Are Bigger councils Really Better?

Manly's ability to preserve its own identity is under threat as the State Government pushes councils to amalgamate as part of its Fit for the Future program.

The threat to our community is that we will be absorbed into a greater Northern Beaches mega-council, where our population of 44,000 and seaside village identity will be lost in a sprawling 260,000-people mass. 

The peak council body Local Government NSW has made a submission to the State Government which strongly argues for local government to remain local.  It challenges the simplistic assumption that big is necessarily better and demonstrates that councils already benefit from economies of scale due to their participation in regional organisations.

The submission identifies lack of funding for councils as by far the most important reason for any financial difficulties. It says merging councils together will not resolve their financial problems unless the funding framework is fixed first.

It argues that the only sure beneficiary of council mergers would be the State Government, as it would have fewer councils to deal with. This would be a bad outcome for local residents who would inevitably find it harder to have their voice heard both at a council, and a state government level. 

The submission's main points are:


1. Many NSW councils are financially insecure. There is a net sectoral operating deficit, meaning that as a group councils are living beyond their means. And a massive state wide infrastructure renewal backlog of $7.2 billion.  

2. Rate pegging undermines the ability of councils to raise sufficient funds. NSW Councils have had their rate increases linked to a cost of living index for the past four decades. As a result NSW is the state with by far the lowest council rates. Rates per capita in NSW in 2012-13 were $499 compared to the national average of $633.   Making up this difference would generate an extra $970 million a year, which alone would resolve the operating deficit and infrastructure renewal backlog. The problem is compounded by the capping of many council fees and cost shifting to councils as state and federal governments withdraw services or financial support. 


3.  Merging two or more councils together is a difficult job. To succeed the merger needs community support, strong leadership, robust planning, adequate financial support, full co-operation from the councils involved and compatibility across the areas being merged. Forced amalgamations may therefore not succeed and may need to be reversed. In 2013, less than five years after the government had forced them to merge, several Queensland councils voted to de-merge. The new councils had to bear the full cost of the de-merger process. 

4. The costs of amalgamation will be significant. Issues include integration of IT systems, relocation of staff and premises, redundancy payments for senior staff and many more. While the State Government has offered some financial incentives to councils that volunteer to amalgamate, it will not be enough to fund the whole merger process.

5. The "best" size for a council depends on what services it's providing. Bigger can be better for purchasing materials or hiring contractors. But councils already benefit from these economies of scale through their regional organisations. Manly is already joined with six other councils to form NSROC - the Northern Sydney Regional Organisation of Councils, which services a population of 600,000. In contrast, services that require consultation with residents and flexibility, are better delivered on a much smaller scale. 

6. The property development sector has pushed the view that Sydney's housing targets will be more easily met if there are fewer councils to deal with. The submission rejects this simplistic view. As well, the "problem" has already been addressed by the recent establishment of the  Greater Sydney Commission, which will oversee planning targets across the metropolitan region. 

7. The Fit for the Future process has been rushed. Council submissions had to be submitted by June 30 and a decision on the fate of each of the state's 152 councils will be made by the end of October. Then the entire amalgamation process is scheduled to be finished by September 2016, an unrealistic timeframe for such a difficult and complex project.

8. Surveys show that a majority of NSW residents say their interests will be less well represented if forced council mergers go ahead. Nearly all (93%) residents say they want to be involved in decision-making in their local area.  

9. Local Government NSW's other recommendations include encouraging councils to make more use of debt, and strengthening regional council organisations so they can take on more responsibility for shared services and regional planning. 

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