University of New England academic Professor Brian Dollery says merging councils does not improve financial performance. Pic: Contributed
The amalgamation of the valley’s various councils in 2004 (and other amalgamations throughout NSW) was forced upon its populace by the then state Labor government – 13 years and several studies later, University of New England (UNE) academic Professor Brian Dollery says that “forced amalgamation of local councils is not a silver bullet for improving their financial performance”.
In a paper titled Counting the cost: An analysis of the post-merger performance of the Clarence Valley Council in New South Wales, Prof Dollery and former UNE PhD student D. Siew King Ting conclude that Clarence Valley Council’s (CVC) financial sustainability “ten years after amalgamation  is considerably worse than the group of close peers selected [for comparison]….”
Meanwhile, CVC’s general manager Ashley Lindsay said on ABC radio that “the information [Prof Dollery] is using is a little bit misleading”.
Prof Dollery and his colleague compared CVC to 10 similar councils using 10 years of Office Local Government financial data (from 2004 to 2014) and IPART (Independent Pricing and Regulatory Tribunal) Fit for the Future assessments.
“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,” Prof Dollery said in a media release.
“In 2002/03 the nominal combined rates and annual charges of the councils that now comprise Clarence Valley was $25.26m.
“In 2013/14 that figure was $48m. Not only did the compound growth rate of 6.011 per cent per annum exceed the NSW rate (5.497 per cent), but population growth was far below the state average.”
Mr Lindsay acknowledged to the ABC that the increase is “significant … but that doesn’t reflect actually why council’s rates and annual charges have increased by that amount”.
Mr Lindsay cited the joint construction of the valley’s and Coffs Harbour’s water supply infrastructure, at a $90m cost to CVC, and sewer infrastructure improvements across the valley totalling $170m to support his assertion that the information Prof Dollery used has resulted in a misleading outcome.
“During that time in 2006/07, CVC adopted a pricing path on water charges – and, on average, [they] increased by 7 per cent, sewerage charges [by] 9.1 per cent,” he told the ABC.
“There are reasons for increases in the charges and I would challenge Mr Dollery to say that the smaller councils wouldn’t have had the capacity to deal with the infrastructure works.
“…Overall, I think Clarence Valley ratepayers, in the long term, will be better off for being amalgamated in 2004.”
Professor Dollery defended the veracity of his paper.
“We used official data … to compare the financial performance of the Clarence Council against 10 peer councils,” he told the Independent, “employing the same financial performance indicators used by the NSW Government in its Fit for the Future structural reform program.
“We demonstrated that the CVC performed worse than its peers on most of these indicators.
“It is thus far-fetched in the extreme to claim that we somehow manipulated data to show Clarence in a bad light.
“Anyone who bothers to read our paper can see that we used official data for a 10-year period against the NSW Government’s own financial benchmarks.”
In general terms, Prof Dollery’s paper, using “empirical evidence”, “does not support the claim that amalgamation puts downward pressure on municipal rates and annual fees”; this “serves to underline the need for evidence-based policymaking in local government”.
“It also suggests that public policymakers should pay more attention to the preferences of local residents before embarking on drastic forced mergers,” the paper states.
On Mr Lindsay’s challenge regarding whether or not smaller councils would have had “the capacity to deal with [significant] infrastructure works”, Prof Dollery said that “all councils face similar issues”, however, he reiterated that his study simply asked “how would CVC be judged using Fit for the Future criteria”?
Further, he told the ABC that there is no benefit attached to a size of a council. “It’s ideology or dogma, it’s not borne out by the facts.” He said.