Submission to the Delegate - Pete...

SubmissiontotheDelegatePalerang/QueanbeyanMergerProposal

onbehalfof

PC/QCCMergerProposalSubmission

April2016 Page2

TableofContents

TableofContents.....................................................................................................................2

ListofFigures...........................................................................................................................4

ListofTables............................................................................................................................5

ExecutiveSummary..................................................................................................................6

Introduction.............................................................................................................................8

1 LegalIssues...................................................................................................................111.1 RuralTownEconomies........................................................................................................111.2 ExemptingBungendoreasaRuralCentre...................................................................12

2 FinancialImpacts..........................................................................................................132.1 ClaimedMergerBenefits.....................................................................................................132.2 SummaryofAlternativeFinancialImpactEstimates.............................................14

2.2.1 KPMGMethodologyEstimates.........................................................................142.2.2 EstimatesbyLKSQuaeroonbehalfofQCC.................................................162.2.3 EstimatesbyORIONConsultingNetwork...................................................18

2.2 AnalysisBasedonPalerang&QueanbeyanCityFinancialData........................202.3 CritiqueoftheKPMGModelling.......................................................................................212.4 CritiqueofQCC/LKSFinancialAnalysis.......................................................................232.5 ScaleandCapacity..................................................................................................................242.6 FinancialSustainability........................................................................................................272.7 Assets...........................................................................................................................................282.8 SummaryofFinancialImpacts.........................................................................................292.9 SummaryofClaims................................................................................................................30

2.9.1 FinancialBenefit.....................................................................................................302.9.2 ReducedRelianceonRateIncreases.............................................................31

3 LocalCommunity..........................................................................................................323.1 CentresofInfluence...............................................................................................................323.2 SurveyData...............................................................................................................................33

4 HistoricalValues...........................................................................................................37

5 Ratepayer&ResidentAttitudes...................................................................................395.1 IRISSurveyCommissionedbyQueanbeyanCityCouncil.....................................405.2 WintonSurveyCommissionedbyPalerangCouncil...............................................41

6 Representation.............................................................................................................446.1 EffectiveRepresentation.....................................................................................................44


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6.2 OperatingModel.....................................................................................................................446.3 Relationships............................................................................................................................45

7 Services&Facilities......................................................................................................477.1 TheTyrannyofDistance......................................................................................................477.2 UrbanvsRuralServices.......................................................................................................487.3 ServiceDeliveryImpact.......................................................................................................50

8 CouncilStaff.................................................................................................................528.1 PotentialtoConvertStafftoLowerPaidFrontLinePositions...........................52

9 RuralCommunities.......................................................................................................55

10 Wards...........................................................................................................................56

11 Diversity.......................................................................................................................57

12 OtherFactors...............................................................................................................5812.1 OrganisationalCapacityandServiceDelivery...........................................................5812.2 StrategicPlanning..................................................................................................................59

13 DataAnalysis................................................................................................................6213.1 ReplicationofKPMGFigures.............................................................................................62

13.1.1 MaterialsandContracts.......................................................................................6213.1.2 EmployeeBenefits.................................................................................................6313.1.3 Other............................................................................................................................64

13.2 StatisticalAnalysis.................................................................................................................6413.2.1 Methodology.............................................................................................................6413.2.2 Analysis.......................................................................................................................65

13.3 RegressionAnalysis...............................................................................................................6513.3.1 StaffRatio–Ruralprovidingwater................................................................6513.3.2 StaffRatio–Ruralnotprovidingwater........................................................6713.3.3 StaffRatio–Metronotprovidingwaterservices.....................................6813.3.4 Conclusion.................................................................................................................68

13.4 OperatingExpenditureRegressionAnalysis..............................................................6913.4.1 Methodology.............................................................................................................6913.4.2 Analysis.......................................................................................................................6913.4.3 Conclusion.................................................................................................................71

13.5 FinancialAssistanceGrants...............................................................................................71

14 Acknowledgements......................................................................................................72


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ListofFigures

Figure2-1 StaffingLevelsinLargeRegionalCouncils..........................................................19

Figure2-2 FTEStaffper100Population..............................................................................23

Figure2-3 StaffingLevelsinLargeRegionalCouncils..........................................................25

Figure2-4 PalerangProjectedOperatingBalanceRatio(PAllan&Assoc).........................27

Figure2-5 PalerangProjectedNetFinancialLiabilitiesRatio(PAllan&Assoc)..................28

Figure2-6 PalerangProjectedInfrastructureBacklogRatio(PAllan&Assoc)...................29

Figure2-7 QueanbeyanProjectedInfrastructureBacklogRatio(PAllan&Assoc).............29

Figure3-1 PalerangResidents’WorkLocations..................................................................33

Figure3-2 PalerangCommunityLinkages...........................................................................35

Figure5-1 PreferredCouncilArea.......................................................................................42

Figure13-1 PopulationvsFTEStaff(Ruralprovidingwater).................................................66

Figure13-2 FTEper100CapitavsPopulation(Ruralprovidingwater).................................66

Figure13-3 PopulationvsFTEStaff(Ruralnotprovidingwater)..........................................67

Figure13-4 FTEper100CapitavsPopulation(Ruralnotprovidingwater)..........................67

Figure13-5 PopulationvsFTEStaff(Metronotprovidingwater).........................................68

Figure13-6 FTEper100CapitavsPopulation(Metronotprovidingwater).........................68

Figure13-7 PopulationDensityandRoadLength.................................................................70


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ListofTables

Table2-1 ComparisonofFinancialEstimates....................................................................15

Table2-2 OngoingSavingsandCosts.................................................................................17

Table2-3 ModellingofQCC/PCFinancials(KPMGMethodology).....................................21

Table2-4 InvalidKPMGAssumptions................................................................................22

Table2-5 StartingFinancialPosition..................................................................................29

Table2-6 ImpactofMergeronOperatingPosition...........................................................30

Table7-1 TravellingDistances............................................................................................47

Table7-2 CouncilServices..................................................................................................48

Table8-1 StaffNumbersandCosts....................................................................................52

Table8-2 PotentialSavingsfromCorporate/ManagementStaffconvertedtoFrontLine 53

Table13-1 Assumptions:MaterialsandContracts..............................................................62

Table13-2 Assumptions:EmployeeBenefits.......................................................................63

Table13-3 AnalysisData......................................................................................................65

Table13-4 OperatingExpenditureRegressionOutcome.....................................................69

Table13-5 OperatingExpenditureRegressionOutcome.....................................................70

Table13-6 FAGRegressionOutcome...................................................................................71


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ExecutiveSummaryThissubmissionprovidescommentaryontheProposaltomergethelocalgovernmentareasofPalerangandQueanbeyanCity.

ItmustbeemphasisedfromtheoutsetthatthepointofreferenceforthisProposalistheMinister’sProposaltodividethePalerangLGA.ItspurposeisnotsomuchtopresentacaseformergingPalerangandQueanbeyanCityCouncilsasitistopresentacasenottodividethePalerangLGA.

Inlinewiththeviewsexpressedbythemajorityofourresidents,PalerangCouncilremainsopposedtoanymergerorboundaryadjustment,believingthatthecurrentorganisationisbetterpositionedtodelivertherangeofservicesourcommunityneedsthananyofthealternativemergedstructuresbeingproposed.

Significantly,noneoftheProposalsbeforetheMinisterappropriatelyaccountfortheconsequencesofSection218CAoftheLocalGovernmentAct1993(theAct)inrelationtothepreservationofstaffnumbersinruralareas.

WhileretainingthePalerangLGAasawholewouldbeabetteroutcomeforPalerangcommunitiesthandividingit,allthreeProposalsinvolvingthePalerangLGAthatarebeforetheMinisterfailtosatisfactorilyaddresseveryfactoridentifiedforconsiderationbytheBoundariesCommissionunderSection263(3)oftheAct.Inparticular:

• TheclaimspresentedinthecurrentProposalarebasedonthesameflawedfinancialdatathatwaspresentedinpreviousProposals.WhilethisallowsavalidcomparisonbetweentheindividualProposals,acomparisonthatillustratesthesignificantandnegativeconsequencesofdividingthePalerangLGA,afullmergerwouldstillresultinanannualbudgetdeficitofatleast$0.5millionfortheproposednewCouncil,whichis$2mworsethanthemostrecentauditedfigures;

• TheProposalfailstorecognisethedistinctnatureanddemographicsofthetwoCouncilsandthesignificantlackofoverlapintheirrespectiveoperations.Areaswheretheremaybeoverlaparebetterdealtwithviaappropriateresourcesharingarrangementsbetweenneighbouringcouncilsthanbymergingentireorganisations;

• TheProposalmarginalisestheruralcommunitiesthroughoutPalerang,leavingthemwithlittlechanceofrepresentationontheproposednewCouncil.ItalsogrosslyunderestimatesPalerangCouncil’scurrentcontributiontoemploymentintheregionandtheimpactthatemploymentconditionswouldhaveonanewCouncil;

• TheProposalignorestheresultsofindependentsurveysofPalerangresidentsthatconsistentlydemonstratetheabsenceofanysignificanteconomicorsocialrelationshipwiththeproposedmergerpartnerandamajorityinterestinretainingPalerangCouncilasanindependententity.

Extensiveregressionanalysis,detailedinSection13,furtherdemonstratesthatbothPalerangandQueanbeyanCityCouncilsarealreadyleanandefficientorganisationsincomparisonwithotherNSWcouncils.Thisunderscorestheview,presentedinthissubmission,thatthesavingsclaimedbyKPMGaresimplynotachievable.


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Underthesecircumstances,theMinisterhasnojustoreconomicallylogicalalternativetotakingnofurtheractiononthisoranyotherProposalthatwouldseethedissolutionofPalerangCouncil.

Nonetheless,PalerangCouncilremainscommittedtosupportinggenuinereformoftheNSWlocalgovernmentsector.Tothisend,themostproductivewayforwardforallcouncilsinSouthEastNewSouthWales(SENSW)isfortheStatetorecognisethecentralroleplayedbytheACTintheeconomyoftheregionandtosupporttheongoingdevelopmentoftheCanberraRegionJointOrganisation(CBRJO).TheCBRJOisalreadyhelpingtobuildstrongworkingrelationshipswiththeACTGovernment,whileatthesametimeprovidingasolidfoundationforthegrowthofmembercouncils.

Asisoutlinedatseveralpointsinthissubmission,most,ifnotallofthebenefitsthatcanbederivedfrommergersintheareaareeitheralreadybeing,orcanbe,achievedthroughtheCBRJO.Significantly,notonlydoestheJOstructureprovideenhancedcapacity,itdoessowhileretainingandevenstrengtheningboththecompetenciesofandrepresentationprovidedbytheindividualmembercouncils.


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IntroductionBothPalerangandQueanbeyanCouncilshavebeenassessedbyIPARTasbeingfinanciallyviable.Theonlypointonwhichtheyhavebeendeclared‘notfit’istheclaimthattherespectivecommunitieswouldbebetterservedbyasingleCouncil.

ItisourviewthatthebestoptionbyfarisforthetwoCouncils,PalerangandQueanbeyan,toplayanactiveroleinthelocalgovernmentreformprocessthroughmembershipoftheCanberraRegionJointOrganisationofcouncils,workingtogetherwithalloftheirneighbours,includingtheACTGovernment,tothebenefitofthewholeoftheSENSWregion.

Inthisregard,itisworthmakingreferencetotheILGRPReport,RevitalisingLocalGovernment.Therearetwoquotesthatareparticularlyrelevantinthepresentcontext.Firstisthenotethat:

“ThePanelseesstrongerregionalcooperationasacentralplankoflocalgovernmentreform.ThiswillenhancetheroleofcouncilsandfacilitatemoreproductiveState-localrelations,especiallyinstrategicplanning,economicdevelopment,infrastructureprovisionandservicedelivery.”(Section11,p.79)

Assuch,weproposethatactiveparticipationintheJointOrganisationinitiativeratherthananymergerisclearlythemostproductivepathtofollowinthepresentcase.Thispathis,asnotedbythePanel,“acentralplankoflocalgovernmentreform”,anditisaplankofparticularrelevanceinthiscaseaswewillseepresently.

Thesecondquoteputsthespotlightonwhatshouldbemotivatingmergers:

“Mergersshouldbepursuedwheretheycanmakeasubstantialcontributiontoaddressingfinancialproblems,reducingfragmentationofresourcesandduplicationofeffort,andbuildingstrategiccapacityforthelongterm.”(Section10.2,p.72,emphasisadded)

Critically,thecontentofthissubmissionillustratesquiteclearlywhynoneoftheProposalsinvolvingPalerangandQueanbeyanCouncilsmakeanysubstantialcontributiontoaddressingfinancialproblems,orreducingfragmentationofresourcesorduplicationofeffortwithintheseCouncils.Neitherdotheygivecausetobelievethattherewouldbeanyimpactonstrategiccapacitytoserveanymorethantheurbanpopulationinvolved,atbest.

Significantly,noneoftheProposalsbeingconsideredmakeanyeffortwhatsoevertoidentifyanyoftheongoingcoststothePalerangcommunity,letalonepresentanycaseastohowanysuchcostmightbeoffset.

ItwillbedemonstratedthroughthissubmissionthattheProposalfailstosatisfactorilyaddresseveryfactoridentifiedinSection263(3)oftheLocalGovernmentAct(theAct).

Themaponthefollowingpageprovidessomereferenceforthegeographiclocationsofthetwocouncilareasinquestion,themaintownsandthedistanceinvolved.


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Braidwood

Nerriga

Araluen

Captains Flat

Mongarlowe

Majors Creek

Queanbeyan

Krawaree

Mt Fairy

Bywong

Bungendore

"18 km

14 min

"18 km

14 min

"45 km

35 min

"53 km

44 min

"14 km

12 min

"27 km

24 min

"17 km

15 min

"45 km

38 min

"48 km

35 min

"74 km

52 min

.

