NSW: Merged councils face rising deficits

The newly created Inner West Council's 2019-2020 budget includes an $18 million deficit

Three years after the New South Wales government forcibly merged 44 metropolitan, regional and country councils into 20 mega councils, the promised savings have failed to materialise.

Instead there is growing evidence that council amalgamations have led to higher deficits and less services, according to Save Our Councils Coalition (SOCC) spokesperson Brian Halstead.

The exact extent of this trend is hard to gauge though given that councils have been given huge capital grants “which mask what is really happening”.

SOCC is campaigning for communities to be given a say on whether they want their councils to stay amalgamated. It has issued a report, A Sea of Red Ink, which outlines the case for communities to be given a binding vote on the matter.

Halstead told Green Left Weekly that “financially, councils do not appear to be delivering what was in the amalgamation proposals and councils are not bothering to explain why”.

Inner West Council

This rang true at the June 25 meeting of the Inner West Council (IWC) — the result of a merger of Ashfield, Marrickville and Leichhardt councils — at which the budget was presented and passed.

At the meeting, Greens and progressive independent councillors said they had either not been given the necessary information about various budgetary items, despite requesting it, or were given it very late, with little chance to come up with alternative savings.

The 2019-20 budget includes an $18 million deficit (excluding capital grants and contributions). This compares to $3 million the previous financial year.

Greens councillor Rochelle Porteous told the meeting that the amalgamation was supposed to save on costs, not blow them out.

She later told GLW that residents are “paying a very high price for this forced amalgamation”.

Town halls, depots and community centres are “at risk of being sold off to developers,” Porteous said, adding that large rises in fees and charges and “a rapid depletion of our unrestricted working reserves” would also eventually hit the community.

“It is extraordinary, with all the apparent resources of this amalgamated council, just how poor the budget process has been in terms of transparency, accountability and consultation with the community. I will be pushing for significant improvements in 2020-21.”

Several residents in the gallery told GLW that they had written to the council CEO asking for an explanation of the projected deficit and had been told that the council was in a “difficult” financial situation.

Yet Labor Mayor Darcy Byrne told the meeting that the deficit was manageable and that it is “not true” that “we are in a crisis situation”.

Instead, Labor and Liberal councillors seem happy to look at service “harmonisation” — which for most public sector workers means cuts, privatisation of council property and the very unpopular idea of raising fees and charges, including for the use of ovals and sports grounds, to deal with the council’s financial situation.

The councillors and gallery were repeatedly told by Liberal councillor Julie Passas that the creation of IWC had been their “saviour” because of the “very bad decisions” made by the three former councils. She also threatened to “go public” with the “real financial situation”, causing some to scratch their heads given that half the room was asking for more information.

At least two of the three former councils had been solvent before the amalgamation, with only Passas’ old council — Ashfield — in the red.

Unpopular mergers

The Mike Baird-led Coalition government pushed through the unpopular council mergers in 2016, promising greater “efficiencies” and $2 billion in savings over 20 years.

In the extremely limited “public hearings” held beforehand, the overwhelming majority of submissions opposed amalgamations and demanded that local residents have the final say.

The KPMG report used to justify the forced amalgamation “savings” has never been made available despite repeated calls for this to occur. SOCC is still pushing to see it.

The government’s lack of transparency did come back to bite it after various court cases ruled it pay costs. In some Liberal heartland areas it simply dropped the proposal, although local government minister Gabrielle Upton said last year that she was not ruling out further amalgamations.

Halstead said that there had been “virtually no reporting of the savings, costs and results” of the amalgamations, nor was there “any demand by the Office of Local Government for any reporting”.

He said the NSW government thought its savings argument would quell community opposition but without financial accountability “this is clearly not the case”.

In 2017, the Greens, Labor, Animal Justice Party and the Christian Democrats supported a Shooters Fishers and Farmers (SFF) bill to de-amalgamate, but it was defeated in the Legislative Council.

Last November, SOCC presented its de-amalgamation pathway, suggesting a new de-merger bill that was supported by all parties other than the Liberals and Nationals.

The five-point plan involves a binding referendum, funded by the NSW government, if 10% of enrolled voters in the old council area wish to poll for a demerger.

But with the Coalition returned to government in March, Halstead said SOCC will have to discuss other options. “Pittwater and Tumbarumba have had petitions to de-amalgamate with the minister for months, and have yet to receive any response,” he said.

Deficit growing

At the recent IWC meeting, independent John Stamolis pointed out that any budget which projected four years of $19 million deficit, rising to $22 million in the fifth year, was heading in the wrong direction.

“The era of ‘big government’ is in,” he told the meeting. “We are no longer a community government … if we commercialise our — or rather the community’s — assets.”

Independent Victor Macri let the cat out of the bag when he said that “making an investment portfolio work for community is not a sell-off, but a rationalisation.”

Porteous said: “The projections of ongoing deficits in the Long Term Financial Plan are unacceptable and must be addressed”.

Judging by the Labor team’s comments at the meeting, the projected deficits and “savings” are not a concern.

Labor councillor Mark Drury goaded Porteous for not coming with an alternative budget on the spot, accusing her of trying to “micromanage” the general manager.

But when half the council says they did not know about the huge and ongoing deficit, and residents are not given any answers to their questions about the draft budget, you have to wonder who the IWC is really working for.