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Proposed amalgamation of Hornsby Shire and Ku-ring-gai councils

Hornsby Shire and Ku-ring-gai councils were both found by IPART to be financially strong and sustainable as stand-alone councils, but failed the government’s arbitrary and ill-defined criteria of “scale and capacity.”

The government claims a forced amalgamation would see a total financial benefit of $90 million over a 20 year period. This includes a $20 million grant from the NSW government, which artificially inflates the so-called benefit and is paid for by the taxpayer. The alleged ‘saving’ component over 20 years is $70 million and would mainly be 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 proposed merger would increase the ratio of residents to elected councillors to 19,306 residents per councillors, up from 12,098 in Hornsby and 16,861 in Ku-ring-gai.

Based on international comparisons there is not a good case for making any of these councils any larger. Sydney councils are on average almost four times larger than metropolitan councils across the developed world, with the average population of OECD metropolitan councils 27,224 and the average population of Sydney councils 104,493. 

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. There is a difficulty created by the fact that one council involved in this proposal is the subject of two separate merger proposal documents. It is unclear how the actual performance numbers of the existing councils are divided as between the proposals. It is likely to be on a population basis, though there is some inherent inaccuracy in such an approach. 

Ku-ring-gai: According to the government's merger proposal, the operating revenue in 2013/14 was $129.8 million. The actual result was $111.6 million in FY 2012/13 and $116.9 million in FY 2013/14. According to the proposal, the operating result in 2013/14 was $16 million, which reflects the actual result. According to the proposal, the asset base in 2013/14 was $517.5 million. The actual asset base was $1.1 billion in FY 2012/13 and FY 2013/14. The proposal states that the infrastructure backlog was 32% in 2013/14. However, by adopting the revised asset condition matrix and adopting the new methodology for calculated the C2S, Council’s backlog ratio has been recalculated as 4.26% compared to the reported value of 32%. In other words, the Government's proposal is off by over 27%!

Hornsby: According to the government's merger proposal, the operating revenue in 2013/14 was $128.7 million. The actual result was $126.3 million in FY 2012/13 and $142.7 million in FY 2013/14. According to the proposal, the operating result in 2013/14 was $17.8 million. The actual result was $7.9 million in FY 2012/13 and $20.2 million in FY 2013/14. According to the proposal, the asset base in 2013/14 was $779.1 million. The actual asset base was $1.4 billion in FY 2012/13 and $1.5 billion FY 2013/14. The proposal states that the infrastructure backlog was 1% in 2013/14, whereas the council’s IPART submission discloses 0.52%.