforms

would be filtered back into the metropolitan regions without any corresponding benefit for rural councils.

An additional benefit of this mode is that evidence suggests that cost-savings from amalgamations are

likely to be much higher for metropolitan councils than rural councils.

6.3 Amalgamate councils into larger regional councils

This option would involve a full amalgamation of councils. Electoral wards within these greater councils

should be created to maintain existing levels of representation.

This option would pave the way for the establishment of strong regional bodies, which could act as

advocates and provide a uniform strategic vision for their respective regions. There is undoubted evidence

that larger councils tend to possess greater level of expertise and can accomplish more complex tasks with

greater efficiency.69

In southern Tasmania, this option has moderate support with a recent survey showing that 35percent of

respondents would be in favour of their region adopting this option.70

There are, however, disadvantages with this larger council model. Some communities would be a

substantial distance from the seat of power. Travel and communication costs for these councils would also

be higher, due to their sheer geographical size, although modern technology could overcome much of this.

There is also evidence from the United States suggesting that the standard of services provided by local

government declines, if councils become too large.71

Very large council bodies could be large enough to rival the State Government politically this may be a

practical impediment to achieving the reform.72

One argument against amalgamations generally is that combining councils that currently delivery different

levels of services at different rate levels will lead to inequities within the amalgamated council. However,

the existing legislation already allows for differential rating within councils and this could be used to

maintain equity while transitioning service levels.

67 Ibid.

68 Ibid.



71 Brian Dollery, ‘Reforming Australian local governments: Forced or voluntary amalgamations’ (1997) 4 Agenda, 445.


Question: Would it be a negative or positive thing for enlarged local councils to challenge the power State

Government politically, given that constitutionally the State will always is stronger?

23 | P a g e

6.4 Common service providers

The common service provider model could be an alternative to council amalgamation. Under this approach,

all existing 29 councils would be maintained and they would become the owners of a regional or State-wide

service provider. Alternatively, outsourcing more functions to a common service provider could occur in

conjunction with other structural reforms.

The common service provider would deliver common services under a fee for service arrangement. These

could include functions associated with land use planning, waste management, general administration,

procurement and road maintenance.

Within this model there is a broad range of detailed options, from outsourcing just one function through to

outsourcing most functions, while potentially leaving the representative structure of the 29 councils intact.

Divisional offices should be retained across the State to provide ratepayers with a local point of contact.

This approach offers of a means of achieving economies of scale and scope, and strategic capacity, while

maintaining the cohesion and sense of community provided through small council electorates. Some argue

that councils are the glue that holds communities together and ratepayers are better served by having

more councillors as opposed to less. Similarly, some also contend that because local councils are close to

the people they serve, they are in the best position to improve community wellbeing.73

Arguably, local governments are more able to effectively focus on governance and representing the

community if they outsource more service delivery to a focussed common service provider. By becoming

champions for their municipalities, councils can take a leadership role by making use of public, NGO and

private resources to serve their constituents rather than attempting to fund and operate all such services

on their own.74

This means the potential advantages of the common service provider approach include:

improved efficiency and strategic capacity;

enhanced representation;

cost savings; and

minimal disruptions to the existing local government structure from a community viewpoint.

The governance and contractual arrangements between the councils and the governing board of the

common service provider would need to be carefully designed to avoid conflicts. Once established, water

and sewerage corporations could potentially become a division of this entity, which could be retained under

government ownership or privatised.

Enhancing the role of common service providers does risk increasing overall costs due to greater

complexity, 75 and risks of duplication associated with a growing bureaucracy of effectively a forth tier of

Government.


74 Ibid.


Question: Which functions should be considered for shifting to a common service provider, e.g. strategic

procurement, waste services, planning, general administration, works and services?

7 Evaluating potential reform options

The following table will be the basis for the evaluation of the reform models against the seven criteria established in this paper.

A score of 1 – 5 will be given to each option (5= High; 4= Medium-High; 3 = Medium, 2= Medium-Low; 1= Low.)

