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Proposed amalgamation of Newcastle City and Port Stephens Councils

Newcastle City and Port Stephens councils were both found by IPART to be financially strong and sustainable as stand-alone councils. Newcastle City failed the government’s arbitrary and ill-defined criterion of “scale and capacity" while Port Stephens was found to be "fit for the future" given its large population size.

The government claims a forced amalgamation would see a total financial benefit of $85 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 $65 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 available 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 Hunter Council, a regional contracting organisation that 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 and 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.

Newcastle is already a very large council

Based on international comparisons there is not a good case for making either of these councils any larger. Newcastle, as one of the State's major metropolitan councils with around 165,000 residents, is already more than five times larger than average metropolitan councils across the developed world. The average population of OECD metropolitan council is 27,224 while the average population of Sydney councils for example is 104,493.

The proposed merger would dramatically increase the ratio of residents to elected councillors to 17,673 residents per councillor, up from 12,309 in Newcastle and 6,973 in Port Stephens.

What can you do to stop this blatantly undemocratic move by the NSW Government?

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.

Newcastle: According to the government's merger proposal, the operating revenue in 2013/14 was $241.8 million, which accords with the actual result and represents and increase on the Financial Year 2012/13 result of $227.2 million. According to the proposal, the operating result in 2013/14 was $18.8 million, which accords with the actual result and represents a significant increase on the Financial Year 2012/13result of was $(3.7) million. According to the proposal, the asset base in 2013/14 was $898.5 million the actual asset base was $1.5 billion in FY 2012/13 and $1.6 billion FY 2013/14. The proposal states that the infrastructure backlog was 10% in 2013/14, whereas the council’s IPART submission disclosed 9%.

Port Stephens: According to the government's merger proposal, the operating revenue in 2013/14 was $113.1 million, which accords with the actual result and represents an increase on the FY 2012/13result of $111.8 million. According to the proposal, the operating result in 2013/14 was $13.9 million, which reflects the actual result and represents an increase on the FY 2012/13result of $9.7 million. According to the proposal, the asset base in 2013/14 was $518.8 million. The actual asset base was $786.7 million in FY 2012/13 and $798.5 million FY 2013/14. The proposal states that the infrastructure backlog was 6% in 2013/14, whereas the council’s IPART submission disclosed 5.57%, projected to reduce to 2.27% by 16/17.

Joint statement by Newcastle and Port Stephens Greens on the proposed amalgamation:

The Newcastle and Port Stephens Greens have agreed on this joint response to the proposed amalgamation of their local councils:

The merger would result in a significant reduction in local democratic representation, evident in the lower ratio of elected representation per capita. The merger would create a more centralised and remote council bureaucracy, and a large electoral area that would make it very difficult for modestly resourced independents and smaller parties or groups to compete with larger political parties or wealthy interests for council representation.

There has been no credible expression of public support for the merger (e.g., a plebiscite) and consideration of the merger has ignored relevant evidence that would be detrimental to the merger case, such as from the Queensland council amalgamation experience. No credible, transparent evidence has been provided for the claimed benefits of the merger.

The population of the proposed merged area does not represent a genuinely coherent community of interest or sense of identity.

The process that has produced this proposal has been deeply flawed, with key information withheld despite repeated requests, and major new government announcements made at the start of the Christmas holiday season. The Newcastle/Port Stephens merger was not even considered in the IPART review or any previous report. The case put for the merger is based on the simplistic and uncritically accepted ideological view, repeatedly asserted in various guises in the Merger Proposal document, that "bigger is (self-evidently) better".

The merger would represent a significant expenditure of public money for no discernible public benefit to either the Newcastle or Port Stephens community. Newcastle and Port Stephens Greens are opposed to the proposed merger and will be making submissions to the delegate.  Representatives have already made their opposition clear in presentations to the Inquiry hearings on 4 February, and in a media release. We have also organised a public forum for Monday 8 February – details at http://www.newcastlegreens.org.au/

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