Information pack on the NSW State Government ’s

Fit for the Future PROGRAM for Local Government

City of Ryde Counci l | Hunter ’s Hi l l Counci l | Lane Cove Counci l

The NSW State Government has released its ‘Fit for the Future’ program that will impact the way all NSW councils operate. The program proposes to merge 41 Sydney metropolitan councils into 18 and was created as a response to the findings in the Independent Local Government Review Report, October 2013.

Independent Local Government ReviewIn 2012, an Independent Local Government Review Panel was appointed to undertake a state-wide review and identify options for governance models, structural arrangements and boundary changes for local government in NSW, taking into consideration:

• Ability to support current and future needs of the community

• Ability to deliver infrastructure and services efficiently and effectively

• The financial sustainability of each local government area

• Consideration of incentives to voluntary boundary changes

Source: Box 1: The Panel’s Terms of Reference Revitalising Local Government p9.

.

CAMDEN

HURSTVILLE

BANKSTOWN

CANTERBURY

WAVERLEY

FAIRFIELDAUBURN

HOLROYD

PARRAMATTA

BLACKTOWN

MANLY

KU-RING-GAIWARRINGAH

PITTWATER

SUTHERLANDCAMPBELLTOWN

LIVERPOOL

PENRITH

HORNSBYBAULKHAM HILLS

HAWKESBURY

GOSFORD

ROCKDALE

KOGARAH

RANDWICK

BOTANYBAY

MARRICKVILLE

LEICHHARDT

CANADA BAY

NORTHSYDNEY

MOSMAN

WOOLLAHRASYDNEYASHFIELDBURWOOD

STRATHFIELD

WILLOUGHBYRYDELANE COVE

HUNTERS HILL

Review Panel’s RecommendationThe Independent Local Government Review Panel presented a Report to the State Government that recommends amalgamating Hunter’s Hill, Lane Cove, Mosman, North Sydney, Willoughby Councils and two-thirds of eastern Ryde’s area based on:

• Projected 2031 population 365,400

• Close functional interaction and economic/social links between these councils

• Need for integrated planning for major centres, Sydney Harbour foreshores, etc

• 3 of these councils projected to have fewer than 50,000 people in 2031.

The western third of Ryde’s area to amalgamate with Parramatta, Auburn and Holroyd Councils to the west based on:

• Projected 2031 population 558,500

• Close functional interaction and economic/social links between these councils

• Need for stronger unified local government to develop Parramatta as second CBD

• Parramatta’s northern boundary is very close to its CBD; relocation to M2 would facilitate planning and improve socio-economic mix and community linkages

• Incorporating part of Ryde would strengthen link between Parramatta and ‘Global Sydney Corridor’ and improve scope for integrated planning around Epping station.

Fit for the Future

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The Fit for the Future PROGRAMBased on the recommendations of the Independent Local Government Review the State Government announced the Fit for the Future program in 2014. It requires all councils to use the recommendations from the Independent Local Government Review Report to address the following criteria:

• Suitable scale and capacity

• Financial sustainability

• Efficiency

• Infrastructure, services and capability.

Each Council is being asked to:

• Review its situation, starting with whether the council has scale and capacity to meet the challenges ahead

• Prepare a Fit for the Future submission by 30 June 2015

• Make the transition to a new structure by September 2016 or implement an improvement plan.