CRITERIA WEIGHT Opt ion 1

As is

Opt ion 2

Shared

services

Opt ion 3

Amalgamate

metro

counc i ls

on ly

Opt ion 4 -

Create

large

regional

counc i ls

1. Communit ies of in teres t 30

2. Financ ial ou tcomes* 30

3. P lann ing, DA & other regu latory roles 10

4. St rategic capac i ty 10

5. Regional equ i ty 10

6. Counc i l human resources 5

7. Private sector workforce 5

TOTAL WEIGHTED SCORE 100

CRITERIA WEIGHT Opt ion 1 +

CSP

Opt ion 2 +

CSP

Opt ion 3 +

CSP

Opt ion 4 +

CSP

1. Communit ies of in teres t 30

2. Financ ial ou tcomes* 30

3. P lann ing, DA & other regu latory roles 10

4. St rategic capac i ty 10

5. Regional equ i ty 10

6. Counc i l human resources 5

7. Private private sector workforce 5

TOTAL WEIGHTED SCORE 100

Overlay wi th Common Service Provider (CSP)

SCORES

SCORES

*These will be subject to further financial modeling.

Question: Do you disagree with any of the weights given to the evaluation criteria?

Question: What scores would you give to each option?

25 | P a g e

8 Other performance enhancement ideas

The following performance improvement and governance strategies should be considered in parallel to

structural reforms.

8.1 State-Local function reassignment

The Department of Infrastructure, Energy and Resources, with input from the Tasmanian Infrastructure

Advisory Council, should conduct a review into cost synergies that could be achieve by reassignment of

functions, or asset management, e.g. roads maintenance, back up to the State Government or alternatively

down to local government.

There are likely to be cost savings and greater access to specialist skills by utilising a specialist State

agency where appropriate. Furthermore, Dollery et al have: “sought to cast doubt on the technical capacity

of local councils the complexities inevitably involved in many new areas give federal and State agencies a

competitive advantage in complicated service arrangements.”76

The review should also explore federal funding opportunities to support any local government restructure.

8.2 Financial performance incentives

The business and local government sectors should lobby the Commonwealth Government to establish a

scheme for incentive payments for councils that implement structural reforms.

In addition, after a five year structural reform policy-testing period, the State Grants Commissions

redistribution formula should be changed to reward rather than punish strong economic performance.

8.3 Community boards & community consultation frameworks

Over time, large councils should consider the devolution of some local representation to ‘Community

Boards’ constituted by members of the public and chaired by a councillor. Each Community Board would

receive modest sums to invest in local projects, but would otherwise be run on a purely voluntary basis with

no operational costs.

It could also be consulted on macro-issues such as council budget planning. Public ballots could be used to

determine matters under consideration, although councillors would retain final authority and accountability

back to council.77

Establishment of such Community Boards should complement each council’s community consultation

framework.

76 Dollery, Wallis, Allan above, n 566

77 See for example http://www.wiltshire.gov.uk/council/areaboards.htm

26 | P a g e

8.4 ‘MyCouncil’ website

The Local Government Sustainability Objects and Indicators Project should be enhanced to provide the full

range of financial and other performance data on a ‘MyCouncil’ style website for maximum comparability by

ratepayers and business investors, and maximum accountability for efficient and effective council

operations.

8.5 Joint review of regulation administered by local government

The Local Government Association of Tasmania, Tasmanian Chamber of Commerce & Industry and other

industry bodies should initiate a joint review of State Government regulation administered by local

government, including development and planning, public health, and environmental management. The

State Government should provide secretariat support from the Department of Treasury and Finance.

The review should take account of the Productivity Commissions current project: Business Regulation

Benchmarking: Role of Local Government as Regulator, and make recommendations to the State

Government on changes to reduce regulatory costs to business and councils.

The combined force of business and the local government sector demanding regulatory changes would be

hard for the State Government to resist.

8.6 Auditor-General review of regulatory compliance

As part of the above joint LGAT-TCCI review, the Auditor-General should conduct a review of regulatory

compliance by councils, with a short period of indemnity provided by the State Government to promote full

disclosure of local government practices.

8.7 Service sharing

Councils and regional bodies should continue to pursue voluntary service sharing agreements or joint

procurement among councils. Such developments are likely to be beneficial, but can occur under any local

government structure. As such, they should be considered a natural part of continuous improvement, as

opposed to significant reforms.