0 10 205

Kilometers

Map of Palerang & Queanbeyan

Mount Palerang

Hoskistown

"19 km

20 min

"26 km

22 min

"123 km

95 min

"119 km

83 min

with Travel Times and Distances


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Section1ofthissubmissiondealswiththelegalissuesrelatingtoSection218CAthathaveabearingonthepresentProposalbuthavenotbeenappropriatelyconsidered.

IntheabsenceofasatisfactoryaccountofthebasisfortheKPMGfinancialmodelthatunderpinstheProposal,PalerangCouncilengagedORIONConsultingNetwork(ORION),aconsultingfirmwithover25years’experienceinlocalgovernmentanddirectinvolvementwiththeQueenslandlocalgovernmentreformprocess,todevelopafinancialmodelfortheproposednewCouncilbasedonpubliclyavailable,auditedfinancialdata.

InaddressingSection263(3)(a)oftheAct,Section2ofthissubmissionprovidesextendedcommentaryonthefinancialimplicationsoftheProposalwithreferencetothemodellingresultsprovidedbyORION.

Sections3–12providefurthercommentagainstSections263(3)(b)–(f)oftheActrespectively.

Section13outlinesthedataandassumptionsunderpinningtheORIONmodellingandprovidesastatisticalanalysisofrelevantNSWCouncildatathatdemonstratesthatPalerangCouncilisalean,efficientorganisationandthatthereisalmostnoopportunitytofindfurtherefficienciesatastaffinglevel.

Section14acknowledgestheassistanceprovidedincompilingthissubmission.


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1 LegalIssues1.1 RuralTownEconomies

Oneofthecriticalissuestoconsideristheemployeeprotectionaspectsofthelegislation.Thesimplistic,andflawed,modellingbyKPMGdoesnoteffectivelytakethisintoaccount.

ItisimportanttorecognisethattheimplicationsofSection218CAcannotbeignoredevenifaproposalischaracterisedasaboundaryadjustment.Section218CA(1)(b)isquiteexplicitinthisrespect.

(1) Thissectionappliestoacouncil(the"transfereecouncil"):a) …b) whosegeographicalareaisincreasedasaresultofthealterationofthe

boundariesoftwoormoreareas,whereacouncil(the"previouscouncil”)whosegeographicalareaisreducedasaresultofthealterationemployedregularstaffataruralcentreintheareaofthetransfereecouncilimmediatelybeforethealterationtookeffect.

ThatSection218CAappliesregardlessisalsoclearfromthelanguageofSection218CA(2),whichstatesthat(emphasisadded):

(2) Thetransfereecouncilmustensurethatthenumberofregularstaffofthecouncilemployedattheruralcentreis,asfarasisreasonablypracticable,maintainedatnotlessthanthesamelevelofregularstaffaswereemployedbythepreviouscouncilatthecentreimmediatelybeforetheamalgamationoralterationofboundariestookeffect.

TheonlycircumstanceswhereSection218CAdoesnotneedtobeconsideredarethecircumstancesprescribedbytheregulations[seeSection218CA(3)]buttherearecurrentlynocircumstancessoprescribed.

Itisalsoimportanttonotethedefinitionof‘ruralcentre’inconsideringifSection218CAapplies.A‘ruralcentre’isdefinedinSection354Btobe:

acentreofpopulationof5,000peopleorfewer,andincludesageographicalareathatisprescribed,orisofakindprescribed,byregulationsinforceforthepurposesofthisdefinitionasbeingaruralcentre.

BothBungendoreandBraidwood,wherethemajorityofPalerangstaffisbased,havepopulationsoffewerthan5,000.Therecanbenodoubtthatregularstaffnumbers(oftenreferredtoasthe‘corenumbers’)applyundercurrentlegislation.

AnyfinancialmodellingforaProposalaffectingPalerangthatdoesnottakeintoaccounttheimplicationsofSection218CAwillbeinaccurate.

Further,theDelegateandMinistercannotlawfullyconsidersavingsthatdependonstaffingreductionsinBraidwood,contrarytothecurrentSection218CA.VirtuallyallofthesavingsclaimedbyQCCcomefromtheplanneddismantlingoftheBraidwoodofficeandstaffinglevels,andthereforecannotbeconsideredintheassessmentofthisMergerProposal.


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1.2 ExemptingBungendoreasaRuralCentre

Intheirpresentationtothepublicenquiry,theQCCMayorandGeneralManagersuggestedthatBungendoreshouldnotbeconsideredaruralcentreeventhoughitmeetsthatdefinitionunderthecurrentlegislation.Themotivationwasstatedasbeing“toenablesomeequitywithstaffconditions”.TheydidnotexplainwhydisadvantagingPalerangemployeesbasedatBungendorewouldenablesuchequity.

Further,QCC’sfinancialanalysisofthepotentialbenefitsofamergerappearstodependlargelyonthereductionofstaffnumbers.GivenQCC’sdesiretohaveBungendoreexemptedfromtheemployeeprotectionlegislationitmightbeinferredthatthelosseswouldbefocussedonBungendore-basedstaff.

Whiletheyprovidednoreasonforseekingtheexemption,QCCdidattempttojustifyachangetotheregulationsunders.218CA(3).

ThefirstwasthatanumberofcurrentPalerangstaffwereformerlyfromoneoftheconstituentCouncils,namelyYarrowlumlaShire.Theyseemtosuggestingthattheseemployeeswouldbe“returninghome”toQueanbeyan.Thisappearstoignoretherequirementsofs.354Ithatemployeesmustberetainedwithintheirformerlocalgovernmentareas.ThissectionrequiredPalerangtomoveitsofficestoBungendore

Theyalsoclaimthat60%ofBungendorepeopleworkinACT.Regardlessoftheaccuracyorotherwiseofthestatistic,itisameaninglessstatement.Itisnot60%ofBungendore-basedPalerangemployeesthatworkintheACT.BungendorefitsthetraditionalconceptofaruralcentreinthatCouncilisthemajoremployerinthetown,andprovidesaconsiderablecontributiontothetown’seconomyboththroughemployeesalariesanddirectpurchasesfromlocalbusinesses.

QCCalsomakethestatementthatBungendorestaffnumbershavegrownfrom60to80since2004.Thisisnotrelevanttotheconsiderationofs.218CAanditiseasilyexplainedbytherapidgrowthofBungendoreanddistrict.FormuchofitsexistencePaleranghasbeenoneofthefastestgrowingareasinNSW,withthepopulationincreasingbyover3,000sincePalerangwascreatedin2004.Thatgrowthhasrequiredtheexpansionofanumberofservices,necessitatingadditionalstaff.

Palerangalsotakestheconceptofregionalcooperationseriously.ConsequentlyPalerangistheauspiceCouncilfortheCanberraRegionJointOrganisationandtheleadagencyforthe$20millionSouthEastregionalweedsmanagementprogram.ThestafffortheseservicesarefullyfundedbutcountedintheBungendorestaffnumbers.

Itwouldbeunwisetobaseanyanalysisofthebenefitsofamergerontheassumptionthats.218CAwouldnotapply.TheDepartmentofPremierandCabinetinitsFebruary2016publicationPreparingforChange:GuidanceforCouncilsisquiteclearonthecurrentstateofthelaw,noting:

“Therearesomeadditionalprotectionsforstaffinruralcentresundersection218CAoftheAct.Aruralcentreforthispurposeisacentreofpopulationthathasapopulationof5,000peopleorless.

Insuchareas,anynewcouncilentitymustensurethatthenumberofregularstaff(permanentandcasualsengagedonaregularandsystematicbasis)ismaintainedatthesamelevelasbeforeamergeroccurs,asfarasisreasonablypracticable.”


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2 FinancialImpactsLegislativeCriterion(a)Thefinancialadvantagesordisadvantagesoftheproposaltotheresidentsandratepayersoftheareasconcerned

2.1 ClaimedMergerBenefits

UsingthedataprovidedbyKPMGinearlierProposals,weseeaslightlyimprovedfinancialbenefitwithafullmergerwhencomparedtodividingthePalerangLGA.However,thesameproblemsremainwiththeassumptionsthatleadtothefiguresquoted,andindeedthesignificanceoftheclaimedsavings.

Theclaimedbenefit,aswithearlierProposals,comesintwoparts.Thefirstisa$15millionenticementfromtheState,paidoutofresidents’taxes,ifoneoftheseProposalsisimplemented.

Itisnotatallclear,however,whatstringsmightbeattachedtothisfunding—$5millionisassociatedwithmergerexpensesandisnotanopencheque.Thecommitmentismerelytocoverimmediatemergerexpenses,andonlyupto$5million,nottosimplyprovideanyfundstothebenefitofthecommunityassuch.Andiftherearenootherbenefitsinthisproposal,thisis$5millionofresidents’moneywasted.

Theother$10millionhereisjustaone-offpaymentforinfrastructureimprovementsandthetrueimpactofthatfundingonthePalerangcommunitywillberevealedbelow.

Theremaining$22millionismoneythatitisclaimedwillbesavedover20yearsthroughtheproposedmerger.Aswehavenotedpreviously,ourownassessmentshowsnothinglikethis,butletusjusttakeitatfacevalueforthepurposeofdiscussionandhaveacloserlookatwhatthat$22millionwouldreallymeantoPalerangresidents,ifindeedthissavingcouldberealised.

Over20years,takensimplythatis$1.1millionperyear.UsingtheKPMGfiguresforthenewCouncil’sbudgetin2019-20,thatisahypotheticalannualsavingofbarely1%in2015-16andonlyhalfthatin10years,asavingofjust0.5%.Suchasmallsavingiswellwithinthemarginoferrorinfinancialmodelling.Evenifthissavingcouldbeachieved,itishardlywhatcouldbedescribedasa“substantialcontribution”,pertherecommendationsoftheILGRP,thatwouldjustifytheriskandupheavalassociatedwiththemergeroftwosuchdisparateCouncils.Infactanyindependentanalysiswouldregardpotentialsavingsof1%ofrevenueinthetimeframebeingforecastasnotbeingstatisticallysignificant.

KPMGhavealsoignoredthecoststothecommunity,asdistinctfromtheorganisation,inpreparingtheirestimates.Asignificantchangeinlocalgovernancearrangementsinvariablyleadstoadditionalcostsbornebycommunitymembers.TheseadditionalcostscanbeassimpleasadditionaltravellingtimeandcosttoattendCouncilofficesand/ormeetingsandthechangefromlocaltotimedtelephonecalls.


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Ourownfinancialmodelling,whichisbasedonauditedfinancialdataratherthanthedubious†KPMGmodelling,suggeststhatnoteventhissmallsavingcouldberealised.

Nonetheless,this$1.1millionisenoughtopayforaround1kmofsealedroadattoday’svalue,andnodoubtsomewhatlessastheyearsgoby.Fortherecord,thereareover1400kmofroad,over700kmofwhichareunsealed,throughoutPalerang.Andofcourse,thesesavingsareforthewholenewCouncil,notjustthePalerangpart.

Ifwelookatthisbasedontherelativepopulationsinvolved,itamountstoaround250metresofextraroadconstructioninthePalerangareaeachyear.ThatisthesumtotalofthefinancialbenefittocurrentPalerangresidentsofthesavingsidentifiedinthisProposal—iftheKPMGfiguresarecorrect.

Ofcourse,thismoneycanonlybespentonce,soifanycontributiontoanewpicturetheatre,oranewcarpark,someplayingfieldsoracelebrationofsomesortisrequired,wewillhavefundingforevenlessthanour250metresofroad,maybenoneofitatall.

Onthisbasis,itisclearthattheongoingfinancialbenefitofthisProposaltothePalerangcommunityisinsignificantatbest,butperhapsevennon-existent.Certainlynotthe“substantialcontribution”recommendedbytheILGRP.

2.2 SummaryofAlternativeFinancialImpactEstimates

PalerangandQueanbeyanCityhavecommissionedseveralindependentestimatesofthepotentialfinancialimpactsofvariousmergerscenarios.Thefollowingarediscussedfurtherherein:

1. EstimatesusingtheKPMGmethodology,2. EstimatesbyLKSQuaeroonbehalfofQCC3. EstimatesbyORIONConsultingNetwork(ORION)onbehalfofPalerangCouncil

2.2.1 KPMGMethodologyEstimates

KPMGwereengagedbytheNSWGovernmenttoundertakethefinancialestimatesunderpinningtheProposalsthatarecurrentlyunderreview.Forthesakeofconsistency,andtofacilitatedirectcomparisonofthevariousProposalsimpactingPalerangCouncil,thesamemethodologywasappliedinpreparingthecurrentProposalforafullmergerbetweenPalerangandQueanbeyan.

However,theKPMGcomputationsonlyapplygenericsavingsandexpenditureassumptionswithoutregardtolocalcharacteristics.Forexample,noconsiderationisgiventoexistingefficiencylevels,salarystructuresorservicelevels.Therefore,theKMPGestimatescanonlyprovidepre-feasibilityindicativeestimatesofthepotentialfinancialimpactsthatneedtobevalidatedorotherwiseinthereviewprocess.IftheKPMGfiguresaresimplytakenatfacevalue,thereviewwillnothaveconsideredallrelevantmattersandbeopentochallenge.

IntheMinister’sproposalforthepartmergerofQueanbeyanandPalerang,KPMGestimatedthatnetfinancialsavingsofaround$20millionwereachievableoverthenext20years,withthepartialmergergeneratingaround$1.8millionperyearfrom2020.InpreparingthePalerangproposalforconsiderationofafullmergeralternative,

† TheMinisterhasstillnotreleasedanythingmorethanasetofgeneric,highlevelassumptionsupon


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independentmodellingfromORIONwassoughttoapplytheKPMGmethodologytothefullmergeroption.Subsequently,theDelegaterequestedKPMGprovideitsestimateofthefinancialimpactsfromthefullmerger.AcomparisonoftheORIONandKPMGestimatesisprovidedinTable2-1below.