CAMDEN

HURSTVILLE

BANKSTOWN

CANTERBURY

WAVERLEY

FAIRFIELD

AUBURN

HOLROYD

PARRAMATTA

BLACKTOWN

MANLYWILLOUGHBY

KU-RING-GAI WARRINGAH

PITTWATER

SUTHERLANDCAMPBELLTOWN Current submissions to IPART

LIVERPOOL

PENRITHHORNSBYBAULKHAM HILLS

HAWKESBURY

GOSFORD

ROCKDALE

KOGARAH

RANDWICKBOTANYBAY

MARRICKVILLE

LEICHHARDTCANADA BAY

LANE COVE

NORTHSYDNEYMOSMAN

WOOLLAHRA

SYDNEYASHFIELDBURWOOD

STRATHFIELD

Approved SRV in last 3 years

RYDERYDE

HUNTERSHILL

CAMDEN

HURSTVILLE

BANKSTOWN

CANTERBURY

WAVERLEY

FAIRFIELD

AUBURN

HOLROYD

PARRAMATTA

BLACKTOWN

MANLYWILLOUGHBY

KU-RING-GAIWARRINGAH

PITTWATER

SUTHERLANDCAMPBELLTOWN Current submissions to IPART

LIVERPOOL

PENRITH

HORNSBY

BAULKHAM HILLS

HAWKESBURY

GOSFORD

ROCKDALE

KOGARAH

RANDWICKBOTANYBAY

MARRICKVILLE

LEICHHARDTCANADA BAY

HUNTERS HILL

LANE COVE

NORTHSYDNEY MOSMAN

WOOLLAHRA

SYDNEYASHFIELDBURWOOD

STRATHFIELD

Approved SRV in last 3 years

RYDERYDE

Characteristics of the Councils proposed to be merged

What is the State Government offering Councils to merge?

Support For Councils who consider a mergerThe NSW Government is providing support for councils who are considering a merger will fully-funded facilitators, subsidised funding to prepare a merger business case, and provide access to technical experts to help councils discuss the findings of the business case with their community and consider the options.

Up to $22.5 million for councils that mergeSydney councils, as well as the Central Coast and Lower Hunter can receive up to $22.5 million in direct funding if they decide to join forces with their neighbours. The money will help to get the new council underway and provide additional services and facilities the community needs. Merging councils will also have support through the transition period, with extra funding to ensure that elected representatives are involved.

The Fit for the Future Proposal Amalgamations PART BThe Fit for the Future Proposal Amalgamations PART A

2012/13 Comparative Data from the Office of Local Government

Hunter’s Hill Lane Cove Mosman North Sydney Willoughby Ryde* Parramatta Holroyd Auburn

Population (2012/13) 14,139 33,726 29,605 67,722 71,933 110,791* 178,549 106,038 80,422

Project 2031 population 17,400 42,700 33,800 83,800 91,700 143,900* 257,400 131,400 121,700

Current Councillor Representation 7 9 7 13 13 12 15 12 10

Merged Councillor Representation 1 1 1 3 3 3 5 3 3

Average Residential Rates (pa) $1,379.15 $1,130.89 $1,181.45 $513.40 $828.97 $645.62 $767.84 $674.42 $583.96

Value of DAs $42,259 $338,967 $217,466 $396,130 $208,578 $408,948 $763,205 $233,639 $235,871

Domestic Waste Management Charge (2012/13) $416.01 $370.52 $432.79 $262.00 $439.10 $363.38

Revenue per Household (‘000) (2013/14) 3.0 3.0 3.4 3.2 3.8 2.1

Liabilities per Household (‘000) (2013/14) 1.2 1.3 2.2 1.0 3.1 0.9

Operating Expenses $13.7M $35.2M $38.4M $86.3M $95.4M $99.2M $172.3M $82.1M $60M

*One-third of Ryde’s population to merge with the western councils and two-thirds to merge with the eastern councils.

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What are the options available to OUR Councils?

1 Agree to the State Government proposal of a merger.

2 Reject merger proposal and remain as an individual council that demonstrates strategic capacity.

3 Provide a superior alternative such as a joint regional body of individual councils that strategically plan and deliver services on a regional basis where appropriate.

What are the Key Issues in relation to these options? • Research and evidence

• Local democracy and representation

• Organisation performance

• Service delivery

• Financial impacts

• Scale and capacity

RESEARCH AND EVIDENCETo ensure an informed decision on a preferred option the following consultants were engaged by City of Ryde, Hunter’s Hill and Lane Cove Councils:

Morrison Low – To prepare a merger business case based on the Panel’s recommendation to amalgamate the eastern two thirds of Ryde with Hunter’s Hill, Lane Cove, Mosman, North Sydney and Willoughby. The business case will include an evaluation of the likely social, environmental, financial and governance outcomes of the proposed merger option.

SGS Economics - To investigate and prepare a business case on the benefits/non-benefits to be realised through the formation of a joint regional body for Northern Sydney that would enhance the region’s scale and capacity in undertaking sub-regional land use and infrastructure planning, community and cultural planning, economic development and tourism and joint regional advocacy.

Prof Percy Allan and Associates - To investigate and prepare a business case on the benefits/non-benefits from delivery of shared services, including identification of appropriate services.