Indeed, the creation of large administrative bodies and associated resource improvements is likely to

facilitate a greater degree of voluntary cooperation and strategic alliances. As stated by the Australian

Centre of Excellence for Local Government:

“Shared services may also enhance strategic capacity to varying degrees, but this would appear to

require more robust and powerful regional structure – such as semi-autonomous arms-length

entities....Looser forms of regional collaboration are least likely to delivery substantial strategic

capacity.”78

78 Aulich et al above, p 11.

Question: What objections do you have to these ideas? Do you have any other suggestions?

27 | P a g e

9 Appendix 1: Recent inquiries

Over the preceding 12 months, a series of inquires have been published into local government reform. The

following chapter provides a brief summary of the major issues and conclusions contained in them.

In addition, the Productivity Commissions is currently undertaking a review of the Role of Local Government

as Regulator and is due to provide a draft report in March 2012.

9.1 Southern Tasmanian Councils Authority (STCA) – Independent Panel

In October 2011 the STCA Independent Panel released the ‘Independent Review of Structures for Local

Governance and Service Delivery in Southern Tasmania’.79 The report outlines the findings of an

independent expert review panel, which was assigned the task of providing southern Tasmanian councils

with a clear sense of future direction. The panel developed four reform options for community consultation.

Based on community feedback it was concluded that maintaining the status quo for southern Tasmanian

local governments is no longer appropriate. It was indicated that the community is concerned about rising

costs and there is an underlying feeling that the region is over-governed. Eighty-three per cent of

respondents were ultimately in favour of reducing the number of councils in southern Tasmania.

In light of this, the panel made 13 recommendations outlining a process for reforming local government in

southern Tasmania. The two major recommendations made by the panel were to establish a Greater Hobart

Council, and provide the STCA with greater regional responsibilities.

From an initial assessment of four models, the STCA Independent Panel recommended the formation of a

single metropolitan council known as the City of Greater Hobart by amalgamating the cities of Hobart,

Glenorchy and the urban sectors of Clarence and Kingsborough with Brighton. Under this model Richmond

and surrounds would be incorporated into the Sorell Council, while the Channel and Bruny Island would

become part of the Houn Valley Council.

To assist in the implementation phase the panel also recommended that wards be introduced for at least

one term.

It was also recommended that the STCA would be responsible for coordinating and implementing strategies

for the Southern region. Its focus would involve fostering strong relationships between Greater Hobart and

the rural municipalities in areas such as economic development, tourism, niche production and marketing.

The recommendations were:80

1 – Establish a Greater Hobart Council

Merge the cities of Hobart, Glenorchy and the urban sections of Clarence and Kingsborough with Brighton

to establish a single council, known as the City of Greater Hobart.

2 – Impose legislative guidelines

Enact a City of Greater Hobart Act, which not only recognises the city as Tasmania’s capital, but also sets

out the powers of the mayor and council.

79 Jude Munro, Saul Eslake and Stephen Hains, Southern Tasmania Councils Authority, Independent review of structures for local

governance & service delivery in Southern Tasmania (2011).


28 | P a g e

3 – Make no adjustments to non-metropolitan councils

Apart from the resulting adjustments in forming a Greater Hobart Council, it was recommended that rural

councils should be maintained in their present state.

4 – Commence the restructure at the next local government election

If adopted, structural reforms should be implemented following the next council election in October 2013

(elections based on the newly formed council structure).

5 – Establish a transitional committee

Establish a transitional committee consisting of two councillors representing the Brighton, Clarence,

Glenorchy, Hobart and Kingsborough Councils.

6 – Form a committee for Hobart

Create a uniform vision for Hobart by establishing a committee comprising of representatives from the arts,

business, environment, social and tourism sectors.

7 – Implement a three year reform program of council functions

8 – Review Financial Assistance Grants

A review should be undertaken of financial assistance and roads funding distributions in view of the special

needs and requirements of non-metropolitan councils.

9 – Change the period of tenure for mayors and councillors

Mayors and councillors should be elected for a four year term providing them with greater long term

responsibilities. Moreover, it was also recommended that the requirement for mayors to have previously

served in local government be abolished, as it restricts the pool of potential leaders and is essentially

undemocratic.