Table2-1 ComparisonofFinancialEstimates

Item InitialORIONEstimate(KPMGmethodology) KPMGEstimate Reasonfordifference

EmployeeCosts $15.6m $16m Rounding

Materials&Services $4.7m $5m Rounding

SeniorManagement $5m $6m Additional$1mappliedbyKPMG,notORION

20YearNetImpact $20.5m $22m

ThedatapresentedinTable2-1showsthatthemaindifferencebetweentheORION(KPMGmethodology)estimateandKPMG’sowncalculationrelatestorounding,andKPMG’sinclusionofanadditional$1minseniormanagementsavingsduetotheadditionalareaincluded.ORIONassumedthattherewouldbenochangeintheseniormanagementsavingsbytheadditionoftheeasternpartofPalerangintothefullmerger.

ThishighlightstheneedfortheDelegateandMinistertovalidatethegenericassumptionsunderpinningtheindicativeestimatesbyKPMG.ThereissimplynowaythatamergerofPalerangandQueanbeyancouldachieve$6moreven$5minsavingswhenPalerangonlyhasoneseniorexecutiveposition–theGeneralManager.

TheKPMGmethodologydoesnotconsiderthestructureorexistingCouncilefficiencies,butsimplyappliesstandardformulaetotheCouncilbudgettoestimatethesavings.Aswewillshowbelow,thisdoesnotprovideanyreliableestimateofamergerontheactualsituationinPalerang,butisanindicationofwhatcouldhappentoanaveragecouncil.

Similarly,thebulkoftheKPMGsavingsestimatescomefromemployeecostswithanetpresentvalueof$16mover20years,whichrequiresannualsavingsofaround$1.9mafterthefour-yearimplementationperiod.GiventhelegislativeprotectionrequiringthepreservationofallpositionnumbersinthecurrentPalerangtowns,thesesavingscanonlycomefromconvertingmoreseniorpositionstofrontlineservicedeliverypositions.However,severallocalfactorshavenotbeentakenintoaccountbyKPMG,whichwouldgreatlyreducetheopportunityforsuchsavingsinthecaseofQueanbeyanandPalerang.Theseinclude:

• PalerangCouncilwascreatedbyamergerofallorpartsofseveralCouncilsin2004.Asthiswasalsosubjecttotheemploymentprotections,mostoftheseniorpositionshavealreadybeenconvertedtofrontlineservicedelivery.Theopportunityforfurtherreductionsisverylimited.TheentirePalerangmanagementandcorporatewagesbillwhichisinexcessofBands1and2salarylevelsforfrontlinestaffisonly$550,000andtherewouldbesomesupervisorystaffstillrequiredforthe97protectedfrontlinepositions.

• AveragesalariesinQueanbeyanareover10%higherthaninPalerang.Thisissomewhatuniqueinthispotentialmerger,becauseQueanbeyanhashadtoincreasethesalarylevelstobecompetitivewiththoseofferedbythe


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CommonwealthandACTGovernments.Wagesequalisationwillcostanadditional$830,000peryear‡.IntheQueensland2008amalgamations,wagesequalisationoftenoffsetallothersavings.

• Approximately$1.8minPalerangwagesarefundedthroughtheRMScontracts,whichQCChasnoexperienceinmanaging.Thesepositionswouldstillberequiredunders.218CA,butthefundingforthemwouldnolongerbeavailableiftheRMSworkwasdiscontinuedforanyreason.

• Thiswouldresultinanetannuallossof$2.6mperyear,oraroundanetpresentvalueofaround$21mover20years.

2.2.2 EstimatesbyLKSQuaeroonbehalfofQCC

QCC’sresolutionof6AprilrequiresanumberofconditionsinordertocreateafinanciallysustainablemergerCouncil:

• A$10mgranttocovertransitioncosts• A$20minfrastructuregrant,inadditiontothe$10mmergergrant,• ReclassifyingBungendoresothatitisnotsubjecttoemployeemaintenance

requirementunders.218CA.ThiswillthenenableQCCtoachievethe63.4staffsavingsestimatedbyLKS.Inotherwords,allofthesavingswillcomefromguttingtheBungendoreoffice,andthelossofaround60localjobswithinaruralcentre,incontraventionofs.218CAasitpresentlystands.(Bungendorecurrentlyhas82.3FTEemployees.WeunderstandthatQCCintendstheleavethelibraryatBungendore).

TheLKSreportonthepartialmergeroptionnoted:• TherewouldbenoadditionalseniormanagementsavingsasthePalerang

DirectorsareemployedundertheAwardandredundancyprotectionsareapplicable,

• TheonlySESpositionatPalerangistheGeneralManager,• LKSappliedsomeKPMGassumptionsincluding:

• materialsandservicessavingsof2%of80%oftheGeneralFund,phasedinoverfouryears

• Staffsavingsof5%ofGeneralFundemployeecosts,phasedinover2years,plusthelossofoneGMposition,

• $250,000inredundancycosts,(onepositioninsteadofKPMG’sassumptions)

In2015,LKSalsopreparedafinancialassessmentofapotentialfullmergerofPalerangandQueanbeyan.TheirreviewestimatedthattheongoingsavingsandcostspresentedinTable2-2belowcouldoccur.

‡ ThePalerangCouncilsubmissiononthepartialmergerusedearlierestimatesprovidedbyQCCthat

havesincebeenrevised.


April2016 Page17

Table2-2 OngoingSavingsandCosts

Item AnnualAmount

Corporate&Governance $511,000

InformationTechnology $150,000

EmployeeCosts $4,834,000

LocalAreaCommittees ($50,000)

TotalAnnualSavings $5,445,000

Itcanbeseenthat89%oftheseprojectedsavingscomefromreducedemployeecosts.Thiscomesfromareductionof63.4FTE,butnoexplanationofwherethesereductionswouldoccurappearsinLKSdocumentationorwasprovidedtoPalerangCouncil.However,thestaff-to-populationratiosarealreadylowerinbothCouncilsthantheaverageoftheircurrentandmergedsize,andthereforethereisnosubstantiationofthesestaffsavings.

TheassumedstaffsavingsintheLKSestimatesaresimplynotplausible,andwouldrequireastafftopopulationratiothatis38%lowerthantheaveragelargeregionalCouncilwithwaterandsewerageinthemergedpopulationrangeof50,000to60,000.Asitcurrentlystands,thestaffratioforthecombinedQueanbeyanandPalerangstaffingisalready26%lowerthantheaverageforCouncilsinthe50-60,000populationrange,whichprovidewaterandsewerage.InfactthereisnoregionalCouncil(withwaterandsewerage)over20,000populationwhichhasastaffpopulationratiolowerthanthecurrentcombinedPalerangandQueanbeyanCouncils.ClaimsoffurtherpotentialstaffingreductionsarenotsupportedbythefactsrelatingtosimilarCouncilsizes.

Further,itappearstobeQCC’sintentiontoclosedownallbutthelibraryinBungendore,sothatthe63.4FTEstaffreductionswillbefocussedonBungendore.SinceBungendoreiscurrentlyprotectedfromstaffreductionsunderthecurrentlegislation(s218CA),theDelegateandMinistercannotlawfullyconsideranysuchsavingsinstaffing.

DismantlingPalerang’sstructureandBungendoreofficeasplannedbyQCCwoulddestroytheabilityofthenewCounciltocontinuewiththeRMScontracts.QCC’ssubmissiononthepartialmergerindicatedthatithadnointerestinmaintainingtheRMScontracts:

Toassistwiththeequitabledistributionofassets,revenuesandstaff,theRoadsandMaritimeServices(RMS)contracttomaintainandupgradetheKingsHighwayandBraidwoodRoadshouldbeassignedtothenewGoulburn-MulwareeCouncil.…Therelevantskills,plantandequipmentshouldmigratetothatnewGoulburn-MulwareeCouncilwiththeassignmentofthatcontract.(Pages3&8,QCCSubmission)

WeunderstandthatQCChassubsequentlyindicatedthatitwouldretaintheRMScontract(s).However,retentionofRMScontractsisnotamatterforanycounciltodecide.QCC’sintentiontoclosedowntheBungendoreoffice,coupledwiththeLKSandKPMGmethodologyofconvertingpositionstofrontlineservicesandtosave63.4positions,wouldnotleavethemergedCouncilwiththetechnicalskillstocontinuetovalue-for-moneyservicethatRMSreliesupon.

ThereisconsiderableriskthatifthePalerangorganisationisdismantledasisbeingproposed,theRMSwouldtransfertheworktoprivatecontractors.Therevenuesand


April2016 Page18

theassociatedskillsetsandexperiencewouldthusbelostentirelytothelocalgovernmentsector.ThepresentProposalmustthereforebeseenasentirelydestructiveinthisrespect.PalerangCouncilwasawardedthisworkastheorganisationishighlycompetitiveintermsofbothservicevalueandproductquality.

QCChaslimitedexpertiseinundertakingsignificantRMScontracts,anditsapparentplanstoreducestaffinglevelsinBungendorewouldeliminatetheabilitytoundertakethesecontracts.TheKPMGassumptionsofconvertingseniorstafftofrontlineservicestogetthebulkoftheclaimedsavings,wouldhaveasimilarimpact.

WithouttheRMSwork,theprojectedfinancesofanewCouncilwillbenegativelyimpactedintheorderof$6.9mperyear.TheRMScontractsdirectlypaythewagesofatleast20FTEemployeesperyearandprovidesignificantotherbenefitfortheorganisationandultimatelytothePalerangratepayer.

Overall,theclaimedstaffsavingsbyQCC’sconsultantsLKSQuaero(LKS)cannotbesubstantiatedandarehighlyunlikelytooccur.

2.2.3 EstimatesbyORIONConsultingNetwork

ORIONhasconductedstatisticalanalysisofNSWLocalGovernment,particularlyinrelationtorural/regionalCouncilsthatprovidewaterandsewerage.InadditiontheyhaveexaminedtheservicedeliveryofbothCouncils.

ORIONnotethefollowing:a) QCCcurrentlyhas10.2%higheraveragesalarylevelstocompetewiththe

CommonwealthandACTGovernments.Salariesequalisationwilladd$830,000peryeartotheoperatingcostofamergedCouncil.

b) ThereareunlikelytobeanystaffsavingsotherthanthePalerangGeneralManager’sposition,because:i) QueanbeyanandPalerangprovidedifferentservices,whichmeansthattheir

structurewillneedtobecombinedratherthanmerged,ii) ThevastdistancebetweenQueanbeyanandtheeasternareaofPalerang,iii) TheprotectionofstafflevelsinBungendoreandBraidwoodunders.218CA

oftheAct,andiv) Theaveragestaff/populationratioishigherforCouncilsintheproposed

mergedpopulationrangethanthecurrentCouncilratios.ThecurrenttwoCouncilsareamongstthemostefficientintheStatebyfocusingontheirdifferenturbanandruralservices.Amalgamationwillleadtogenericservicedeliveryandhigherstafflevels.

c) Therefore,itislikelythattheongoingcostofrunningamergedPalerangandQueanbeyanwillbegreaterthanthecostofthetwoseparateCouncils,andwillconsumetheamalgamationgrantrelativelyquickly.

IntheMinister’sProposalsrelatingtoPalerang,$15mwasofferedforthePalerang(part)/Queanbeyanmerger,and$15mfortheGoulburn-Mulwaree/Palerang(part)merger,givingatotalof$30monthetableforthisarea.Itwouldbebettertoaapplythe$30mcurrentlyavailableinthisareatowardstheessential$50mupgradeofthemissinglinkoftheNerrigaRoadtonationalstandardsinlinewiththeNerriga-Nowrasectionofthatroad,upgradedprimarilythroughaFederalGovernment


April2016 Page19

grant..ThisisthebulkoftheassetmanagementbacklogclaimedbyQCC,butisinrealityanupgraderequiredfornationalandstatepriorities.

Figure2-1 StaffingLevelsinLargeRegionalCouncils

ThegraphpresentedinFigure2-1illustratesourargumentthattheKPMGandLKSassumptionsonpotentialstaffsavingsfromafullmergerarenotplausible.TheblacklineshowstheaverageFTE-to-100populationratiodoesreduceasthepopulationincreases.ThisseemstobethebasisoftheKPMGformula-drivensavingsestimates.

However,PalerangandQueanbeyanarealreadyoperatingatwellbelowtheaveragelevelatallpopulationranges.Theaveragecouncilbelow20,000populationhasastaffratio14%higherthancouncilsinthe20-40,000populationrange.Thereforethegenericassumptionthatamalgamationsavingsmightbepossibleformerginga15,000populationcouncil(likePalerang)witha40,000populationcouncil(likeQueanbeyan)isworthyofinvestigation.ButtherealityisthatPalerangandQueanbeyanarealreadyamongstthemostefficientintheirrespectivepopulationranges,andthishasbeenachievedbytightgovernanceandmanagementandfocussingofdifferentiatedurbanversusruralservices.BycreatingamoregenericcouncilwhichneedstoprovideurbanandruralservicesoveranareathreetimestheentireSydneyMetropolitanareameansthatamergedPalerangandQueanbeyanislikelyto‘reverttotheaverage’.Thiswouldseestafflevelsincreasefrom0.7to0.84,oranadditional12%staffabovecurrentlevels.

