Governance as Leadership in Local Government What is happening ‘elsewhere’ Brian Bell General Manager Lake Macquarie City Council, NSW 10 November 2015

NSW Circumstances ILGR Panel set up by State Government (2012) Panel makes 65 recommendations for reform(2014) Large majority of recommendations strongly supported by NSW Councils However, the options relating to structural reform via amalgamations consumed the debate and drowned out the rest of the recommendations 2

Fit for the Future? Gov’t starts ‘Fit for the Future’ Program 144 (of 152) councils required to show how they can be Fit for the Future 136 of the councils submit their proposals saying they want to stand alone Gov’t gives assessment job to IPART 3

IPART Report Startles! State Government strikes! Councils not happy! IPART report with ‘Fit for the Future’ submitted to Gov’t on 16 October. Report released 4 days after state gov’t receives it Hardly anything different in it from ILGR Panel final report recommendations/options in relation to amalgamations Premier comes out strong … with lots of populist but ‘challengeable’ statements ‘Last Chance’ for recalcitrant councils – 28 days to see the error of their ways before Government strikes! Councils not happy! 4

What we think might happen Forced amalgamations across NSW. Government announcement sometime after 18 November this year ‘Transition Committees’ in place until September 2016 local government elections Newly amalgamated councils in operation following September 2016 local government elections Regional Joint Organisations (JOs) for some of the non-metropolitan councils in NSW 5

Regional Joint Organisations 5 ‘pilot’ JOs currently being trialled across the state. (Hunter, Central NSW, Illawarra, Namoi, and Riverina regions). Pilot JOs are testing the opportunities for regional groupings of councils to strengthen their regions and more effectively partner with the state government as a region. Core functions of the JOs are being identified as regional strategic planning and priority setting; intergovernmental collaboration; and regional leadership and advocacy. Will not be prevented from undertaking larger regional projects to realise their core functions. Will also be able to define their own particular ‘regionally defined’ functions. Will have appropriate legislative backing. 6

Issues we all get lost on Why is amalgamation always the preferred ‘solution’ of state governments? The real evidence for ‘Bigger is better’ local governments is often missing in action! The performance numbers tell a different story A study of 24 regional cities in NSW tells a story ……. 7

OPERATING PERFORMANCE RATIO Of 5 Councils meeting the OLG 3yr average criteria, 4 are not amalgamated, 1 is amalgamated. Of the 10 best performing councils over the last 3yrs, 7 are not amalgamated and 3 are amalgamated. Population size of the council has no correlation to performance – bigger is not better. Amalgamated councils are not performing any better than non amalgamated councils. Misses Criteria Meets Criteria Population 000’s Amalgamated Non Amalgamated 8

Benchmark >1 ASSET MAINTENANCE RATIO 6 Councils met the 3yr average benchmark. 2 were amalgamated and 4 were not amalgamated. Of the Top 10 performing councils, 6 were amalgamated and 4 were non amalgamated. Population size has no correlation with performance against this benchmark. Population 000’s Amalgamated Non Amalgamated Misses Criteria Meets Criteria 9

Benchmark <2% INFRASTRUCTURE BACKLOG RATIO For the year 2014, 7 councils met the OLG criteria. 5 are non amalgamated, 2 are amalgamated. Of the top 10 performing councils, 6 are non amalgamated and 4 are amalgamated. Population size has no correlation with performance on this measure Population 000’s Amalgamated Non Amalgamated Misses Criteria Meets Criteria 10

More and More Curious! Interestingly, just 7 out of the 26 merger entities arising from the 2000 to 2004 amalgamations in NSW were deemed to be FIT to stand alone by IPART (18 deemed NOT FIT, and 1 chose to merge). Should we dare ask ….. if amalgamation is important to ensure councils are Fit For the Future why are the large majority (in fact, over two-thirds) of councils merged between 2000 and 2004 deemed by IPART to be NOT FIT? 11

Federal and State Funding Drying Up? The experts say Federal and State funding is drying up, so you better be a big council. Why? If the funding pie doesn’t increase, and 2-3 councils become 1 bigger one, there still won’t be ‘more’ funds in total for the bigger council, unless they squeeze resources from the smaller players with a lesser voice, which is what they will do! It simply means that the same funds previously spread over a region may well be controlled by a more centralised (CBD?) based administration. What happens to the ‘fringe dwellers’ who previously had more control over their resources in this scenario? 12

Beware the politics of rate capping Victoria and WA? Looks good politically.. to short term thinkers! It may work in the short term and won’t create problems IMTO, but serious problems arise later. Councils get better at ‘own source revenue’ (other fees and charges) which is good, but they pay a big price down the track because they resort to shaving back over the ensuing years on asset management, to make ends meet. For example, lesser funding into Asset Management fund reserves becomes the ‘survival bank’. This is what happened in NSW. 13

Make your own sustainable funds LG should stand on it’s own as much as possible, get away from having to look for handouts (except for FAGs from Federal Government). Appropriate rate settings (IPR process where community sets it’s standard and council follows). Include ‘courage’ in the political decision making when setting rates. Management efficiencies via comparative benchmarking 14

A minimum rate cap??? Setting a rate cap. CPI VS CPI? If there is no escaping rate capping then it should be a minimum rate increase set by the state, such that councils must raise their rates by (at least) that amount!! Goodness!! This would take away the political negatives for local councillors who may have some problems setting their rates at a level that will allow the council operational plans to be carried out. 15