Prof Brian Dollery - To undertake a report titled ‘Compulsion Versus a Collaborative Regional Approach - an Empirical Analysis of Forced Amalgamation versus a Regional and Shared Services Approach.’

Local Democracy And RepresentationThe Part A proposal will see a merged council for Hunter’s Hill, Lane Cove, Mosman, North Sydney, two thirds of Ryde and Willoughby with a total population of 294,649 reach a population of 370,130 by 2031. Part B proposal will see the western third of the Ryde area combine with Parramatta, Auburn and Holroyd local government areas and will have a total population of 398,246, which is forecast to reach 697,570 by 2031.

Under the proposed merger, based on a calculation of 12 Councillors there would be a dramatic decrease in representation and reduced access to a Councillor.

Organisation PerformanceIn a study undertaken by Professor Brian Dollery and Associates of 35 NSW councils that were merged between 2000 and 2004 into ten, compared the TCorp financial ratings of the merged entities against the TCorp ratings of all NSW councils. The study found no material difference in performance between the ten merged councils and the rest of the NSW councils. In fact, the ten councils under consideration had a higher proportion of sub-standard performance than the rest of NSW councils.

In an analysis of the 2008 Queensland forced amalgamations Drew, Kortt and Dollery (2015) found an increase in real operating expenditure in the order of 4.7% p.a. and that the council rates increased 4.9% (excluding the effects of inflation). Dollery states ‘far from the earlier claims of leaner more efficient local authorities, the Queensland forced mergers actually produced more expensive local government, funded in part by higher municipal rates and fees’.

Service DeliveryA benefit of larger organisations is that they can achieve economies of scale on operational activities, depending on the scalability of the activity. Dollery and others analysed the Queensland Councils’ performance three years after amalgamation and found almost 25% of all councils (thirteen councils) were now found to exhibit diseconomies of scale.

An alternative to achieve economies of scale is for councils to co-operate and share services where appropriate. Councils in Northern Sydney already participate in a variety of services which are shared. Some examples include:

Aboriginal Heritage Program; Regional Asphalt Tender; Metropool Insurance and Risk Scheme; Shorelink Regional Library Support Services; Northern Sydney Internal Audit Service; Family Day Care; Emergency Management Committee; State Emergency Service; Regional Waste Disposal Tender, Regional Community Recycling Centre.

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To be amended

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Dollery concludes that Shared Services are superior to Merged Councils, and draws the following broad inferences in relation to shared services:

• Shared services arrangements can enhance local service delivery

• Some services seem to be more conducive to shared services arrangements

• Successful shared services arrangements typically include IT services, human resources and waste management

• Successful shared services arrangements can vary significantly

• Barriers to shared services arrangements can be challenging to address, and

• Barriers to shared services arrangements include: (i) loss of control, (ii) competing objectives, (ii) uncertain benefits, (iv) and increasingly complex management and administrative processes.

Percy Allen in his paper ‘A Shared Services Centre Migration Plan for North Shore Councils’ states that there is no compelling evidence that centralising all local council activities into a single mega-council produces cost efficiencies. He states ‘If a shared services centre operated as a genuine commercial enterprise, savings of 10-20% may be possible.’

Financial IMPACTSThe Fit for the Future Program identifies 7 key financial indicators to assess a Council’s Financial Sustainability. The following provides an indication of each Council’s performance. It should be noted that Councils do not meet the criteria have the capacity to meet the indicators over time.

Current and Projected Performance against Fit for the Future Financial Benchmarks

Fit for the Future Criteria

Hun

ter’s

Hill

2023

Lane

Cov

e

2023

Ryde

*

2023

Mos

man

2023

Nor

th S

ydne

y

2023

Will

ough

by

2023

Operating Performance O P P P O P1 O P1 O O P O3

Own Source P P P P P P P P P P P PAsset Renewal O O2 P P P P1 P O O O2 O OInfrastructure Backlog O O P P O P1 O P O O3 O OAsset Maintenance P P P P O P O P1 O P O P

Debt Service P P O P P P P P O P P PReal Operating Expenditure

O P P P P P P P O P O P

TOTAL P 3 5 6 7 4 7 4 6 1 4 3 4

Source: Table 5.5 Current Performance, Compulsion verses a Collaborative Regional Approach, Professor Brian Dollery. April 2015. Projected Performance Morrison Low Fit for the Future - Joint Business Case Modelling Highlights of Draft Report May 2015.1 Met with SRV. 2 Met until 2018. 3 Met until 2021.