10 – Make voting at council elections compulsory

11 – Provide staff and elected members with strategic skills training

12 – Ensure ongoing community engagement

Train officials and council staff about community engagement strategies as a means of ensuring continual

improvement in the newly structured councils.

13 – Make the STCA responsible for formulating and coordinating strategies which influence the region as

a whole

29 | P a g e

9.2 Deloitte Access Economics, Local Government Structural Reform

The Property Council commissioned a report by Deloitte Access Economics regarding local government

structural reform in Tasmania.81

This report contends that there is a strong basis for a well conceived structural reform of Tasmanian

councils. According to Deloitte Access Economics, local government could achieve the following efficiencies

by providing their services on a wider scale:

Economies of scale – as a local government becomes larger, the fixed costs associated with

providing services are spread across a larger population, which in turn lowers total operating costs.

Economies of scope – an amalgamated council may be able to lower its average costs by providing

a greater mixture of services.

Economies of specialisation – as the size of a council grows, so does its capacity to employ

specialist employees, such as planners.

The report found that on past experience, cost efficiency gains of 10–20 percent could be expected from

well conceived and effectively managed amalgamations. However, such economies of scale diminish for

councils larger than around 100,000 people.

It also suggested the even higher efficiency gains of up to 35percent could theoretically be achieved under

a scenario of amalgamating Tasmania’s 12 southern councils, although the econometric analysis utilised

could not account for differences in service quality. Furthermore, no case studies were provided to support

the assertion that 35 percent savings could be achieved in practice.

Operational efficiencies could translate into social and economic benefits, such as improved local

governance; enhanced services; real reductions in the levels of rates and charges; and positive flow-on

effects to property values.

It was also argued that broader economic benefits arise from the creation of fewer but larger councils due

to the simpler administrative interface between local, state and federal government.

The report noted that the analysis has been purely desktop based and that a: “more detailed study might

also draw on consultations with councils and other stakeholders, as well as seeking additional data directly

from councils.”82 (The TCCI local government project seeks to do this.)

9.3 Australian Centre of Excellence for Local Government (ACELG)

In Consolidation in Local Government: A Fresh Look (2011), the ACELG collaborated with the Local

Government Association of South Australian and Local Government Association of New Zealand to revisit

old and new evidence on council ‘consolidation’, a broad term encompassing shared service delivery,

regional collaboration, boundary adjustments and amalgamations.

A major finding of the ACELG’s report was the need for ongoing reform to enable councils to remain

financially stable and to meet changing community expectations.83 The ACELG’s research indicates that all

consolidation strategies – whether shared services, amalgamation or other forms of achieving greater


82 Ibid, p. 2.


30 | P a g e

collaboration between councils – can have significant benefits. These benefits, however, need to be

weighed against any mitigating factors, such as transitional costs and weakening of community democracy.

In respect of the consolidation process, it was indicated that the process works best following extensive

community consultation.

The ACELG concluded that efficiency gains derived through consolidation may not offer any significant

reductions in rates and other charges. According to the ACELG, it is more likely that efficiency gains would

be reflected in economies of scope, enhanced service delivery and improved strategic capacity. The report

suggests that larger amalgamated councils are more likely to be engaged in partnership with State or

Federal governments in regional planning and governance initiatives.

The ACELG also found that: “Too much attention is focused on the institutional arrangements of the local

government system in each jurisdiction rather than on the fundamental issue of the societal functions

performed by local government and its changing role.”84

9.4 Tasmania Chamber of Commerce and Industry members survey

A recent survey of TCCI members has highlighted the Tasmanian business community’s growing discontent

with local government. According to the findings of the survey, the following were ranked as a “large” or

“critical” constraint to business growth:

local government rates (31percent of businesses);

water and sewerage charges (41percent of businesses); and

planning approvals (36percent of businesses).

Some members expanded on their concerns describing local government as being ‘inefficient’, ‘too

bureaucratic’, and that there ‘is no feasible economic logic [for having] 29 councils.’

Overall it appears that the majority of Tasmanian businesses are in favour of reducing the number of

councils (see graph below). The State Government is the preferred driver of these reforms.