The63.4staffsavingsassumedbyLKSwithoutanysupportingdocumentationisclearlyspurious.ThepurplebarinFigure2-1indicatesthatthestaffratiowouldbecomethelowestinNSWforanyrural/regionalcouncilprovidingwaterandsewerage.ThestaffratiosuggestedbyLKScouldonlyoccurundera‘slashandburn’scenarioandwouldresultinasignificantreductioninservicelevels,presumablyruralservicesinPalerang.

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April2016 Page20

TheareaofthePalerangLGAunderconsiderationcomeswithintherequirementunderSection218CAoftheLocalGovernmentAct1993tomaintainalllocalstaffnumbers.Inthecontextoftherelevantlegislation,onlyPalerang’sGeneralManagerisconsideredseniorstaff,withallotheremployeescoveredbytheLocalGovernmentStateAward.Assuch,theiremploymentisprotectedforthreeyearsunderlegislation,andwhiletheactualpositionsmaybevariedthereafter,regularstaffnumbers,oftenreferredtoascorenumbers,mustbemaintainedinperpetuity.

Further,PalerangCouncil(PC)andQCChavesignificantlydifferentsalarystructures,sothatQCC’sweightedaveragecostperemployeeis10.2%higherthanthatofPalerangCouncil.ThisistheresultofQCC’sbeliefthattheyneedtocompetewiththesalariesonofferbytheCommonwealthandACTGovernmentsinCanberra.Palerangpaysstaff,withtheexceptionoftheGeneralManager,undertheAward.ThepresentProposalwillthereforeinvolvea10%wageequalisationcostamountingtoapproximately$830,000peryear,andthisalonewouldoutweighmostofthesavingsclaimedintheKPMGanalysis.

2.2 AnalysisBasedonPalerang&QueanbeyanCityFinancialData

ThepresentProposalclaimsthat,basedonKPMGmodelling,a$37mfinancialbenefittothecommunitywillbeachievableovera20-yearperiod.Theactualcalculationsunderpinningthisclaimhavenot,however,beensubjecttoanyindependentverificationorindeedmadeavailabletothepublic.

Nonetheless,withtheassistanceofindependentconsultingfirmORION,usingthegeneralisedmethodologyappliedbyKPMG§togetherwithpubliclyavailableCouncilfinancialdata,wehavebeenabletoreplicatetheclaimsmadeintheProposalaspresentedinTable2-3below.TheassumptionsadoptedinthemodellingprocessarelistedinSection13ofthissubmissionandprovidethebasisforthecritiquepresentedinSection2.3below.

§ KPMG,OutlineofFinancialModellingAssumptionsforLocalGovernmentMergerProposals:Technical

Paper19January2016


April2016 Page21

Table2-3 ModellingofQCC/PCFinancials(KPMGMethodology)

Fullmerger Comments

Benefitover20yearsNSWgovernmentfunding

$22m$15m

Netfinancialsavings $37m

Grosssavings

Streamliningseniormanagement $6m

KPMGincreasedthesavingfromseniormanagementfrom$5minthepartmerger,to$6minthefullmerger,eventhoughtherearenoseniormanagersintheadditionalareaaffected.

Redeployment(employeebenefits) $16m

Materialandcontracts $5m

Councillorsavings $3.9m KPMGestimateof$380kperannum+2.3%salaryinflation.NetPresentValue(NPV).

Totalgrosssavings $30.9m

ImpliedOne-offcosts $8.9m

KPMGdidnotspecifytheestimatedmergercosts.Howeverthereisa$8.9mgapbetweenthe$30.9msavingsfromtheindividualsavingsitemsandtheoverallnetsavingsof$22m,whichisassumedtobeduetoone-offcosts.

MergerCosts(one-off)Breakup

ICT $4.4m $3.35mplus30%contingency,KPMGmethodologypage5,assumedmetropolitancluster.

Transitioncosts $2.1m

2%ofnewcouncilOpex,KPMGmethodologypage6,"Transitioncostsareestimatedtobe2percentofamergedentityoperatingexpenditureinthefirstyearofoperation"

38weekspayment $0.5m 1GM,[email protected]

Leaveentitlements $0.1m 17.5%leaveentitlements

Othercosts $1.8mCostsorsavingsnotidentifiedinKPMGmethodologytobalancewiththe$8.9m

Totalone-offdistribution $8.9m

Annualsavingsfrom2020 AverageAnnualgrosssavings $3.3m Averagefrom2020to2035

Impliedassumedannualcosts -$1.3m Assumingaround40%ofsavingsusedasexpenditure

Netaveragesavingsfrom2020(Discounted)

$2.0m

2.3 CritiqueoftheKPMGModelling

ThereareanumberofinvalidassumptionsappliedbyKPMGinrelationtothepresentProposal.ThesearepresentedinTable2-4belowalongwithourcomments.


April2016 Page22

Table2-4 InvalidKPMGAssumptions

KPMGAssumption Reality

$6minexecutivesalariesisassumedtobesavedover20years.$5mwasassumedforthepartialmergeroption.

ThereisonlyoneexecutiveinPalerangwhoisnotundertheAwardandthereforenotprotectedbylegislationforthefirst3years.Thereforenosuchsavingsarepossible.TheexistingQCCexecutiveswouldneedtomanagealargerarea,onethirdmoreinpopulation,andtheirsalariesarelikelytoincrease.ThecurrentPalerangmanagement(excepttheGM)arepaidsalariessimilartomiddle-managersinQCCandsimilarroleswouldberequiredtoprovidethevastlydifferentruralservices.

Equalisationofsalarieshasnotbeenconsidered TheQueenslandLocalGovernmentamalgamationexperienceshowedthatsignificantcostsarosefrommovingstaffpaidunderdifferentsalarystructurestothehigherlevel.QCC’sweightedaveragesalaryperemployeeis10.2%higherthanPC’s,andstaffsalarieswouldneedtoequalisetothehigher(QCC)levelfromtheoutset.Thiswilladd$830,000toannualcosts

$16msavingsover20yearsareassumedfromredeployingadministrativeandsupportstafftofrontlineactivitiesatlowerwagerates.ThesavingshavebeenappliedtotheentireworkforceofQCCandPalerangworkforce.

Palerangoperatesaveryleanstructure,andhasapopulation/staffratiolowerthanmostrural/regionalCouncilswithmuchlargerpopulations.AllbutonePalerangpositionisprotectedfor3yearsandstaffnumbersmustbemaintainedinperpetuityunderthelegislation.Inaddition,PalerangstaffsalarieswillneedtoincreasetoQCClevels(extra10%),offsettinganysavingsfromredeployingthefewmanagerialandsupportstafftofrontlineservices.

Nolossinotherincome,e.g.RMScontracts Paleranghasactivelypursuedopportunitiestogenerateadditionalrevenuethroughexternalcontractwork,includingcompetitiveRMScontracts.QCChaslimitedexpertiseinundertakingsignificantRMScontracts,anditsplanstoreducestaffinglevelsinBungendorewouldeliminatetheabilitytoundertakethesecontracts.TheKPMGassumptionsofconvertingseniorstafftofrontlineservicestogetthebulkoftheclaimedsavings,wouldhaveasimilarimpact.Withoutthesecontracts,theprojectedfinancesofanewCouncilwillbenegativelyimpactedtothetuneof$6.9mperyear.TheRMScontractsdirectlypaythewagesofatleast20FTEemployeesperyear.

Furthertotheseobservations,Figure2-2illustratesthattheremaybepotentialefficienciestobegainedfromanaveragecouncilineachofthepopulationranges,iftheyamalgamatetomovetoalargerpopulationrange.However,PalerangandQueanbeyanarealreadywellbelowtheaveragestaffratiofortheirpopulationrange,andarealreadyrealisingefficienciesfromsharedservices(suchaslibraries)and


April2016 Page23

regionalgroups.ItshouldbenotedthatPalerang’sFTEstafffiguresinclude20FTEstaffinvolvedfulltimeinRMScontractsandnotdeliveringLocalGovernmentservices.ThisisunusualinthesimilarCouncils,andmeansthatthePalerangFTE’sforCouncilservicesisonly0.65,andwellbelowQueanbeyanandtheaverageofalllargerpopulationregional/ruralCouncils.

Figure2-2 FTEStaffper100Population

ThishighlightsthattheKPMGformulaecanonlybeusedaspre-feasibilityindicationofthepotentialbenefitstoanaveragecouncil.Palerangisnotanaveragecouncil.Itwasformedbyamalgamation12yearsagoandhasalreadyachievedthepotentialsavings.AfurthermergerwithQueanbeyanisonlylikelytoworsenthesituation.

2.4 CritiqueofQCC/LKSFinancialAnalysis

TheQCCsubmissiononthepartialmergerwithPalerangnotesthefollowinginrelationtotheLKSfinancialanalysis:

The2015MergerReportundertakenbyLKSproposedaraftofservice,structuralandbackofficechangestoachievea$54msaving–inpartthroughreductionofover60staffandwithoutthelimitationsofs218CA.Withoutthosechanges,theLKSreportindicatedamergedentitywouldnotachievethefinancialandassetbenchmarksofgovernmentwithinthe(then)prescribed5years.Butnowwiththeassumedbenefitof$5mtowardcostsofmergerandinvestmentintechnologyandbackofficefunctionsnotnormallyavailabletocouncils,togetherwitha$10minjectionintoinfrastructure,mostofthosebenchmarkswouldlikelybeachieved.

TheseassumedsavingsarebasedonadoptionofanovelalternativeservicedeliverymodelbeingpromotedbyLKSQuaero,butwhichhasneverbeensuccessfullyimplementedinanyNSWLocalGovernmentArea.Evenifsuchsavingsareachievable,theywouldbeduetothealternativeservicedeliverymodel,andnottheamalgamation.Furthermore,theyaredependentonoverridingthelimitationsofs218CAthat

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April2016 Page24

guaranteesemploymentintownsofunder5,000population,whichappliestoBungendoreandBraidwood.Therefore,suchsavingswouldonlybeachievableifstaffinginBungendoreisvirtuallyeliminated,andservicesareprovidedfromQueanbeyanandBraidwood.ServicelevelsinthecurrentPalerangareawoulddeclinedramatically.Furthermore,theclaimedtotalstafflevelforamergedPC-QCCwouldhaveastafftopopulationratiobelowthatwhichhasbeenachievedinanylargerrural/regionalCouncilinNSWprovidingwaterandsewerage.

ThequotedLKSstaffsavingsareclearlynotachievablewithoutasignificantreductioninservicelevels.GiventheminorityrepresentationthatwouldoccurforthePalerangpartofamergedCouncil,thelossofservicelevelswouldbepredominatelyinthePalerangarea,especiallyinrelationtotheruralserviceswhicharenotprovidedbyQueanbeyan.

Itismorelikelythatstaffingwillincrease,ashasbeentheexperienceinQueensland,duetolongertraveltimesandequalisationofservicelevelstothehigherstandard.Thestafftopopulationratioforcouncilsinthe50-60,000range(whichisapplicablefortheproposedmergedCouncil)is0.94FTE’sper100population.Thisis35%higherthanthecombinedstaffingofcurrentQCCandPC.

Iftherestrictionsareremoved,theonlywaytoachievetheLKSsavingswouldbetoclosedowntheBungendoreoperationsandprovideallservicesfromQueanbeyanandBraidwood.

2.5 ScaleandCapacity

AnassumptionbyKPMGandotherbodiesindetermininglocalgovernmentreformsisthatlargercouncilscanbemoreefficient.ThetechnicalanalysisbyORIONinSection10ofthissubmissionshowsthatthereareapparentdiseconomiesofscaleinruralcouncilsbelow10,000populationandmetrocouncilsbelow50,000.Figure2-3illustratesthestafftopopulationratios(asFullTimeEquivalentstaffmembersper100population)forNSWregionalcouncilsthatprovidewaterandsewerservicesandhaveapopulationof40,000–100,000.ThefactthatPaleranghasalowerthanaveragestafftopopulationratiointhisgroupisindicativeofthefactthatthereisverylittlepotentialforeconomiesofscaleinstaffingbeyondthosethatarealreadybeingrealisedwithinthecurrentPalerangCouncilorganisation.


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Figure2-3 StaffingLevelsinLargeRegionalCouncils

TheanalysisprovidedinSection10alsoshowsthatmanyofthediseconomiesinsmallercouncilsareassociatedwithlowpopulationdensitiesanddisproportionatelylargetransportinfrastructureresponsibilities.

MuchhasbeenmadethroughouttheFitFortheFutureexerciseoftheimportanceof‘scaleandcapacity’inlocalgovernment.Indeed,theverybasisforthepresentProposalistoimprovethe‘scaleandcapacity’ofcouncilorganisationsintheregion.Thereis,however,afundamentalflawinthislogicinthepresentcase.

Itisgenerallyrecognisedthatefficienciesincapacityareachievedthroughincreasesinpopulationdensity.ThepresentProposal,however,willresultina30-foldincreaseintheareacoveredbyQCC,withadramaticreductioninoverallpopulationdensity,yieldingaproportionatereductioninassociatedefficiency.

TheproposedamalgamatedareaisthreetimestheentireSydneyMetropolitanarea,whichtheGovernmentproposestoberunby25metropolitancouncilsaftertheamalgamations.

AsnotedinSection2.2.2,dismantlingPalerang’sstructureandBungendoreofficeasappearstobesuggestedbyQCCwoulddestroytheabilityofthenewCounciltocontinuewiththeRMScontracts.

RetentionofRMSworkisnotamatterforanyCounciltodecide.Nonetheless,QCC’sapparentintentiontoclosedowntheBungendoreoffice,coupledwiththeLKSandKPMGmethodologyofconvertingpositionstofrontlineservicesandtosave63.4positions,wouldnotleavethemergedCouncilwiththetechnicalskillstocontinuetoundertaketheRMSwork.

