Merged councils face financial tsunami

By Jo Cooper

Amalgamated councils already beset by budgetary and cultural challenges have been warned the global financial crisis is likely to present further economic threats.

Just prior to finishing his term as president of the Australian Local Government Association in November, Paul Bell told Government News that amalgamations, such as the widespread mergers that have occurred most recently across Queensland, compounded with the oncoming financial crisis was like a “tsunami rolling in on local government where the job has been tough enough.”

“Bringing together four, five, six, eight different entities is hard, but now when you also have the concern of what the economy is doing to state government finances and therefore the states’ ability to support local government through this tough economic time, it’s creating a great deal of anxiety,” Cr Bell said.

Cr Bell said amalgamated councils were “anxious” about the new partners they took on in the transition period to look after IT systems and other assets.

 “But also they’re very concerned about the support from the state government that we’ve been screaming for,” Cr Bell said.

University of New England economics professor Brian Dollery said local government had been struggling to raise revenue and roll out or update infrastructure for many years.

“The current financial crisis has obviously intensified that financial trend – it’s an adverse trend, things are getting tougher for councils,” he said.

“Now with the likelihood that business is going to slow down, you’re going to get less development in towns, which means less rates revenue and so on.”

This situation is even worse for councils exposed to risky investments.

“Because they’ve been under such pressure they try and get higher investment returns than they would have done in the olden days and that’s meant they’ve taken bigger chances and risks – so it’s all linked really back to this basic ongoing financial crisis in local government,” Professor Dollery said.

Amalgamated councils still grappling with cultural and management issues have been urged to address grassroots staff issues now, particularly in light of the financial crisis.

Anne Barclay, director of management consultancy HR Advantage, leads a team that has worked with numerous councils around Australia, in particular Queensland. She said since the March mergers, Queensland councils had primarily focused on getting CEOs and directors in place, inducting new councillors and organising important nuts and bolts, such as IT, financial systems and new logos.

 “Councils are doing some great work and they have a lot on their plate – but it’s important that they don’t overlook the ‘people’ factor,” she said.

Ms Barclay said significant change, such as that brought about by amalgamation, could trigger a loss in team performance.

“That dip in performance is a concern at any time, but when you’re facing tough financial environments it’s even more critical that change is managed effectively,” she said.

Her recommendation is for councils to have two post-amalgamation strategies: one dealing with big-picture issues, the other looking at the workplace level, examining which teams are coming together, prioritising the critical teams in terms of dealing with residents and giving them structured assistance with change issues.

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