84 Ibid, p. 8.

0

2

4

6

8

10

12

14

16

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Re

spo

nse

s

Number of councils

Optimum Number of CouncilsTCCI Member Survey 2011

31 | P a g e

9.5 Auditor-General’s Report on Local Government Authorities.

The most recent Auditor-General’s report of local government authorities in 2010-11 found that many

Tasmanian councils continue to incur operating deficits.85 While financial sustainability is improving, the

report noted that out of the 25 councils assessed:

Eleven councils incurred deficits.

From an operational perspective three councils were at high financial sustainability risk, while a

further ten were at moderate risk.

From a governance perspective, twelve councils were assessed as being at a high risk, while a

further nine were at a moderate risk.

In addressing these issues, the report observed the importance of sound long-term asset management and

financial planning. LGAT is currently implementing frameworks for long-term financial and asset

management planning.

9.6 DPAC Local Government Sustainability Objectives

A consultation paper published by the Local Government Division of the Department of Premier Cabinet has

proposed a set of four key strategic priorities for councils.86 These priorities, listed below, could be

voluntary or imposed as mandatory guidelines.

Having such guidelines in place, along with public reporting, would provide local government with direction

and assist in continual improvement, thus placing councils in a better position to capitalise on post-reform

efficiency gains.

Local Government Sustainability Objectives

Key strategic priority Required Outcome

Financial management Achieve or seek to improve financial sustainability levels by meeting sound

fiscal management requirements.

Asset Management Manage assets in a manner which maximises service delivery, effectively

manages risks and accounts for costs incurred over the life of the asset

Planning and development Develop, implement and improve planning and development strategies to

enhance the community’s quality of life by supplying access to facilities and

services; providing appropriate infrastructure; and undertaking sustainable

environmental practices.

Community satisfaction Ensure that the community is satisfied with councils’ provision of services in

the areas of planning and development; community involvement;

infrastructure; environmental/waste management; recreation/culture;

community health and safety; and overall satisfaction levels.

Source: Sustainability Objectives Consultations Paper 2011.


86 Department of Premier Cabinet, Parliament of Tasmania, Local government sustainability objectives and indicators – sustainability

indicators consultation paper (2011).

32 | P a g e

The local government sector itself has acknowledged need for this information. In an address to the

National Press Club in March 2010, the then President of the Australian Local Government Association,

stated:

‘I am a strong believer in the community having a right to be able to access information on the

performance of their public institutions. And local government should be no different. I support the concept

of developing a MyCouncil style website so residents and ratepayers are able to compare how their council

is performing compared to other like councils.

‘Data is so important in targeting where reform is most needed. Getting data collection uniform and

meaningful across key local government indicators makes sense and ought to be a greater priority. And

using it to highlight the most innovative approaches and to target improvement where it is needed is in

everybody’s interests.

‘This is something I want to see local government drive as a sector on a bottom up basis, rather than

waiting for other governments to impose it from above.’87

9.7 Productivity Commission, Role of Local Government as Regulator

In 2011, the Productivity Commission released an issues paper on local government regulatory activities

and the costs they impose on business. The Commission has sought submissions in respect of the issues

paper and consulted with stakeholders, including the TCCI.

A draft report will be released in mid March 2012 and a final report is due in July 2012, with the goal of

indentifying leading regulatory practices.

While acknowledging regulations will ‘almost always impose costs on business’, the Productivity

Commission indentified the following causes of unnecessary costs:

unduly prescriptive regulations;

complex institutional requirements in the application or approval process;

inconsistent interpretation and application of regulations; and

inconsistency between regulatory frameworks across council and State boundaries.

Accordingly, the Productivity Commission has questioned whether there are functions undertaken by the

local government sector that could be more effectively performed by either the private sector or State

governments.

In response to the issues raised by the Productivity Commission, Tasmanian companies, GHD and Nekon,

made submissions as outlined below.

Nekon Pty Ltd expressed concern about the complexity of the State’s 36 planning schemes (some councils

having multiple planning schemes). The company holds a large property interest in Tasmania, yet note that

property investors and their consultants often encounter difficulties navigating through these regulations.

Nekon argued that there is no need for the present number of planning schemes and is calling for a

common State-wide scheme to be introduced.