AllindicationsfromtheRMSalsosupporttheviewthatifthePalerangorganisationisdismantledasisbeingproposed,thesecontractswouldbeawardednottoanotherCouncil,buttoprivatecontractors,revenuesthuslostentirelytothelocalgovernmentsector.ThepresentProposalmustthereforebeseenasentirelydestructiveinthisrespect.Palerangdidnotwinthesecontractsinthefirstplaceforanyotherreasonthan

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April2016 Page26

therecognitionofbothservicevalueandproductqualityprovidedbythePalerangCouncilorganisation.

ThesamedestructioninservicecapacitywillapplytoPalerangCouncil’sEnvironmentalServicesdivision,which,forexample,iscurrentlytheleadagencyforthe$20mSEWeedsActionProgram.

Bothoftheseprogramsrequireacentrallocation,criticalmassandteamcohesiontoprovidetherequiredorganisationalcapacitytoundertakeprojectsofthescalebeingawardedtoPalerangCouncil.

Fromtheinformationprovidedintheprecedingsections,itshouldalsobeabundantlyclearthatthepresentProposalwillnotimprovethefinancialsituationofQCCandhenceanewCouncil.IthasalsobeennotedthattheprovisionsofSection218CAoftheActwillconstrainanewCouncil’sstaffingarrangementsandresourceallocationcapability.

Inviewofthesedetails,theProposalclearlyfailstoprovidefinancialadvantagetoanyoftheresidentsandratepayersinvolvedandfailsonseveralcriticalcountstoimprovethe‘scaleandcapacity’oftheproposednewCouncil.Rather,thepresentProposalhastheverygenuinepotentialtounderminethecapacityofanewCouncilbydestroyingtheproductivecohesionthatexistswithinthePalerangorganisation,significantlyincreasingtheareathatmustbeservicedandreducingtheoverallpopulationdensitywithoutincreasinganyfinancialcapacitytosupportthisexpansion.

TheQCCpartialmergersubmissionnotesthatPalerangandQueanbeyanarealreadybenefitingfromjointprojects,andfurtheropportunitiesmightbepossible:

8Existingcostsharinginitiatives

BothPalerangandQueanbeyanparticipateindatagatheringandbenchmarkingprogramsaimedtoreducecostandstreamlineprocess.ThoseincludetheAustralianBusinessExcellenceFramework(ABEF),theprocurementroadmap(ArcBlue)andLGperformance(PWC).ExamplesareatAttachment1.Drillingintothosedatasourcesmayexposeopportunitiesforjointsavingthatmaynothaveemergedinthehighlevelmergerproposal.

Itshouldberecognisedhowever,thatthoseorgreatersavingsmayalsobeachievedthroughcooperativejointpurchasingandservicedeliveryoptionscoordinatedthroughtheCanberraRegionJointOrganisation(CBRJO),orformerlySEROC.

ItshouldberecognisedthatQueanbeyanandPalerangstaffalreadyshareresources,skillsandfunctions,basedonscaleandexpertise.Forexample,Palerangbringroads,weeds,waterandemergencyserviceexpertisetothetable,whileQueanbeyanretainsplanning,development,environment,parks,HRandICThighlevelskills.Bothsharefacilitiessuchasemergencyservicesandpound,whileQueanbeyanhostABEF,libraryandotherbackofficesupport.P12

Paleranghasspent10yearsfashioningitsstaffintotheorganisationitistoday.WhileitwouldbedifficulttosplitteamsacrosstheLGAorbetweentowns,butitmayassistsettinganewcultureforthemergedentity.P12


April2016 Page27

Asoutlinedinthesectionon‘serviceability’,theaccesstothemainservicecentrebyresidentsandtheaccessofstafftodelivertomoreremoteruralorvillagecentres,mayexceedthe60-90minutetravelthresholdrecommendedbyILGRP.P12

Fromtheexperienceofthe2008Queenslandmergers,thereisthepotentialthatstandardisingservicesandassetlevelstendtoelevatestandardstothehighestexistinglevel(forparityandconsistency)andwiththatmaybringhighercostsandpressureonrates.Forexample,expectationsmayraisetoprovidehigherlevelparks,streetscapeandotherservicesakintotheQueanbeyanurbanarea,invillages.However,giventheincreasedscale(bothinvolumeandgeography)ofsomeservices,differentdeliverymodelsmaybeexplored,withleveragedcoststhroughthatscale.ThosemodelsmayincludeshareddeliverybetweencouncilsthroughtheCBRJOorcontractarrangementswithcommercialorACTgovernmentproviders.P12

Thishighlightsthatamergerisnotnecessarytoobtaintherequiredscaleandcapacity.

2.6 FinancialSustainability

QCCcommissionedPercyAllan&Associates(PA)toconductfinancialsustainabilityAnalysesforbothQCCandPalerangCouncil.ThesewerecompletedinMarch2016andarethereforethemostrecentassessmentofeachCouncil’sfinances.

ThePAreportsshowthatPalerangCouncilisheadedforimprovedfinancialsustainability,andwillthereforebefitforthefuturewithouttheneedforanamalgamation.

Paleranghadanoperatingsurplusin2014-15,andPAshowedareturntoahealthyoperatingpositionovertime,asshowninChart1ofthatReport(seeFigure2-4):

Figure2-4 PalerangProjectedOperatingBalanceRatio(PAllan&Assoc)

Similarly,PalerangwasshownbyPAtohaveahealthylevelofnetfinancialliabilitiesovertheforecastperiod(seeChart2ofthatReport,Figure2-5below).Coupledwiththeforecastreturntoanoperatingsurplus,thiswouldgivesomescopeforPalerangCounciltoincreaseborrowingstoovercometheinfrastructurebacklogwithouttheneedforanyCouncilamalgamations.


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Figure2-5 PalerangProjectedNetFinancialLiabilitiesRatio(PAllan&Assoc)

2.7 Assets

InitssubmissiononthepartialmergerofPalerangandQueanbeyan,QCCraisedconcernsabout:

“theveracityofthePalerangassetbacklogandstandards”.“TheFY2014financialstatementsforPalerangdiffertotheirFY2015statements.Inessence,byreducingstandards,thePalerangpublishedassetbacklog(ss7)hasbeenreducedfrom$24m(FY14)to$16m(FY15).YetthemergerproposalsidentifiedthecombinedPalerangbacklogat$40m.”

Theseclaimsaresimplyincorrect.Insimpleterms,PalerangCouncilrevieweditsclassificationofassetrequirementstoensurethatitfocussedonrenewalrequirementsofexistingassetsanddidnotincludedesiredupgradestoassetstandards.

MorrisonLowwasengagedbyCouncilforthisreview,andhassincemadethefollowingcommentaryontheprocess:

MorrisonLowwasengagedtoadvisethePalerangCouncilonthecalculationoftheInfrastructureBacklog.MorrisonLowarerecognisedasexpertsinassetmanagement(appointedtotheFitfortheFutureTechnicalPanel:AssetandInfrastructurePlanningandManagement)andhaveaparticularexpertisearoundSpecialSchedule7.TheconditionbasednetworklevelmethodologyusedbyMorrisonLowandadoptedbyCouncilisexplainedintheappendix.ItisthesamemethodologyusedbyMorrisonLowincompletingtheonsiteassessmentsfortheOLG’s2013LocalGovernmentInfrastructureAudit(refertopage98ofthatreportforthereportedresultsofthe35Council’sassessed),presentedattheIPWEAInternationalConference(2013),demonstratedtoover90attendeesfromacrossRegionalandRuralNSWthroughwebinars(2015)andadoptedbybetween15–20CouncilsacrossNSWeitherbeforeorduringtheFitfortheFutureprocess.WhiletheresultdiffersfromthatpreviouslyreportedbyCouncil,Councilisconfidentinthemethodologyandthechangeisnotwithoutprecedent.ManyCouncilsacrossNSWreportedlowerinfrastructurebacklogsduringtheFitfortheFutureprocessasaresultofareviewoftheapproachusedtocalculateanumberwhichcontinuestohavenoprescribedmethodologyforitscalculation.DanBonifant,Director.

InthePAreviewofPalerang’sfinancialsustainabilitythatwasonlyrecentlycompleted,theinfrastructurebacklogratiowasshowninanacceptablerange(seeChart3ofthatReport,Figure2-6below):


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Figure2-6 PalerangProjectedInfrastructureBacklogRatio(PAllan&Assoc)

Bycontrast,theanalysisconductedforQCCshowsthattheywillhittheredzone(over5%)withinafewyearsunlesstheyadoptaresponsiblescenario,involvingincreasedratesandcharges,asillustratedinFigure2-7below.

Figure2-7 QueanbeyanProjectedInfrastructureBacklogRatio(PAllan&Assoc)

2.8 SummaryofFinancialImpacts

ThemostrecentauditedfinancialstatementsshowthefollowingfinancialresultsforPalerangandQueanbeyan.

Table2-5 StartingFinancialPosition

2014-15OperatingSurplus/(Deficit)Palerang $1,289,000Queanbeyan $197,000

StartingPositionPalerang&Queanbeyan $1,486,000


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Table2-6 ImpactofMergeronOperatingPosition

OpeningOperatingPosition $1,486,000Plusmaximumstaffsavings(conversionofcorporate&managementpositionstofrontline) $552,000

Plus1xGeneralManagerSavings $250,000PlusPalerangCouncillorsavings(KPMGCalculation) $380,000PlusKPMGMaterials&Contractsavings $586,000Lesswageequalisationcosts ($830,000)LessRMScontributiontocostsincludingprotectedemployeewages ($2,760,000)

NetOperatingResult ($1,336,000)

Table2-9showsthatevenwiththeoptimisticsavings,amergerofPalerangandQueanbeyanwouldturnthemostrecentcombinedoperatingsurplusofaround$1.5mtoanoperatinglossof$1.3m,oradeteriorationof$2.8mperyear.Section8outlinesananalysisofthemaximumtheoreticalpotentialsavingsthatcouldbeachievedbyconvertingallPalerangnonservicedeliveryrolestolowerpaidfrontlineservicedeliveryroles.Thismaximumsavingsis$552,000peryearcomparedwith$1.9massumedbytheKPMGmodelling.WehaveappliedthemodelledKPMGsavingsforCouncillors,andmaterialsandcontractsalthoughthereisnosubstantiationbyKPMGofhowthesecouldbeachieved.LKShavemadesimilarestimateswithoutprovidinganysupportingdata.Withoutthematerialsandcontractsavings,theendresultwouldbeanannualdeficitofover$1.9mperyear,or$3.4mworsethanthecurrentsituation.

ThefinancialcaseformergingPalerangandQueanbeyansimplydoesnotstackupevenunderthemostoptimisticassumptions.

2.9 SummaryofClaims

2.9.1 FinancialBenefit

AcomprehensiveindependentanalysisofthefinancialimplicationsofthepresentProposalisprovidedabove.

Nonetheless,itisimportanttorecognisethevariouscomponentsoftheclaimedfinancialbenefit.

Thereisnonetbenefitassociatedwiththe$5millionbeingofferedtocoverthecostsofimplementingthepresentProposal.Ourconsultants’analysisoftheKPMGmethodologyindicatesthattheone-offmergercostscouldbecloserto$9million.Thesefundsarebeingprovidedfromthepublicpurse,simplysothattheydonotneedtobedrawnfromthecouncil’sownrevenuestream.Ultimately,residentsarepayingregardless.Theonlyissueiswhethertheypaythroughtheirincometaxortheirrates.Ifthereisnoongoingfinancialbenefit,anyexpenserelatingtothecostofthepresentProposalwillsimplyhavebeenanextra,unnecessarydrainonthepublicpurse.

Thereisthenaone-off$10milliongrantforcommunityinfrastructure.Toconsiderthetrueimpactofsuchagrant,itmustberecognisedthatindependentfinancialmodellinghasrevealedanongoingannualdeficitof$1.3milliononthebalancesheetoftheproposednewCouncil.Thiscompareswiththe$1.5millioncombinedoperatingsurplus


April2016 Page31

ofthetwoCouncilsaccordingtothemostrecentauditedfinancialstatements.Thatis,thevalueofthisgrantwouldveryquicklybenegatedbytheongoinglossesofanewCouncil.

Theremaining$20millionismoneythatitisclaimedwouldbesavedthroughimprovedefficienciesoverthenext20years.Asalreadynoted,however,independentfinancialmodellingindicatesthattheproposednewCouncilwouldactuallybelosing$2.8millionperyearcomparedwiththecurrentsituationandwiththebestpossiblesavings.

Onthisbasis,therecanbenoexpectationofanyongoingfinancialbenefitarisingfromthepresentProposal.Infact,therewillbeanongoingandmountingfinancialdeficit.

2.9.2 ReducedRelianceonRateIncreases

Again,onthebasisthatindependentfinancialmodellingdemonstratesthatthepresentProposalwillcreateasubstantialfinancialdeficitinthenewCouncil,revenuestreamswillneedtobeaugmentedtosimplymaintain,letaloneimproveservicelevels.IntheabsenceofadditionalStateorFederalfundingopportunities,thismustincreaseratherthanreducethepotentialforrelianceonrateincreases.ThisfactissupportedbyseveralindependentfinancialanalysesthathavebeencommissionedbybothPalerangandQueanbeyanCityCouncilsintheprocessofrespondingtoboththeFitForTheFutureprogramandthecurrentroundofmergerProposals.

TherealissueherewithinthePalerangLGAistheimpactofcostshiftingfromhigherlevelsofgovernment,inparticulartheburdenofmaintainingregionaltransportinfrastructurethatrestsdisproportionatelyonruralcouncils.Everydollarthatcouncilsmustdrawfromratesrevenuetomaintainregionalinfrastructureisadollarthatcannotbeinvestedtothebenefitofratepayersinlocalinfrastructureorservices.

