De-amalgamation: The real costs and benefits

August 10, 2021
Rates are rising as part of the forced amalgamation of three councils into the Inner West Council.

The Inner West Council (IWC) will give residents a say in a non-binding poll on de-amalgamation at the December 4 local government elections (postponed from September 4 due to the COVID-19 pandemic).

While Labor and Liberal councillors tried to block the poll at every turn, including putting up a rescission motion, they failed.

Labor says it never agreed to the forced merger of the councils in 2016, but argues it does not make financial sense to de-merge.

The two Liberal councillors have voted opportunistically against a poll and for it, but want the councils to remain amalgamated.

In May, IWC decided to secure an independent cost benefit analysis report, and it was tabled on August 3.

Morrison Low’s (ML) report, Cost benefit for proposed Inner West Council de-amalgamation, contains several problems.

First, it accepts the NSW government’s pro-amalgamation policy and is therefore, political, in character.

It spends most of its 65 pages arguing why the IWC must stay amalgamated. It does not investigate how a de-merged council could work, including which services, including the IT system, could remain shared.

This is despite the IWC agreeing that an independent assessor would be asked to look at a range of issues related to de-amalgamation, not just costs.

Secondly, the ML report includes cost estimates, but does not say how they were arrived at.

Thirdly, the ML report states the community is “largely satisfied” with the IWC’s performance based on a survey undertaken in June, but fails to mention any concerns about the forced merger, the widespread opposition to rate hikes, or that a majority of councillors are so unhappy with the merger that they opted for a residents’ poll on the question.

In short, the ML report is partisan.

It is little wonder, therefore, that Labor councillors are focused on trying to scare people out of even discussing de-amalgamation by reducing it down to a question of cost.

While there would certainly be a financial cost to de-amalgamate, it could be far less than what was spent on amalgamation in the first place, depending on how the de-amalgamation takes place.

The ML report estimates the IWC merger would have cost $24.3 million and states (without providing a source) that the net costs (one off and ongoing) for any proposed de-amalgamation would be higher. It says the cost to de-amalgamate would be $26.2 million and ongoing costs would be about $22.1 million.

It states the $26.2 million would cover redundancies, information, technology and council establishment costs.

This is not addressed in the report.

The NSW government delivered just $10 million of the $30 million IWC thought it would get to amalgamate the former Ashfield, Leichhardt and Marrickville councils.

The cost of sacking and paying out staff from the three former councils has never been made public.

The report concedes that even though the Independent Local Government Review Panel’s assessed that the three councils were “financially sustainable”, individually, it said, they “lacked scale and capacity”.

This vague criticism begs the question: Scale and capacity to do what and for whom?

We already know that the NSW government is hell-bent on reducing council’s and residents’ power over development, the latest being Rob Stokes’ attempts to “reward” developers with a “merit assessment” by giving them greater discretion over environmental standards.

The ML report does not once mention the decline in services and face-to-face assistance, or the rise in rates. It assumes the three councils will be returned to their previous financial positions, but, again, no data is given for this assumption.

The cost of three sets of councillors compared to a combined one may well be less, depending on whether wages are being spent on councillors, middle managers or general managers.

For example, each council would not need a special Mayoral $500,000 communications budget.

After detailing the problems with de-amalgamation, the ML report then concedes that the “risks from a three council de-amalgamation of Inner West Council may be lower considering that Ashfield, Leichhardt and Marrickville Councils were operating successfully before the merger”.

Further, it states: “The relatively similar community of interest profiles suggest the risks in separating the communities are lower than they might otherwise be”.

Amendments to the Local Government Act 2021 set out a pathway for councils to de-amalgamate and that the NSW government is liable to pay for this.

Interestingly, the report warns that the “greatest risk” to any de-amalgamation would be the political nature of the three separate councils. But, then it says “improved representation” would be a benefit.

“The number of people represented by each councillor will decrease under a de-amalgamation arrangement, providing easier access to their councillors and the council.”

Currently, each Inner West Councillor represents a little over 14,000 people.

In a de-amalgamated council, this number would reduce to between 4‒8000, depending on the council and final number of elected councillors.

Better representation would be a big value to residents in any de-amalgamation.

Councils need residents to be engaged. As the Inner West has many such communities, passionate about environment and social rights, we need to reinstitute a process whereby councils actively encourage residents, rather than developers, in playing a big role in shaping our diverse urban environment.

[Pip Hinman is standing as a candidate for the Socialist Alliance in the Damun ward of the Inner West Council. She can be contacted through her Facebook page.]

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