Research shows forced local government amalgamations not a financial benefit

Professor Brian Dollery of the UNE Centre for Local Government has cast doubt on the controversial practice of forced amalgamations, which the NSW Government abandoned in July 2017 after a huge public outcry and numerous court challenges.

The Government had planned 35 mergers, largely on economic grounds, which would have seen the State’s 152 councils cut to 112. However, just 19 mergers have gone ahead.

Professor Dollery said that forced amalgamations have occurred across Australia, with the exception of Western Australia, and in every local government jurisdiction the financial claims don’t stack up.

“State Governments commonly say it will lead to improved financial sustainability and lower rates for ratepayers, but bigger doesn’t mean cheaper, better or more efficient.”

Prof Dollery and former UNE PhD student, Dr Siew King Ting, assessed the financial health of the Clarence Valley Council (CVC), which was created in 2004 by forcibly merging the Copmanhurst, Maclean, Pristine Waters and much larger Grafton shire councils.

They compared CVC to 11 similar councils using 10 years of Office Local Government financial data, and Independent Pricing and Regulatory Tribunal (IPART) Fit for the Future assessments.

“A decade down the track, Clarence Valley Council was in worse financial shape than many of its peers,” Prof Dollery said.

“The amalgamation did not lead to lower rates and annual fees, and the council failed to meet benchmarks in terms of its operating performance, debt service, asset renewal, infrastructure backlog and asset maintenance.”

In 2002/03 the nominal combined rates and annual charges of the councils that now comprise CVC was $25,262,932. In 2013/14 that figure was $48,013,000.

Not only did the compound growth rate of 6.011% per annum exceed the NSW rate (5.497%), but population growth was far below the State average.

Professor Dollery said his econometric analysis proves that there are winners and losers in council amalgamations, with some residents paying higher rates and others lower rates, depending on where they live.

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