12 Dec 2012

Councils Aren't One Size Fits All

By Pat Garcia
Local government isn't a business, so why treat it like one? The O'Farrell Government's plan to amalgamate councils will make them less representative, not more efficient, writes Pat Garcia

For every complex problem there is a solution that is clear, simple, and wrong.

The NSW Government's current push toward council amalgamations is a classic example.

In a few months' time, the Government's Independent Local Government Review Panel will recommend that there be widespread local government mergers across NSW.

This month, Local Government Minister Don Page committed to take the proposal to cabinet for approval, despite Premier Barry O'Farrell promising before last year's election there would be no forced amalgamations.

The O'Farrell Government has been softening NSW up for a while on this one, knowing that the move is unpopular.

The Independent Local Government Review Panel's initial report proposes a range of alternate governance models for larger, amalgamated councils with expanded responsibilities. They include proposals for full-time salaried mayors and new local government cabinets.

Their recommendations are based on a single, defining assumption: that bigger, amalgamated councils produce superior economies of scale.

Proponents argue that amalgamated councils are more efficient and effective because they supposedly enjoy lower administrative costs per capita and benefit from increased purchasing power and improved utilisation of capital assets.

The argument is simplistic and accessible to those with a rudimentary understanding of economics, and it's easy to understand its surface appeal.

Why run six local councils, when you can run one big amalgamated council? Surely that has to be more efficient?

Not really. The idea that larger councils are economically more efficient than their smaller counterparts is not backed up by research or experience.

So why the gap between theory and experience? The problem is one of category error. Councils aren't businesses.

Economies of scale are traditionally derived from the higher and more intense utilisation of a capital asset. It is much harder to derive economies of scale in organisations that provide human services.

Think of the kinds of services that local councils provide: lifeguards, gardeners, swimming teachers, childcare workers, librarians, garbage collectors — for these sorts of services it is difficult to increase output without a corresponding increase in the number of staff.

Actually, in cases like these, diseconomies of scale can occur where larger and more costly management systems are required to manage a growing and diverse range of activities and staff.

Yet the potential problems with amalgamation do not, by any means, end there.

Unlike in some sectors where producers have identical production processes, councils are not homogenous. The whole point of local government is that it addresses the unique and varied needs of individual communities.

Coastal councils have different expenses to regional country councils. Small, densely populated councils require different services and management systems to large, sparsely populated councils. Some councils have large migratory populations that put stress on council assets each season, while other councils have very stable populations.

You can see how this muddies the neat, theoretical waters.

The fact is that the NSW Government's swim toward council amalgamations is actually against the current public policy tide.

The key concept being explored all over the globe today is in fact "devolution" — the opposite to amalgamation.

The idea behind devolution is to bring decision makers closer to the end user, shortening the feedback loop and thereby improving the quality of service delivery. The devolution of authority to line managers allows them to flexibly respond to external changes and tailor delivery to individual needs.

Amalgamations, on the other hand, reflect the old and opposite mode of thinking: centralisation and standardisation. Representative government is a different beast to most other organisations. It is not just about service delivery or production.

Councillors serve the unique purpose of representing and advocating for the communities in which they live. Most residents enjoy the fact that their councillors are easily accessible and can be found at the local supermarket on Thursday night or at nippers on Sunday morning.

Instead of rushing in to restructure local government, the Independent Local Government Review Panel should be careful it is taking into account the unique needs of each community, the representative function of councils and the accessibility of councillors to their constituents.

It needs to ensure it is not attempting to apply a solution designed for a very different problem.

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Dr Dog
Posted Wednesday, December 12, 2012 - 13:48

Let O'Farrell have his mega councils, as long as he agrees that the biggest waste of taxpayers money is state governments.

One federal tier for national issues like defense and foreign policy and one local tier for service delivery like education, health and child care. Seems fine with me, as long as the funding flowing from the feds is commensurate with population size and special needs like roads in rural areas.

Turn out the lights on the way out of Macquarie Street, Barry.

Posted Thursday, December 13, 2012 - 14:57

Always intriguing to me how the Federal system leads to such a hodgepodge of policies and government settings. Victoria merged all of its councils into larger 'super-councils' in the 1990s - to largely great success. There were many of the same complaints, not to mention the heritage of some of the councils having been in existence for over a hundred years.

However - smaller councils tend to be over governed and expensive to run - larger councils have economies of scale and are able to deliver better services. There is also more scrutiny over governance on larger councils, who have a larger rates base - and thus can afford more and better services.

Posted Thursday, December 27, 2012 - 15:47

Cadwallon, 1969. May I say, codswallop!!!
Forced CouncilAmalgamations in Queensland under Peter Beatty have caused no end of troubles, and now the No Nothing NLP are trying to turn back time, and de-amalgamate those councils desiring same, and finding that the costs are going to be prohibitive on an ongoing basis.
However, those councils which did amalgamate have been pretty much declared disaster zones, with bankruptcy pending. The Roma District Amalgamations, to the Maranoa Regional Council (after another poll and name change to suit the Mayor, a man who is now totally cemented into position because he can not be voted out under local voting rules) is close to absolute bankruptcy, with massive costs from flooding three years in succession, and a levy bank proposed but unfunded. Insurance companies, after three years of massive flooding, have increased annual insurance cover to figures that no one can pay, unless the levy bank is built.
No one can see how our unloved and unwanted Mayor is going to get us out of this one. Massive increases in Rates this last year to cover costs of repairs and replacements in other towns in the new Region, also caused by flooding, have caused great anger in Roma, whose ratepayers are going to have to wear the greatest cost. And all can see that it has not ended there. The Mayor is a great pusher of the CSG Industry, and this town, and others in the Region, have been totally socially destroyed by FIFO and DIDO Gas workers. And it seems that to encourage the CSG Industry, ratepayers are going to have to cough up to support their infrastructure. They are coughing, all right!
Some Amalgamations may have been a success, but they are a rarity, and they are not sticking their necks out to say so.
Again, the VOTERS in our SOCIETY have been totally ignored for the greater good of the Rich and Powerful, by our supposed democratically elected GOVERNMENTS.
Poor Fellow, My Country!