Fears are growing rapidly among NSW Councils that a new $1 billion State government package deal tied to reforms is a Trojan horse for council amalgamations in the lead up to the March 2015 State election.

This week NSW Liberal Premier Mike Baird dangled a swag of incentives in front of councils, including the holy grail of more rate-setting flexibility, alongside cheaper loan finance; greater planning powers; priority access to state funding and grants and a wedge of cash to help any councils that want to merge but there is a catch: local governments must first prove they are ‘Fit for the Future’ .

To prove they are fit, councils must complete a self-assessment by June 2015, which has not yet been emailed to them, the criteria of which some councils say includes the requirement to put forward an amalgamation proposal, if that’s what was recommended by the independent review that informed the funding package.

The Fit for the Future deal, which State government claims will save councils up to $600 million in loan interest payments, comes out of a three-year Independent Local Government Review Panel: Revitalising Local Government led by Graham Sansom and requested by Local Government NSW (LGNSW) itself. The Sansom Review recommended that 105 of NSW’s 152 councils consider merging and that eight councils in the far west of the state should form a Far West organisation.

Funding applications must include an overview of service delivery, scale of operations, financial sustainability and management of infrastructure. They must also contain details about a council’s infrastructure backlog, asset maintenance, debt service ratio and its ability to meet its own operating costs, among other things. Councils must then complete a ‘roadmap’ of how they will achieve sustainability in the future.

Marrickville Council in Inner Western Sydney, which the review suggested should form a super council with Ashfield, Burwood, Canada Bay, Leichhardt and Strathfield, has already cried foul and called the process ‘amalgamations very thinly disguised as voluntary’.

Marrickville Labor Mayor Jo Haylen said councils had to submit an amalgamation proposal to satisfy the first Fit for the Future application criteria.

“Not only are these amalgamations very thinly disguised as voluntary but the so-called ‘record $1 billion package’ is misleading,” Ms Haylen said.

“Each Sydney Metro Council that agrees to amalgamate will receive $10 million — and councils agree that the cost of amalgamations will exceed that amount many times over.”

Ms Haylen said that most of the $1 billion touted by the State government was made up of $600 million interest rate savings from lower borrowing rates over ten years. Since Marrickville Council had no plans to borrow externally it would receive zero benefit.

She said ‘mega amalgamations’ often created years of uncertainty and meant councils were focused inward for up to 18 months while they readjusted.

“While we are supportive of local government reform, it would be refreshing if the state government was a bit more upfront and honest about what is being proposed,” she said.

Other recommended mergers include creating a new council from the City of Sydney, Randwick, Waverley, Woollahra and Botany Bay Councils.

LGNSW president Keith Rhoades told Government News he had ‘concerns’ that NSW councils were being pressurised to merge.

Mr Rhoades said former NSW Premier Barry O’Farrell promised in 2011 that there would be no forced council amalgamations, only voluntary ones, but with the State election coming up in March next year, this promise could evaporate.

“There are strong rumours that this is just amalgamation by stealth, because if you don’t apply to be classed as Fit for the Future you don’t get any funding and you leave yourself vulnerable if the government changes and they don’t have the word ‘forced’ in their documentation,” Mr Rhoades said.

Mr Rhoades said he was also troubled that some councils could end up sidelined from funding and decision making.

“It potentially creates a two level system: councils that are in favour with government and those that aren’t,” he said.

Mr Rhoades said there were “a lot of question marks” over funding and eligibility. While he welcomed financial incentives for councils to merge, which he said LGNSW had fought long and hard for, he was concerned that a new financial planning authority for local councils to borrow from would not be independent but instead be government-controlled and administered by T-Corp.

It is clear from Fit for the Future documents that the NSW government is expecting most councils to consider mergers and those who do not put forward amalgamation proposals where one has been recommended by the review will not be looked on kindly.

“Sooner or later amalgamations will have to be part of the package,” says the Sansom review, which found about one-third of councils were ‘at risk’ from weak revenues, infrastructure backlogs and declining populations and found that ‘some are in crisis or very close’.

Fit for Future guidelines state: “councils may submit proposals for scale and capacity that are different to recommendations made by the Panel, so long as they are broadly consistent with the panel’s recommendations”.

NSW Local Government Minister Paul Toole called it a “generous package of incentives and support”.

He said Fit for the Future would achieve up to $100 million savings in red tape and duplication and make available $258 million to councils who decide to merge: $153 million for Sydney councils and $105 million for regional councils.

“Our State cannot continue to be constrained by local government boundaries that were set up more than 100 years ago,” Mr Toole said.

“We are supporting councils that wish to voluntarily merge by providing financial incentives and other supports to assist the process,” he said.

There is a series of September workshops planned where councils will be given more information about how to complete their Fit for the Future proposals upon which so much appears to be riding.

The panel has recommended that eight Far Western NSW councils, like Broken Hill or Brewarrina, many of which have heavy financial and social pressures, should form a Far West organisation and they can choose whether or not to apply to the fund. There will be a forum in November to discuss this new organisation.

Earlier this year four Queensland councils who had been forced to merge finally de-amalgamated after current Queensland Premier Campbell Newman’s popular 2012 election promise gave councils the option of reversing earlier forced amalgamations. In 2008 the Bligh government more than halved the number of Queensland councils from 157 to 73.

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