Nekon has also expressed concern about the amount of political involvement in the planning process,

asserting that elected members are increasingly overturning the advice of professional council officers. The

submission argues decisions regarding development applications should made by an independent expert

87 Department of Premier and Cabinet, Parliament of Tasmania, Discussion paper sustainability objectives and indicators project

(2010), 4.

33 | P a g e

panel. (The Australian Institute of Architects also argued that referring complex/contentious applications to

an expert panel is seen as the most efficient and transparent method of decision making.)

GHD Pty Ltd is an international network of engineers, architects and environmental scientists. Its

submission focuses on the expense and delay incurred by developers when planning authorities exercise

discretionary power.

GHD submitted that in their capacity as planning authorities, councils are being increasingly influenced by

matters outside of the planning scheme. GHD believes that councils should have an obligation to inform

the community that matters outside the ambit of the planning scheme cannot be considered as a part of

the development application process.

9.8 Concept Economics, Economic efficiency of the Tasmanian planning system

In 2008, the TCCI commissioned Concept Economics to assess the economic efficiency of the Tasmanian

planning system.88 They found that there is a need for Tasmania to implement a more adaptive and flexible

planning regime in order to reduce the chance of investment being re-directed to the mainland.

It was estimated that the improved productivity and investment flowing from improvements to Tasmania’s

planning scheme could result in a 2.4percent increase in gross state Product, worth over $500 million. This

could have numerous flow-on effects including: the creation of new jobs; a reduction in the cost of goods

from increased retail competition; and higher wages owing to increased levels of productivity.

The report recommended that the Government:

consider and implement strategic land use planning, and large scale development applications at

a regional or State level;

revise and update planning schemes based on a risk management approach. This approach is

aimed at minimising the costs associated with incorrect planning decisions by requiring an ongoing

evaluation of restrictive regimes; and

improve transparency in the planning approval process, providing developers with increased

certainty.

88 Stephen Beare and Stephanie Szakie, Concept Economics, Economic efficiency of the Tasmanian planning system (2008).

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10 Appendix 2: The regulatory obligations of local government

Apart from the Local Government Act, the principal legislation establishing council powers and functions,

the following State legislation also has a significant influence on the activities and services provided by

local government:89

Australian Road Rules 2009

Councils have the power to approve parking controls, including Loading Zone Certificates.

Building Act 2000

Councils must ensure that property owners are informed of their duties under the Building Act.

Dog Control Act 2000

Councils are required to develop and implement dog management policies.

Environmental Management and Pollution Control Act 1994

Councils are under a duty to prevent and control pollution. Their role includes undertaking environmental

assessments of planning permit applications and issuing land use permits which contain environmental

management conditions. Council officers may also issue environmental infringement notices for prescribed

offences.

Financial Management and Audit Act 1990

Councils are required to release financial statements to Auditor-General as requested.

Food Act 2003

Councils are responsible for ensuring that food sold to the public is safe and fit for human consumption.

Councils are also responsible for the registration of food premises and ensuring that food handlers are

aware of their minimum skill requirements. As a part of this process council officers must conduct routine

food inspections, food sampling and provide education programs.

Historic Cultural Heritage Act 1995

As a planning authority, councils are responsible for managing and protecting local heritage.

Land Use Planning and Approvals Act 1993 and Local Government (Building and Miscellaneous Provisions)

Act 1993

Councils are responsible for administering the planning and building approval scheme by:

regulating land use and development; and

implementing planning directives.

89 Local Government Association of Tasmania, Legislative framework (2011) What is local government?

<http://www.lgat.tas.gov.au/site/page.cfm?u=226>.

35 | P a g e

Litter Act 2007

Councils assist in enforcing the provisions of the Litter Act through officers who are charged with the power

to issue and serve infringement notices for offences under the Act.

Local Government (Highways) Act 1982

Councils are charged with the responsibility of maintaining local highways in their municipality.

Major Infrastructure Development Act 1999

Councils must assess major projects and provide representatives for a combined planning authority (where

applicable).

Public Health Act 1997

Within their municipalities councils must promote and improve public health by ensuring that the provisions

of the Public Health Act are complied with. Councils are also required to develop and implement

immunisation programs.

