Proposed amalgamation of Armidale Dumaresq and Guyra Shire councils
Armidale Dumaresq and Guyra Shire councils both met the majority of IPART's financial criteria as stand-alone councils, but failed the the government’s arbitrary and ill-defined criteria of “scale and capacity.”
The government claims total financial benefit of $21 million over a 20-year period. This includes a $15 million grant, which artificially inflates the so-called benefit and is paid for by the taxpayer. The only possible ‘saving’ component is $6 million and would be mainly achieved through job cuts to council staff.
The government has chosen to release only selected extracts and a high level summary from the study undertaken by its consultants, KPMG to support these alleged savings. It is impossible for the community to make a full submission on the government's financial case for amalgamation without having access to the complete study for each and every council. What is apparent from the publicly information about the KPMG study is that it:
+ inflates any potential savings from future contracting arrangements in amalgamated councils, especially given the councils already enter into many contracts through Regional Organisation of Council contract tenders when there are identifiable economies of scale from doing so
+ assumes large staff losses in the merged council that will inevitably impact on local services an the local economy
+ grossly underestimates the likely costs to councils from renewing each council's IT infrastructure following the merger
+ fails to consider the very real costs the council and local community will incur with a less responsive and larger council that has less intimate knowledge of local needs
+ ignores the large loss of council staff time and resources in implementing an unwelcome and often unsupported amalgamated council, and
+ has no regard to the informed academic opinions based on detailed empirical studies of past council mergers that proves forced amalgamations typically fail to generate financial sustainability for local councils.
The government claims that the new council will use it's larger scale and capacity to achieve efficiencies through greater purchasing power and increased collaboration with State and Federal Governments.
Yet both councils already partner effectively with state and federal agencies. Both councils also have shared service arrangements with adjoining councils where efficiencies can be achieved. As with all NSW councils they already have access to regional tender processes through their regional organisation of councils (ROCs) where economies of scale are available.
Guyra has a long and proud history of having an independent council, supported by its local community, with a clear focus on promoting the economic, social and environmental welfare of the local area. Due to the disparity in size between the two council areas if the merger proceeds it is inevitable that any future decisions about Guyra will be made by a council that is overwhelming comprised of councilors elected from the Armidale-Dumaresq area.
The cultures and communities of the two council areas, with Guyra as a largely rural council and Armidale-Dumaresq as a large regional city with a strong university and metropolitan identity, are quite distinct and not well chosen partners in a merged entity.
As with much of regional and rural NSW, keeping councils and council jobs can mean the difference between keeping libraries, waste management, road safety and other essential services in local communities.
The proposal also ignores that both councils have made a deliberate choice to run operating deficits in order to expend funds that strengthen the asset base. This is a legitimate economic decision, but also one that reflects democratic mandates. It is part of a long-term strategy that sees a return to operating surpluses by the end of the decade.
The proposed merger would increase the ratio of of residents to elected councillors to 2,995 residents per councillor, up from 2,533 in Armidale Dumaresq and 770 in Guyra.
More Detailed Financial Material Relevant To Each Council
There are some significant variations between the figures outlined in the Government's proposal and the correct figures as reported in the councils' financial statements.
Armidale Dumaresq: According to the government’s merger proposal, the operating revenue in 2013/14 was $37.8 million. The actual result was $48.5 million. According to the proposal, the operating result in 2013/14 was $(5.3) million. The actual result was $(1.5) million in 2013/14. According to the proposal, the asset base in 2013/14 was $448 million. The actual asset base was $731 million. This represents an increase from $718 million in 2013, which reflects council’s policy decision to run an operating deficit to strengthen the asset base. The proposal states that the infrastructure backlog was 5% in 2013/14, whereas the council’s IPART submission discloses 2.9% for 2013/14.
Guyra: According to the government’s merger proposal, the operating revenue in 2013/14 was $11.7 million. The actual result was $11.8 million. According to the proposal, the operating result in 2013/14 was $(1.4) million. The actual result was $(1.1) million. According to the proposal, the asset base in 2013/14 was $115.9 million. The actual asset base was $292 million, up from $289 million in 2013, reflecting council’s policy decision to run an operating deficit to strengthen the asset base. The proposal states that the infrastructure backlog was 16% in 2013/14, which reflects the council’s IPART submission. However, the proposal does not mention that the backlog is projected to decrease to 6% in 14/15, 5% in 15/16 and 2% by 18/19.