Ifthepracticeofcostshiftingwastocease,andregionaltransportinfrastructureweretobeadequatelyfundedbytheState,therewouldbeagenuinepotentialtoreducerelianceonrateincreases.

Palerangwascreatedin2004withenormousfinancialchallenges.AlargeratebasefromtheformerCouncilshadbeentransferredtoQueanbeyanandotherarea,buttheemployeeprotectionprovisionsoftheActremainedandwereenforced.Paleranghadnooptionbuttobecomeasefficientaspossibleandtoseekalternativerevenuesources,suchasRMSwork.AmergedCouncilislikelytolosethefocusonruralservicesandRMSwork(especiallyifstaffinginBungendoreismassivelyreducedasapparentlysoughtbyQCC).ConsequentlythereisaveryrealpossibilitythattheRMSwork,whichprovidesconsiderablenetbenefittothePalerangcommunityincludingtheemploymentof20protectedFTEpositionswillbelost.Therefore,therelianceonspecialratevariationsislikelytoincreaseunderanamalgamation,ratherthanreduce.


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3 LocalCommunityLegislativeCriterion(b)Thecommunityofinterestandgeographiccohesionintheexistingareasandinanyproposednewarea

Throughoutthereformprocess,ithasbecomeapparentthattheinfluenceoftheACTandCanberrawithintheSENSWregionhasbeenconsistentlyunderestimated.Totrulyappreciatethecharacteroftheregionatacommunitylevel,onemustignorethejurisdictionalboundarybetweenNSWandtheACTandsimplylookatthesettlementpattern.

Quiteclearly,theregionalcitiesofGoulburn,QueanbeyanandYasspredatethecreationoftheACTandCanberra,butthisisoflittlerelevanceinthiscase.CanberraandthesurroundingregionareuniqueinAustralia.

ThegrowthofCanberraintheperiodsinceitwascreatedhasresultedinitsclearlybecomingthedominantcentreintheregionfromanypointofview.ThishasasignificantimpactontherelevanceofQueanbeyan,forexample,asaregionalcentre.WhileQueanbeyanmightofficiallyberecognisedasacity,itisuniqueinmanyways,notleastbecauseitisnotthedominantinfluenceinthesurroundingregion.Infact,QueanbeyanhasbecomesodependentonCanberrathat,forexample,itisnotpossibletobuywhitegoods,atelevisionorthelikeinQueanbeyan.Fortheseitems,aresidentmusttraveltoCanberra,althoughthisisnofurtherawaythanthenextsuburbinanymetropolitanarea.

TherelevanceofthissituationisthatanybroadergoaltostrengthencitycentresinregionalNSWmustrecognisethatwhileitmayoncehavebeen,andindeedmaystilllooklikearegionalcentreifoneignorestheexistenceoftheACT,andCanberra,ithasveryfewofthecharacteristicsofotherregionalcentresinNSW,orindeedAustralia.WerewetoignoretheACTboundary,QueanbeyanwouldbeindistinguishableinmostwaysfromanddemandnomorerecognitionthananyofCanberra’sothertowncentres.ThefactisthatnoneoftheruralareassurroundingtheACTareanymoreeconomicallydependentonQueanbeyanthantheyareonanyofCanberra’stowncentres**.

3.1 CentresofInfluence

Fromaworkforceperspective,asidentifiedbythe2011ABSCensusdata,62%oftheworkingpopulationofQueanbeyancrossthebordertoworkinCanberraeachday,asdoaround50%oftheworkingpopulationofYass.Similarly,56%oftheworkingpopulationofPalerangworkintheACT.Only10%ofPalerangresidentsatthattimeworkedintheQueanbeyanarea.Comparethis,forexample,tothe56%oftheworkingpopulationwhocrossthebordertoworkinCanberraeachday,asillustratedinFigure3-1.

** Canberraisbasedonaseriesofinterconnectedtowncentresanddiscreteindustrialestatesrather

thanasingle,centralbusinessdistrict.


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Figure3-1 PalerangResidents’WorkLocations

ThesocialandeconomicexchangebetweenadjacentareasinNSWisindeedminimal,asdiscussedfurtherinSection3.2below,instarkcontrasttothesituationthatprevailsinotherNSWruralandregionalareas.

ItmightthenbetemptingtosuggestthattheareashaveacommoncommunityofinterestinthattheyareallcloselytiedtoCanberra.That,however,iswherethesimilarityends.PalerangandQueanbeyanhavetraditionallyattractedquitedistinctdemographicgroups.

Sincetheseventiesinparticular,whenruralresidentialdevelopmentbeganinearnestinthepartsoftheformerYarrowlumlaShirethatarenowwithinPalerang,theindividualcharactersofQueanbeyanandYarrowlumla/Paleranghavedevelopedalongquitedistinctpaths.Queanbeyanhasalwaysprovidedopportunitiestoownfreeholdland(allACTlandisleasehold)inanurbanenvironment,whilethoseseekingamorerelaxed,rurallifestylehavesettledinthePalerangorYassLGAs.

Today,aroundtwothirdsofthepopulationofPalerangresidesineitherruralresidentialareasalongtheACTborderorintheruraltownsofBungendore,BraidwoodorCaptainsFlat.Bycontrast,theQueanbeyanpopulationisalmostentirelyurban,andthereisnoevidencethateitheronecouldbeconsideredasoverspillfromtheother.

Further,whiletheKingsHighwayprovidesthemainlinkbetweenCanberraandthecoast,thebusiestroadsinPalerang,onadailybasis,arethosethatfeedintoCanberraviatheFederalHighway—theygonowherenearQueanbeyan.

3.2 SurveyData

Intheprocessofrespondingtothevariousrequirementsofthelocalgovernmentreformprocess,PalerangCouncilcontractedWintonSustainableResearchStrategiestosurveyPalerangresidentsonarangeofissues.ThesewillbediscussedinmoredetailintheSection5ofthissubmission.Inthepresentcontext,however,thesurveyincludedquestionsrelatingtoshoppingpatterns,healthservices,entertainmentandeducationalactivities.TherelevantsurveyquestionsandresultsaresummarisedinTable3-1.

31%

56%

10%

4%

PalerangResidents'WorkLocaions

Palerang

Canberra

Queanbeyan

Other


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Table3-1:CentresofInfluenceQ.AInwhichcityortowndoyourweeklyormajorfood,groceryormajorsupermarketshopping?Q.BWheredoyoushopformajorhouseholditemssuchaswhitegoodsandfurniture?Q.CWheredoyoumostlyvisitforminortop-upfoodandgroceryshopping?Q.DInwhichcityortownareyourmainhealthcareproviderslocated,suchasyourdoctor,dentistandthelike?Q.EWhichcityortowndoyouusuallyvisitforentertainment?Q.FWhichcityortowndoyoumostlyassociatewiththeprovisionofprimary,secondaryortertiaryeducationforyourfamily?

Majorfoodandgroceryshopping

%

Majorh’holditems

shopping%

Minortop-upfood&groceries

%

Healthcareproviders

%

Entertainment%

Education%

Canberraonlyormainly 15.2 48.3 8.0 38.9 56.3 29.9

CanberraandQueanbeyanaboutequally 9.4 12.1 0.0 2.1 1.9 2.9

Queanbeyanonlyormainly 44.8 15.1 12.9 9.0 7.8 14.8

TotalCanberraand/orQueanbeyan 69.4 75.5 20.9 50.0 66.0 47.6

Goulburn+nearbytowns 3.6 2.5 0.4 1.8 2.5 3.6

BatemansBay+nearbytowns 2.2 0.7 0.0 0.7 1.9 0.4

Furtherafield(inclSydney) 0.0 0.0 0.0 1.7 3.7 1.4

TotalbeyondPalerang 75.2 78.7 21.3 54.2 74.1 53.0

Braidwood[town] 18.4 13.7 31.8 27.1 5.8 12.7

Bungendore[town] 4.6 0.4 45.1 18.0 6.4 7.6

CaptainsFlat[town] 0.0 0.0 0.0 0.0 0.0 0.7

Sutton[area] 0.0 0.0 0.0 0.0 0.0 0.2

Notapplicable/don’tdothat/unsure

1.8 5.6 1.8 0.4 13.7 25.8

TheresponsesrevealthatmajoritiesofthepopulationventurebeyondPalerangCouncil’sbordersformajorhouseholdshopping(78.7%),majorfoodandgroceryshopping(75.2%),entertainment(74.1%),healthcareproviders(54.2%)andeducationalactivities(53.0%),butwithonlyaminoritydoingsoforminortop-upfoodandgroceryshopping(21.3%).

Inallcases,mostofthoseventuringbeyondPaleranggonofurtherthanQueanbeyanorCanberra.Clearly,Canberra(farmoresothanQueanbeyan)isthemaindestinationformajorhouseholditems,healthcareproviders,entertainmentandeducation,whereasmorepeopledotheirmajorandtop-upfoodandgroceryshoppinginQueanbeyanthaninCanberra.

ThesesurveyresultsarefurthersummarisedandpresentedinFigure3-2below,whichemphasisestherelativelevelsofdependencethatexistwithinthelocalarea.MostcommunitytiesarestrongerwithinPalerangitselfthantheyarewithQueanbeyan.Clearly,thestrengthofthesetieswillvaryinlocalitiesclosertotheactualboundarybetweenthetwoareas,butCanberraremainsthedominantinfluencewithintheregion.


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Figure3-2 PalerangCommunityLinkages

ThemergerProposalsalsoclaimthattherewillbebenefitsfromhavingacommonregulatoryframeworkacrossthearea:

Adoptingbestpracticeregulatoryactivitieswillgenerateefficienciesforamergedcouncilandbenefitlocalresidentsandbusinesses.Forexample:• atradespersonwhooperatesasmallbusinessacrossBungendoreandQueanbeyan

willhaveasinglelocalcouncilregulatoryframeworktounderstandandcomplywith;and

• residentscanhavegreaterconfidencethatdevelopmentapplicationswillbesubjecttoamoreuniformprocessthantheexistingvariationsinregulations,whichcanaddtothecostandcomplexityofhomerenovationsandbuildingapprovals.

Thereis,however,noevidenceintheABScensusdataorindependentsurveyscommissionedbyPalerangCouncilthatthisisinanywayanissueinthePalerangarea.FarmoreimportantintheSENSWregionarethecrossborderissuesbetweentheACTandneighbouringcouncils,andthesewillexistwithanycouncilthatborderstheACT,regardlessofitssize.

Nonetheless,tradespeopleoperateprimarilyundernationalstandardsandanyvariationsinCouncilregulationsaremoreareflectionofthedifferentpredominantlandusecharacteristicsinaruralversusandurbanarea,noneofwhichwouldchangeinanewCouncil.

Furthermore,theStatenowhasallthecontrolitneedstostandardiseregulationsthroughtheStandardInstrumentLocalEnvironmentalPlan(SILEP).Itcaneliminateanyundesirabledifferencessimplybymandatingclausestherein.Tosuggestthatmergingcouncilswillcreateamoreuniformprocessnecessarilyimpliesthatindividualcommunitieswillhavelesscontrolorcapacitytoinfluencethecharacteroftheirarea.ThisfollowsasadirectresultofreducedrepresentationontheirlocalCouncil,orsimplyalossoffocusonindividualcommunitiesbasedonsomemisguidedassumptionthatallcommunitieshavethesameneeds.

UltimatelyanLEPandaCouncil’sdevelopmentpoliciesareformulatedbythelocalCouncil,whichcomprisesthecommunity’selectedrepresentatives.Tosuggestthatone

020406080100

PalerangCommunityLinkages

Palerang Canberra Queanbeyan


April2016 Page36

mightmergecouncilstoeliminatethislevelofpolicycontrolissimplysuggestingthatasmaller,localcommunity’sviewsshouldcarrylessweightinmakingsuchdecisions.

Thisapproachhasallthemakingsofaone-size-fits-allapproachtoplanning.Ifthatistheintent,thenmergingcouncilsisnotthewaytoachievethisend.TheStatehasthepowertocontrolthecontentoftheSILEPsothatitcontainsallthestandardisationthatitwants.IftheStateGovernmentwantsahigherlevelofstandardisation,itshouldchangetheplanninglegislationaccordinglyanddealwithanycommunitybacklashdirectly,ratherthanpassingthebuckbymergingcouncilstodiminishtheinputindividualcommunitieswillhaveoverdevelopmentcontrols.

Thispositionnotwithstanding,itisimportanttonotethatPalerangCouncilalreadyhasplanningresourcesharingarrangementsinplacewithneighbouringcouncilsasameansofbalancingoutDevelopmentApplicationassessmentloadsbetweenparticipatingcouncilsinthearea.Thisisnotsomeidleclaimrelatingtowhatcouldbe,butastatementofarrangementsthathavebeeninplaceforseveralyears.


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4 HistoricalValuesLegislativeCriterion(c)Theexistinghistoricalandtraditionalvaluesintheexistingareasandtheimpactofchangeonthem

WhilePalerangisonlyayoungLGA,theareamostimpactedbythepresentProposalfromanhistoricalperspectiveisthatpartwhichistheformerTallagandaShire.Withitsboundaryestablishedin1906,thetraditionalcommunitiestherebydefineddatebackover110yearsandbeyondtothetimeoftheoriginalEuropeansettlementoftheareaandthesubsequentgoldrushofthe1860s.

Whilethismayseemtohavelittlerelevanceinthepresentcase,theimportanceliesinthevoidthatexistsbetweenthevaluesofsuchcommunitiesandthoseofthecurrentQueanbeyanCityarea.Aswillbeemphasisedthroughoutthissubmission,QueanbeyanisanurbancentreandthefocusofQueanbeyanCityCouncilactivitiesisnecessarilyquitedifferentfromthosewhichareseenasbeingimportantinaruralcommunity.