Sewers and Drains Act 1954

Councils are obligated to provide and maintain common sewers necessary for effective drainage in their

municipalities.

State Polices and Projects Act 1993

Councils have a statutory obligation to enforce State Government policies (as planning authorities under

Land Use Planning and Approvals Act 1999) and parliamentary approved permits where applicable.

Strata Titles Act 1998

Under the Strata Titles Act, councils have an approval function in relation to strata plans and modifications.

Traffic Act 1925

Councils are responsible for the enforcement of parking regulations.

Vehicle and Traffic Act 1999

In accordance with section 56C(2) of the Vehicle and Traffic Act councils may issue permits for street side

stalls and busking,

Weed Management Act 1999

Councils have the power to appoint a weed management inspector within their municipalities.

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11 References

AAD Nominees Pty Ltd v Resource Management and Planning Appeal Tribunal [2011] TASFC 5, 4

Auditor-General, Parliament of Tasmania, Local Government Authorities (2011).

Aulich, Chris et al, Australian Centre of Excellence for Local Government, Consolidation in local government: a fresh

look (2011).

Australian Government, Our Cities, Our Future – A National Urban Policy for a productive, sustainable and liveable

future (2011).

Beare, Stephen and Stephanie Szakie, Concept Economics, Economic efficiency of the Tasmanian planning system

(2008).

Deloitte Access Economics, Property Council of Australia –Tasmania, Local government structural reform in Tasmania

(2011).

Department of Premier and Cabinet, Parliament of Tasmania, Discussion paper sustainability objectives and indicators

project (2010).

Department of Premier Cabinet, Parliament of Tasmania, Local government sustainability objectives and indicators –

sustainability indicators consultation paper (2011).

Devonport City Council, Central Highlands Council and Southern Midlands Council v Farrell, David (Chief Electoral

Officer) [1998] TASSC 92.

Dollery, Brian ‘Reforming Australian local governments: Forced or voluntary amalgamations’ (1997) 4 Agenda, 445.

Dollery, Brian et al, ‘Shared Services in Australian Local Government Rationale, Alternative Models and Empirical

Evidence’ (2009) 68 The Australian Journal of Public Administration, 208.

Dollery, Brian and Lin Crase, ‘Is bigger local government better? An evaluation of the case for Australia municipal

amalgamation program,’ (2004) 22 Urban Policy and Research, 265.

Dollery, Brian, Joe Wallis and Percy Allan, ‘The debate that had to happen but never did: The changing role of Australian

local government’, (2006) 41 Australian Journal of Political Science, 553.

Fulcher, Helen, South Australian Department of Local Government, The concept of community of interest (1991).

Garcia, Allan, ‘The momentum Train’, LGAT News (Hobart), December 2011.

Hand, R. J., et al, Roles and Responsibilities of State and Local Government: Final Report to the Premier, through the

Minister for Local Government and to the President, Local Government Association of Tasmania (1996)

Haward, Marcus and Ivan Zwart, ‘Local government in Tasmania: reform and restructuring’ (2000) 59 Australian

Journal of Public Administration 34.

Launceston City Council, Financial Statements, Year Ended 30 June 2011, p. 68 (2011).

Local Government Association Tasmania, Towards improved local government in southern Tasmania (2011).

Local Government Board, Department of Premier and Cabinet, Principle for voluntary merges report (2010).

Local Government Managers of Australia, Local government in Tasmania where to next? (2009).

Munro, Jude, Saul Eslake and Stephen Hains, Southern Tasmania Councils Authority, Independent review of structures

for local governance & service delivery in Southern Tasmania (2011).

Productivity Commission, Business Regulation Benchmarking – Role of Local Government: Consultation Paper (2011).

Tasmanians for reform, Briefing on structural reform of local government in Tasmania (2011).

37 | P a g e

Further Information

For information please contact:

Tasmanian Chamber of Commerce & Industry

Industry House

30 Burnett Street

GPO Box 793

Hobart TAS 7001

t > 03 6236 3600

f > 03 6231 1278

e > [email protected]

w > www.tcci.com.au

http://www.tcci.com.au/

Documents

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