Based on the proposed merged entity Analysis conducted by Morrison Low, found that it does not meet the Fit for the Future financial benchmarks which are detailed below:

Fit for the Future Simulations of Merged Entities

Fit for the Future Criteria Current Projected Performance 2023

Operating Performance P POwn Source O PAsset Renewal O OInfrastructure Backlog O OAsset Maintenance O PDebt Service P PReal Operating Expenditure O P

TOTAL P 2 5

Source: Table 5.5 Current Performance, Compulsion verses a Collaborative Regional Approach, Professor Brian Dollery. April 2015. Projected Performance Morrison Low Fit for the Future - Joint Business Case Modelling Highlights of Draft Report May 2015.

Amalgamations have upfront costs which need to be recovered in the long term. The average cost of the 2008 amalgamations in Queensland was $8.1M per Council. Modelling by the independent NSW Parliamentary Budget Office estimated the total cost of mergers to be $445M, if all councils participated voluntarily, “significantly higher” if they did not. To offset these costs, the State Government’s assistance package amounts to $280M, with the remainder to be funded by councils.

The size of councils does not ensure financial sustainability. In the last financial year, nine of the State’s biggest councils ran large operating deficits. Seven of these were Sydney Metropolitan Council’s including the State’s biggest, Blacktown City Council.

Scale and CapacityThe Government has identified the following advantages by increasing Scale and Capacity:

• More robust revenue base and increased discretionary spending

• Scope to undertake new functions and major projects

• Ability to employ a wider range of skilled staff

• Knowledge, creativity and innovation

• Advanced skills in strategic planning and policy development

• Effective regional collaboration

• Credibility for more effective advocacy

• Capable partner for State and Federal agencies

• Resources to cope with complex and unexpected change

• High quality political and managerial leadership.

The ‘Morrison Low Fit for the Future – Joint Business Case Modelling Report Highlights,’ identifies that preliminary findings indicate that the Councils of Hunter’s Hill, Lane Cove and City of Ryde Councils may meet Scale and Capacity criteria as outlined by the State Government. An alternative proposal to form a Joint Regional Authority of neighbouring councils will further enhance the benefits of Scale and Capacity desired by the State Government.

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A superior alternative

Joint Regional AuthorityHunter’s Hill, the City of Ryde and Lane Cove Councils endorsed the exploration of an alternative proposal to form a Joint Regional Authority of neighbouring councils.

It must be noted that the original recommendations from the Independent Local Government Review Panel included the option to combine as a strong Joint Regional Organisation, however in the Fit for Future Program this was only earmarked for rural/regional councils.

Investigating this regional alignment in a metropolitan setting would see the Councils not only retain their identity, voice and history, but partner in a way that will meet the State Government’s criteria of size and strategic capacity and demonstrate that the Councils in the region under this model are sustainable and Fit for the Future.

Joint Organisation

Regional Strategic Planning

Intergovernmental collaboration

Regional Advocacy

Shared Services

Plan for future needs of the region

- schools, transport,

employment & economic

development

Single point of contact

and manage subregional

planning process - Sydney Metro

strategy

Represent and advocate for the region’s

priorities

Deliver joint services on

behalf of each Council to be more efficient

JOINT REGIONAL AUTHORITY

CITY OF RYDE LANE COVEHUNTER’S

HILL

STATE GOVERNMENT

What are Joint Organisations According TO the NSW State Government?Joint Organisations are an exciting new opportunity to connect the ideas and priorities of Local and State Governments at the regional level to help our local communities to grow and thrive.

They will be empowered to bring all councils in defined regions together to discuss and agree to strategic regional priorities for their communities. They will also create a mechanism for State and Local Government to collaborate on agreed priorities in a more consistent, structured and effective way than ever before.

Importantly, Joint Organisations are not about duplicating the work of councils, or replacing successful joint service delivery arrangements, or creating a fourth tier of Government.

Rather, they are about providing a means of elevating key community priorities, identified by councils through strategic planning processes, into a regional vision and core strategic priorities, and bringing people together to help make them happen.