Itisperhapsalsoimportanttoconsiderrecenthistoryhere.IntheamalgamationthatcreatedPalerang,theresidentsoftheformerTallagandaShirecomprisedonly25%ofthepopulationofthenewPalerangcouncilarea.Theirproportionaterepresentationatacommunitylevelwasreducedfrom100%toaround25%,effectivelyfromninecouncillorrepresentativestojustthree.Todaytheareaisrepresentedbyonlytwolocalresidentsandwearenowlookingatasituationwheretheuniqueinterestsofthislocalcommunitymightnotevenraterepresentationbyasinglelocalcouncillor.Thisisasignificantchangeinaperiodofjust12years,andthereisnoevidencetosuggestthatcommunityvaluesacrossthisareaandadjacentLGAshavehomogenisedtothepointwhereruralandurbancommunitieshavesimilarpriorities.

InthesouthwestofthePalerangLGA,thereareindeedcommunitieswithtieswiththecurrentQueanbeyanarea.This,however,islargelyduetotheill-conceivedboundarythatwasdefinedatthetimePalerangwascreated.ThetiesherearenotsomuchwithQueanbeyanastheyarewithinthecommunitiesthatweredividedbytheboundarythatwascreatedatthattime.

TherealityisthatthegrowthalongtheNSWsideoftheACTborderisdrivenbygrowthinCanberra.QueanbeyancapturesanelementofCanberra’surbanoverflowwhilePalerangcapturesthedemographicgroupthatisseekingamorerurallifestyleanditsassociatedvalues.ThisgrowthisnotQueanbeyanoverspill,norisQueanbeyangrowthinanywayduetoPalerangresidentsmovingintourbanlocalities.Thesearedistinctdemographicgroupsembracingdifferentsetsofvalues.

Theissueherethenisthatthereisnovalueincombiningthesedemographicgroups.Theserviceneedsandexpectationsaredifferent,andthegrowthinbothareas,urbanQueanbeyanandruralPalerang,isanindicationthatbothsetsofvaluesareviableintheirownright.

TheriskisthatmergingthetwoLGAswillnecessarilyreducethefocusofthemergedentityoneitherdemographicgroup,sincetheyhavelittleincommonandmustbeservicedlargelyindependentlyofeachother,iftheyaretobeservicedatall.


April2016 Page38

Andthisisthenuboftheproblem.Inasituationwhereonegroupissignificantlylargerthantheother,thenaturalconsequenceofchangeisthatthelargergroupdominatesandtheinterestsofthesmallergroupbecomelesssignificant,tothepointwhereperipheralelementsofthesmallergrouparesimplyignored.


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5 Ratepayer&ResidentAttitudesLegislativeCriterion(d)Theattitudeoftheresidentsandratepayersoftheareasconcerned

ThePalerangareaisacollectionofruralandruralresidentialcommunities.Historically,ruralcommunitieswouldhavebeencentredonnearbyvillages,andultimatelythetownsofBraidwood,Bungendore,CaptainsFlatandQueanbeyan,dependingontheirindividuallocation.Inmorerecenttimes,theruralresidentialareasclosertotheACThavebeeninfluencedentirelybyeconomicgrowthinCanberra,andtheseareasnowaccommodatethemajorityofPalerang’spopulationinlifestyleandhobbyfarmdevelopments.

Bungendorehasdevelopedalongsimilarlines,withmanynewresidentsseekingamorerelaxedlifestylethanisprovidedinnearbyurbanareas,buttheyarenonethelessemployedinCanberra.Furthertotheeast,thetraditionalvaluesofaruralcommunityremainalthoughthisareatooisbecomingincreasinglyattractivetoresidentsseekingarurallifestylewhileworkinginCanberra.

GrowthintheruralresidentialareasalongtheACTborderbeganbackinthe70sand80s,andcontinuestoday,althoughatareducedpace.Bungendorehasseenadoublinginitspopulationinjustthelast15years.

Inthe12yearssinceitsformation,thePalerangLGAhasdevelopeditsown,uniquebutfundamentallyruralcharacter.Ithasnotgivenwaytourbansprawl,retainingrelativelylargeblocksizesevenwithinitstowns.Thedominantruralresidentialpopulationoccupieslotsgenerallyrangingfrom5to40acresandaccommodatingarangeofruralactivities,fromlifestyleblockstolowintensityandspecialisthobbyfarming.

ThePalerangareanowprovidesauniquelifestyleopportunitythatclearlyretainsitsruralrootsbutaccommodatesademographicgroupthatseesCanberraasitsfocusforemploymentandawiderangeofsocialactivities.

PalerangCouncilplaysanimportantroleinsupportingthiscommunity.Withmanyresidentsavailingthemselvesofhigher-levelprofessionalservicesprovidedinCanberra,PalerangCouncilisabletofocusitsresourcesonthedeliveryofservicesthatunderpintheruralcharacterofthearea.

Throughoutthewholereformprocess,therehasbeenacommonmisconceptionrelatingtogrowthinthePalerangarea.ThisgrowthisoftenreferredtoasQueanbeyan‘overspill’development.Itwould,infact,beanentirelydefensiblepositiontoproposethat‘historical’Queanbeyanisnotgrowingatall,andthatwhatis,andhasbeenhappeningforseveraldecadesislittlemorethanwhatisalsonowhappeningonthenorth-western(NW)boundaryoftheACT—Canberradevelopmentisspillingacrossthestateboundary.ThereislittlemorelogicinconsideringthisgrowthtobepartofQueanbeyanthanitistoconsidertheoverspillintheNWpartoftheACTtobepartofYass.NoneofthisgrowthisdrivenbyeconomicdevelopmentorgrowthinQueanbeyan(orYass),itisentirelydrivenbyeconomicgrowthinCanberra.


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5.1 IRISSurveyCommissionedbyQueanbeyanCityCouncil

ItisimportantatthispointtocommentonthesurveycommissionedbyQueanbeyanCityCouncilandconductedbyIRISResearch.

Thissurveyclaimstohavebeencarriedoutonastratifiedsampleof402Palerangresidents.Anecdotalevidence,however,suggeststhatthesurveywasfundamentallyflawedandthattheresultsarenotatallrepresentativeofcommunityviews.

Inthefirstinstance,theadultpopulationinPalerangnumbersaround10,600(2011ABScensusfigures)andPalerangCouncilcomprisesninecouncillors.InthesupposedlyrandomsampleofresidentsselectedbyIRIS,threecouncillorswerecontactedtoparticipateinthesurvey.AllwererejectedbytheinterviewerbecausetheywereelectedrepresentativesonPalerangCouncil.CurrentemployeesofPalerangCouncil,andtheirfamilies,werealsoexcludedformthesurvey.

Therearetwoseriousproblemshere.Ifoneweretoseekasmallsampleofcommunitymemberstocommentontheviewsofthecommunityasawhole,wouldnotthefirstpeopletobeconsultedbethecommunity’sownelectedrepresentatives?Whydidthecommunityelectthesepeopleinthefirstplaceifnottorepresenttheirviews?Whereisthelogicin,orreasonfor,excludingelectedrepresentativesfromasurveyimpactingthefutureoftheresidentswhoelectedthem?

Thesecondisapurelystatisticalassessmentofthissituation.Ifthreecouncillorsoutofninewereincludedinarandomsampleofthecommunity,onastatisticalbasisthatwouldsuggestthatthesampleincludedfullyone-thirdofthepopulation,oraround3,500residents.Yetthesurveyclaimstohaveinvolvedonly402residents.

Tounderstandthisapparentparadox,weneedtolooknofurtherthanthesurveymethodology.Thisassessmentisbasedonreportsfromcouncillors,Councilstaffandresidentsoftheirfirsthandexperiences.

Thesurveyinquestioncomprised10questions.Thefirstwassimply:

AreyouinfavourofamergerofanysortbetweenQueanbeyanCityCouncilandPalerangCouncil?

Acceptableresponsesweresimply“Yes”or“No”.Thereisalreadyaproblemhereinthatitwasnotacceptabletobe“Undecided”.

Thesecondquestionsoughtreasonsfortheresponsegiventothefirst.

Thethirdquestion,however,waswheretherealproblemsbegan.Itasked:

IfCouncilweretomerge,whichofthetwomergeroptionswouldyouprefer?

Onlytwoacceptableresponseswereoffered:

ApartmergerbetweenQueanbeyanCityCouncilandthewesternandsouthernpartsofPalerang

orAfullmergerbetweenQueanbeyanCityCouncilandPalerangCouncil

Again,itwasnotacceptabletobe“Undecided”.


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Theproblemnowwasthatifarespondentfailedtonominateoneofthetwo‘acceptable’options,andinsistedthattheywereeitherundecidedordidnothaveapreference,invariablybecausetheydidnotsupportamergerofanykind,thesurveywasterminatedandtheywereremovedentirelyfromthesurveysample.

Assuch,theresponsesreportedforthefirstquestion,relatingtosupportforamerger,areonlythoseofrespondentswhoagreedtonominateoneofthe‘acceptable’responsestothethirdquestion.Ifarespondentwasstronglyopposedtoamalgamationanddeclinedtoselectoneofthemergeroptionsoffered,theywerenotincludedinthesurvey.

Itisthennotsodifficulttounderstandwhymorethan3,000residentsmighthavebeencontactedinordertoaccumulatejust402‘acceptable’responses.

OneresidentreportedtoCouncilthathehaddemandedtospeaktotheinterviewer’ssupervisorwhentheinterviewerrefusedtoaccepthisresponseasvalid,subsequentlypointingouttothissupervisorthathehadextensiveexperiencewiththesurveyingsystembeingusedandexplaininghowthesurveycouldbeamended,quitesimply,toallowthecollectionofallrelevantresponses.Hisinputinthisregard,togetherwithhis‘non-compliant’surveyresponse,whichsimplyfailedtonominatewhichmergeroptionhesupported(sincehesupportedneither),wasdismissed.

Inviewoftheabove,thisentiresurveymustbedeemedtobestatisticallyinvalid.

5.2 WintonSurveyCommissionedbyPalerangCouncil

Bycomparison,PalerangCouncilcommissionedasurvey††,partoftheCouncil’sregularcommunityfeedbackprogram,thatwasbasedonastratifiedrandomsampleof1,100residentsanddidnotrestricttheresponsesthatcouldbeprovidedinavalidinterview.Thissurveyeffectivelyprovidedrespondentswithan‘undecided’optionoranopportunityforanopenresponsetoallquestions.

Thisisquiteclearlyafarmorevalidmeansofseekingouttruecommunityviewsthanlimitingresponsesor,worsestill,rejectingentiresurveyresponsesbecausetheydonotcomplywithsomepredefinedoutcome.

Theresultsofthissurveyrevealthatmorethanhalfoftherespondents(55%)wouldpreferthatPalerangremainasitis,whileonlyone-fifth(21%)indicatedapreferencetobepartofthemoreurbanstyledQueanbeyanCityCouncil.TheresponsestothequestionsrelatingtoamalgamationaresummarisedinFigure5-1andpresentedinmoredetailinTables5-1and5-2below.

†† 2015CommunitySurvey,conductedonbehalfofPalerangCouncilbyWintonSustainableResearch

Strategies,5July2015


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Figure5-1 PreferredCouncilArea‡‡

The2015Wintonsurveyalsoincludedseveralquestionsdesignedtogaugethecommunity’sbehaviourswithregardtosocialandeconomicdependenceonsurroundingareas.TheseresultsarepresentedinSection3above.

Table5-1 ViewsonAmalgamation

Q.GAsyoumayknow,theStateGovernmentisseekingtoamalgamatevariouscouncilsthroughoutNSW,andithasbeensuggestedthatPalerangCouncilbemergedwithQueanbeyanCityCouncil.Inyouropinion,should

PalerangCouncil:

Total%

Areaof

Braidwood Bungendore CaptainsFlat

Continueasanindependentcouncilinitsownright 54.8 62.7 51.2 57.1

AmalgamatewithQueanbeyanCouncil 20.5 17.3 20.9 28.6

AmalgamatewithGoulburnCouncil 8.6 9.3 9.3 0.0

AmalgamatewithYassValleyCouncil 0.4 0.0 0.6 0.0

AmalgamatewithsomeotherCouncil/s 1.4 1.3 1.1 4.8

BesplitupamongadjoiningCouncils 8.3 5.3 9.4 9.5

Unsure 6.0 4.0 7.6 0.0

Table5-2 ReasonsforResponses

n

Whycontinueasanindependentcouncilinitsownright[54.8%gavethisresponse] 600

Citycouncilwouldn’tunderstandruralneeds/chalkandcheese/mismatch 123

Currentcouncilgoodenough/anythingelseworse/ifitain’tbroke,don’ttrytofixit 99

Webecomejuniorpartner/losepriority/loseouridentity/fewerservices/poorcousin 89

Biggerisnotbetter/morebureaucratic/moreimpersonal/lessfriendly 71

Lesscontroloverwhorepresentsus/lossoflocalrepresentation 57

‡‡ Percentagesbasedontotalexpressingapreference(i.e.excluding‘unsure’responses)

55%

21%

9%16%

PreferredCouncilArea

Palerang

Queanbeyan

Goulburn

Other


April2016 Page43

n

Lessmoney/fewerservicesperhousehold/morewastedongrandioseprojects 56

Moreexpensive/higherrates 27

Wewouldinherittheirdebt/beworseoff 26

Alreadyamalgamatedfiveyearsagowithnegativeconsequences/don’trepeat 22

Majorlocaljoblosses/currentcouncilstaffwouldlosejobs 17

Othercouncilspoorlymanaged/notasgood/politicised 14

WhyamalgamatewithQueanbeyanCouncil[20.5%gavethisresponse] 225

Closesttous/ourarea/alreadyourmajorlocalcentre/weshopthereanyway 76

Queanbeyanmoreefficient/progressive/modern/bettermanaged/forwardthinking 45

WoulddomoreforusthanPalerang/moreresources 26

Wouldprovidemoreratesperhectareoverallsowebenefit/morefundsavailabletous 21

More/betterservices 15

BetterdealfortownsandvillagesotherthanBungendore/putBungendoreinitsplace 15

Easier/moreefficientlandzoningandcontrols 12

Reducedrates/prices/fees 8

MorelikeusthanGoulburn/moreconnections 7

WhyamalgamatewithGoulburnCouncil[8.6%gavethisresponse] 95

Ruralorientedlikeus/bettermatch/morecompatiblethanQueanbeyan 45

Goulburnwell-managed/efficient 15

Hassimilarhistory/heritagevalues 15

Wouldbemoregenerousthanothers/moremoney 11

Betterservices 9

WhyamalgamatewithYassValleyCouncil[0.4%gavethisresponse] 4

Yassisrurallikeus/Wehavemoreincommonwiththem/Lesslikelytoignoreus/strongervoice 4

WhyamalgamatewithsomeotherCouncil[1.4%gavethisresponse] 15

Eurobodallathemaincouncilmentioned,mainlybecauseitisasimilarcollectionoftowns 15

WhybesplitupamongadjoiningCouncils[8.3%gavethisresponse] 91

Paleranghasdisparatecommunities/previousamalgamationdidn’tworkasartificialmix/heterogeneous

41

Joinlikewithlikesothatalltownsandvillagesbenefitandnonegetignored 26

Shiretoobigasis/bettertoaddbitstonearbycouncilsratherthanaddwholeshiretoonecouncil

24

Whyunsure[6.0%gavethisresponse] 66

Insufficientinformation/advicetomakedecision 66

TheresultsofallofPalerangCouncilsurveys,conductedoverthepast10years,arepubliclyavailablefromboththeCouncilandothercommunitywebsitesand,unliketheIRISsurveyconductedonbehalfofQueanbeyanCityCouncil,nonehaveeverreceivedanynegativecommentaryrelatingtotheprocessemployed.


