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Few benefits to NSW council mergers: expert

NSW council mergers may be an unholy alliance, says academic.

The NSW Baird government has not based its pursuit council mergers on any evidence and the number of councils in NSW and Sydney should not change, says an expert in Australian government.

University of New England (UNE) economist and government specialist Professor Brian Dollery, who has written books on local government amalgamations, said the Independent Local Government Review Panel, which recommended reducing Sydney’s councils from 41 to between 15 and 18 , had alienated local councils and communities, partly because it provided no evidence that council mergers had any benefit, economic or otherwise.

“The panel really went badly wrong in terms of its merger proposal. They put the local government sector badly off-side and made the whole report contentious – even the parts people agree with,” Prof Dollery said.

“No attempt was made to determine whether there is a statistically significant association between larger population size and improved financial sustainability ratios, nor whether the proposed merged local authorities will be more financially viable.”

When Government News asked NSW Local Government Minister Paul Toole’s office to release cost-benefit analysis underpinning its push for NSW council mergers a spokesperson said the review panel did a “comprehensive study of the local government system”, which she said included recommendations on how savings and efficiencies could be achieved.

Prof Dollery is part of a UNE team that has been researching the relationship between the size of various Sydney councils and their financial viability. Researchers simulated mergers and examined how they affected each council’s financial position.

For example, the team simulated a merger between small, financially sustainable Pittwater Council and two other councils and then recalculated each council’s financial sustainability.  Prof Dollery said that none of the councils’ financial strength improved.

“The empirical analysis reported indicates that the proposed amalgamations will not secure enhanced financial sustainability in Greater Sydney local government,” the team concluded.

He said the NSW government was shying away from doing any deep research, or looking at the effects of past council mergers under Premier Bob Carr in 2004.

“They don’t want to do these things because they know the answer might not be what they’re looking for.”

Local government was about delivering cost-effective and good quality services but also fulfilled another vital function.

“It articulates the needs and desires of local communities and when you merge that disappears straight away. You can’t put a dollar amount on it but it doesn’t make it any less real,” Prof Dollery said.

“They ram amalgamation down the throats of local residents, the people get jacked up about it. Think of the millions wasted. I’m not against voluntary mergers by any means if councils want to merge and think it’s in their interest then they probably know best.”

But he said economies of scale could sometimes result from mergers.

“There are some scale of economies in local government service delivery but most of those economies have already been reaped in the Sydney area, for instance, water (when Sydney councils used to provide water for their communities).”

While savings were unlikely to be made in labour intensive service provision, like garbage collection, they could be found in areas like IT.

“Three of four councils can share but you don’t have to merge to do it. It’s a very expensive sledgehammer to achieve a saving that could be, and very often has been, made by council collaboration, through Regional Organisations of Councils, for example.”

Prof Dollery added that mergers could also lead to diseconomies of scale, where councils got so large that new, supercharged CEOs need more directors, administrators and extra resources to support them and a more complex bureaucracy emerged.

Government News asked Mr Toole’s office how new super councils would avoid the trap of diseconomies of scale and larger bureaucracies but no answer was forthcoming.

NSW Treasurer Andrew Constance sparked a backlash last week after claiming at a CPA Australia breakfast that Sydney could not function as a global city, unless it slashed its council numbers to a maximum of five.

Prof Dollery pointed to London and Los Angeles, which both have multiple councils and said that Australian council areas were already the fourth most populous of the 25 OECD countries.

“It’s a pathetic claim that to be a global city Sydney has to become a mega council. It’s just not true,” he said.

He conceded that property developers were often fans of council amalgamation because they only had to deal with one planning authority and could more easily focus their lobbying energy on one council.

“There’s something in that. For example, if you want to build a whole lot of stores across the city you have to presently get permission from each council.”

The solution could be to have one planning authority for Sydney, like the Greater London Authority or in some Canadian cities.

Prof Dollery said he feared NSW was failing to learn the lessons of the 2004 mergers, where he said smaller councils were taken over and some local communities became ghost towns.

Under the mergers, three councils were merged to create Tamworth Regional Council. Equipment, workers and other resources shifted to Tamworth leading to unemployment and falling enrolments in local schools.

“Councils are big employers. It’s (mergers) costly in dollar terms and in human terms. Everybody is full of angst.”

NSW Councils are currently busy working on their Fit for the Future applications, due in mid-2015. The $1 billion Fit for the Future package includes $258 million to help those councils who decide to merge, access to cheaper finance saving $600 million, $13 million to support councillors transitioning to new councils, $5.3 for newly formed regional Joint Organisations in rural areas and $4 million innovation fund to help small rural councils find new ways of working together.

Mr Toole called it: “the most significant investment NSW has ever made in the local government sector” that would ensure “strong, modern councils”.

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One Response to Few benefits to NSW council mergers: expert

  1. TRC Resident October 31, 2014 at 9:45 am #

    As a resident in the TRC area, I personally see the amalgamation of the small local councils in the area here as hugely beneficial- to the smaller of the council areas.

    Yes, you do lose jobs (and subsequently costs), such as General Managers, sets of Councillors, but TRC has achieved a very successful economy of scale and has sent more back into these old smaller Local Government areas than they would ever have been able to achieve on their own.

    A $20 million dollar water scheme for Barraba (approximately worth $20,000 per head of population in Barraba) could never have gotten off the ground in Barraba had it not been financially propped up by the rest of the TRC Council area- specifically the rate-payer base in Tamworth.

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