Joint Organisations

Forum for collaboration on

regional priorities

State Government, Others

Regional Action PlansRegional Growth Plans

other State plans/strategies

Member Councils

Community Strategic Plans

Other council plans and strategies

Community

Figure 1: Intergovernmental collaboration on regional priorities. Fit for the Future Joint Organisations – A roadmap for intergovernmental collaboration in NSW, September 2014.

Joint Organisations need to operate in a flexible way so that they carry out functions to meet the needs of individual regions and encourage cooperation with Government to achieve key community priorities.

These functions may include:

• Regional strategic planning and prioritisation

• Intergovernmental collaboration

• Regional advocacy.

Joint Organisation

Regional Strategic Planning

Intergovernmental collaboration

Regional Advocacy

Regional Service Delivery

Other

Source: Figure 3: Potential functions of Joint Organisations. Fit for the Future Joint Organisations – A roadmap for intergovernmental collaboration in NSW, September 2014.

Benefits of this model may include:

• Being the one point of contact for both the State and Federal Governments

• Strong participation with the State Government strategically planning for the region, with consistent urban planning, infrastructure standards and unified processes

• Identifying opportunities to further reduce operational costs through joint purchase initiatives

• Identifying key areas within each council’s operations where it would be more efficient for councils to have a shared services approach (e.g. payroll, finance, libraries)

• Working together to lobby the State Government to enhance key priorities, align with the State Government’s capital works program, additional services and grant funding for the region.

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Hunter’s Hill Council Phone 9879 9400 www.huntershill.nsw.gov.au/fitforthefuture

City of Ryde Phone 9952 8222 www.ryde.nsw.gov.au/fitforthefuture

Lane Cove Council Phone 9911 3555 www.lanecove.nsw.gov.au/fitforthefuture

OCT 2013

Final Report from the Independent Local Government Review

SEPT 2014

Fit for the Future Merger Plan announced by NSW Government

FEB 2015

City of Ryde, Hunters Hill and Lane Cove Councils oppose forced amalgamations

MAY 2015

Community Meetings on Regional Proposal

APRIL 2015

Community Meetings on Regional Proposal

JUNE 2015

Council submissions due 30 June

OCT 2015

IPART makes recommendations to NSW Government based on submissions

MARCH 2016

Implementation based on NSW Government decision

SEPT 2016

Local Government elections based on new Councils

APRIL 2015

Independent Research on Regional Business Case

Timeline and Next Steps

SUMMARY of Options for the CommunityThe Independent Local Government Review Panel has made it clear that Hunter’s Hill, Lane Cove and Ryde Councils need to address the scale and capacity targets set out in the Fit for the Future program.

In addition to the option of supporting the State government’s proposed merger into one mega-council, the Councils have worked together to provide an alternate option that addresses the issues raised by the community.

Each Council is now seeking feedback from the community on each of the three options available to them. This will form part of the Council’s Fit for the Future response to the State Government.

Option 1 Option 2 Option 3STATE GOVERNMENT PROPOSED MERGER

REJECT MERGER PROPOSAL

PROVIDE A SUPERIOR ALTERNATIVE

OUTCOME:

One mega-council made up of Hunter’s Hill, Lane Cove, Mosman, North Sydney, Willoughby and two-thirds of Ryde Councils 14,139

OUTCOME:

Stand alone as individual Council and demonstrate it meets strategic capacity set out by State Government.

OUTCOME:

Form a Joint Regional Authority of individual councils that strategically plan and deliver services on a regional basis.

SUMMARY:

• Meets State Government targets of scale and capacity

• Population of 290,000 shared amongst 15 Councillors

• Regional collaboration on services, advocacy and resources

• Upfront costs to merge

• Some initial funding provided for Councils that merge – additional costs to be borne by Councils

• Merged entities to be in place by March 2016.

SUMMARY:

• Does not meet State Government targets of scale

• Population and Councillor representation remains

• Retains local services and existing financial sustainability

• Triggers the need to demonstrate strategic capacity under the Fit for the Future framework

• May still result in mergers based on the assessment of the response by October 2015.

SUMMARY:

• Meets the State Government targets of capacity and alternate framework to achieve scalability

• Population and Councillor representation remains with added benefit of wider regional representation

• Retains local services while providing benefits of regional collaboration at strategic level

• Existing financial sustainability strengthened where shared services are available

• Funding only initially earmarked for rural/regional Councils.

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