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6 RepresentationLegislativeCriterion(e)Therequirementsoftheareaconcernedinrelationtoelectedrepresentationforresidentsandratepayersatthelocallevel,thedesirableandappropriaterelationshipbetweenelectedrepresentativesandratepayersandresidentsandsuchothermattersasconsideredrelevantinrelationtothepastandfuturepatternsofelectedrepresentationforthatarea

6.1 EffectiveRepresentation

ThePalerangcommunityhasidentifiedlocalrepresentationasamajorissueinthepresentcase,whereitisbeingproposedthatageographicallylargeruralareawithrelativelylowpopulationbemergedwitharelativelysmallandfundamentallyurbanareawitharelativelyhighpopulation.

Ashasalreadybeennoted,asimplecalculationrevealsPalerangresidentswouldcompriseonly25%ofthepopulationoftheproposedmergedentity.Asaresult,thewholeofthePalerangareawouldhavethenumberstoelectjusttwolocalcouncillors[onanine-memberCouncil]atbest,maybethreeifthecardsfelltheirwayatelectiontime.ThiscouldhardlybeconsideredeffectiverepresentationforademographicgroupthathasverylittleincommonwiththepredominantlyurbanQueanbeyanpopulation.

Anylevelofeffectiverepresentationwouldthenbedependentonasharedcommunityofinterestwithsomeother,largersectorofthenewCouncilarea.Onceagain,however,ourcommunitysurveysreveallittleincommonbetweentheQueanbeyanareaandthemajorityofPalerangresidents.Evenso,withinexcessofa30-foldincreaseinarea,itwouldnotbeasimplematterforanyrepresentativebasedinQueanbeyantocoverthenewareabasedsimplyonthedistancesinvolved.

CommentsonthescaleandcapacityofanewCouncilareprovidedelsewhereinthissubmission,buttheyapplyequallytotheroleofcouncillorsinanynewCouncil.Ifindividualcouncillorsareobligedtotravelmuchlongerdistancestoapprisethemselvesandstayabreastofcommunityneeds,theircapacityforeffectiverepresentationcanonlybediminished.

Itisalsoperhapsimportanttoconsiderrecenthistoryhere.IntheamalgamationthatcreatedPalerang,theresidentsoftheformerTallagandaShirecomprisedonly25%ofthepopulationofthenewPalerangcouncilarea.Theirproportionaterepresentationatacommunitylevelwasreducedfrom100%toaround25%,effectivelyfromninecouncillorrepresentativestojustthree.Todaytheareaisrepresentedbyonlytwolocalresidents.

Wearenowlookingatasituationwherethislocalcommunitymightnotevenraterepresentationbyasingleresidentcouncillor.

6.2 OperatingModel

Thereisafurtherdimensiontothisproblemoflocalrepresentation.Asaruralcouncil,Palerangworkscloselywithcommunitymembersspreadacrossthe5,147km2areaof


April2016 Page45

thecurrentLGAthroughmorethan30Councilcommittees.Thisisbothanoperationalexercise,inthatthesecommitteesareinstrumentalinmanagingCouncilassetswithinruralcommunities,andpartofCouncil’scommunityliaisonresponsibilities.Thistaskissharedbetweentheninecouncillorswhoworkwithindividualcommunitieswithintheirgeneralgeographicarea.AnyreductioninthenumberofcouncillorsdrawnfromthePalerangareawillreduceratherthanenhancethecapacityofanynewCounciltoeffectivelyrepresentandservethesecommunities.

Thisfactdrawsattentiontoanothersimplegeographicrealitythatconstrainscapacityinthepresentcase.QueanbeyanislocatedatoneextremityoftheproposednewLGAwithoftencircuitousroutesrequiredtoreachallbuttheclosestPaleranglocalities(seemaponp.9above).Foraroundthree-quartersofthePalerangarea,thiswouldplacethemainCouncilofficesafurther25kmaway.ForservicesremovedfromtheBraidwoodoffice,theadditionaldistancewouldbe74km,andsomeresidentsaremorethan50kmfurtherawaythanthatfromBraidwood.

Therealityisthatcouncilsoperatingingeographicallylargeruralareasmustnecessarilyadoptadifferentoperatingmodeltoanurbancouncil.Asadirectconsequence,therearefeweropportunitiesfororganisationalconsolidationwhenattemptingtomergearuralcouncilwithanurbancouncil.Itmaybethatinsituationswherethereisamutualdependenceatoneleveloranother,acceptablecompromisescanbereached,butwherethereislittlesuchinterdependence,thereissimilarlylittlebenefittobederivedatanylevelfrommergingentities.Therealriskisthatthereisalossoffocusononeortheothersideofthebusiness,orworsestillboth,withdisastrousconsequences.

Allofthesefactorscontributetothatfactthat,whiletheproposednewCouncilwouldbebigger,thereisnoindicationthatanyincreaseinsizewouldleadtoanincreaseincapacity,ateitheranorganisationalorrepresentationallevel.Infact,thereisaverygoodcasetosuggestpreciselytheopposite.

6.3 Relationships

ThecurrentPalerangareacoversaround5,147km2witharelativelylowpopulationdensity.Ashasbeennotedelsewhereinthissubmission,56%ofitsworkforcetravelstotheACTeachday(seeSection3.1).Thesefactorshavecreatedchallengesforengagingwiththearea’sdiversecommunities,challengesthathavebeenmetbyanumberofspecificstrategies.

WithQueanbeyanlocatedinonecornerofthegeographicareacoveredbythepresentproposal,theabilityfortheorganisation,electedmembersandthecommunitytointeractwouldbecompromisedbythetravellingdistancesinvolved.

Thes.355committeesoperatedbyPalerangCouncilhelpbuildasolidbondbetweenCouncillors,theorganisationandthecommunitytheyserve.Councillors,whoarenotnecessarilyfromthearea,areseentobesupportingthebroaderPalerangcommunity.ThecommitteesalsoprovideaclearlineofcommunicationbetweencommunitymembersandtheCouncilthroughthedirectinvolvementofelectedmembersandthepresentationofallcommitteeminutesatordinaryCouncilmeetings.

Giventhattheoverwhelmingmajorityofcouncillorsinanine-memberCouncil,quiteapartfromtheindependentlyelectedMayor,wouldbeQueanbeyanbaseditisdifficult


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toseehowjustthecurrents.355committeescouldbesupportedatacouncillorlevelinamergedentity.Withoutthissupport,theproposalcurrentlybeingexaminedwouldshattertheserelationships,whicharesocriticalforsocialcohesionandwellbeing.


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7 Services&FacilitiesLegislativeCriterion(e1)Theimpactoftheproposalontheabilityofthecounciltoprovideadequate,equitableandappropriateservicesandfacilities

7.1 TheTyrannyofDistance

FormuchofthePalerangpopulation,underthepresentProposalthedistancetothemainoperationalcentreoftheareawouldincreasebyaround25km.Thiswillmakeitmoredifficultorlesseconomicaltodeliveranycentrallylocatedservicesthaniscurrentlythecase.

Table7-1includesthedistancesbetweenBraidwood,BungendoreandQueanbeyan,asanindicationoftheadditionaldistancethatwouldbeinvolvedforthemajorityofthePalerangarea.

Table7-1 TravellingDistances

Location Distance AdditionalDistance

BraidwoodtoBungendore(PCOffice) 49km

BraidwoodtoQueanbeyan(QCCOffice) 74km 25km

BungendoretoBungendore –

BungendoretoQueanbeyan(QCCOffice) 25km 25km

Itisgenerallyacceptedthatitisbothmorepracticalandeconomicaltodeliverservicesintomoredenselypopulatedareas.However,theProposalwouldincreasethelandareatobeservicedoutofQueanbeyanfromjust172km2to5,319km2,amorethan30-foldincrease.

QCCappearstobeunderthemisapprehensionthatitwillbeabletosimplyextenditscapabilitiesfromanareaofonly172km2,toanareawhichisthreetimeslargerthantheentireSydneymetropolitanarea.(TheSydneyMetropolitanareaisplannedtobeservicedaftertheproposedamalgamationsby25Councils).

Theadditionofasparselypopulatedruralareawouldfurtherdramaticallyreducethepopulationdensityaspreviouslynoted.Thisquiteclearlythencannotleadtoanyincreaseinefficiencyofservicedeliverysinceboththeareatobecoveredwillincreaseandthepopulationdensitywilldecrease.Rather,thepresentProposalwillsurelydiminishthenewCouncil’scapacitytosimplymaintainexistingservicelevels.

AsnotedaboveandrepeatedinTable7-2below,theservicesprovidedbyPalerangandQueanbeyanarequitedistinct.Assuch,therewillbelittleornoopportunitytoachieveanyeconomiesofscale.However,withtheoperatinglossasoutlinedinSection2,therewillbestrongpressuretoabsorbthePalerangservicedeliveryneedsintotheQCCstructure.Thiswillinvariablyleadtodeteriorationinthequalityofruralservicedelivery.


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ThishascertainlybeentheexperienceinQueenslandwhereill-consideredmergersofruralCouncilswithurbanCouncilshasresultedinadeteriorationinruralservicessuchasunsealedroadmaintenanceandweed/pestcontrol.

7.2 UrbanvsRuralServices

OnesignificantfactorthatappearstohavebeenoverlookedinthemergerProposalsinvolvingPalerangandQueanbeyanCityCouncilsisthedistinctnatureofthesetwoCouncils.Palerangisaruralcouncilthatdevelopedthecapacitytodeliverrelevantservicesintoitsruralcommunity,whileQueanbeyanCityisanessentiallyurbancouncilthatspecialisesinthedeliveryofquiteadifferentrangeofservices.

Forpurposesofcomparison,someoftheservicesofferedbythetwocouncilsarepresentedinTable7-2below.

Table7-2 CouncilServices

Service Palerang Queanbeyan

GravelRoads 62% 2%UrbanRoads 6% 71%RuralRoads 94% 29%RMSContract $8m($17min2016/17) $250kWater&SeweragePlants OperatedbyCouncil WateroperatedbyIcon

(formerlyACTEW)SeweroperatedbyCouncil

On-siteseweragemanagementsystems

Extensive Minimal

WasteCollection DayLabour(9protectedemployeepositions)

Contract

Parks&Gardens Minimal,withfewstaff Extensive,withsizeableworkforce

Weed/PestControl Extensive LimitedLibraries Alreadyamalgamated AlreadyamalgamatedPopulationDensity 27Hapercapita 0.4Hapercapita

Furthermore,thefollowingarelistsofsomeoftheskillsavailableandservicesdeliveredwithlocalresourceswithinPalerangthatarenotwidelyavailable,ornotavailableatallthroughQueanbeyanCityCouncil.

Engineering• AdvancedRoaddesign• Waterandsewerinfrastructuredesign• Structuralreinforcedconcretedesign• LatestGPSsurveyandmachinecontrolsystems• Roadconstructioncapabilitiestomultimillion$level(highways,largeculverts

andbridges)• Pipelayingcapabilities(watersewerdrainage)• Dedicatedmainroadsofficerforcontractinspectorialduties


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• Sewagepumpstationdesignandconstructioncapabilities• Highlevelwatertreatment/processexpertiseacrossawiderangeof

applications• Expertiseinruralroadconstructionandmaintenance• Unsealedroadmaintenance• Gravelresheeting• Telemetryinstallation,developmentandoperation• Roadsidewastemanagementcollection(ruralandurban)• Wastetransferstationconstructionandoperation• Saleyardsoperation• Watersupplyheadworksdesignandoperation(dams,offtakes,boresetc)• Stockcontrol(impounding)• Dedicatedsewercctvunit

RuralServices• RuralservicesmanagedfromBungendore

• Septictankoperation,monitoringandapprovals• Weedmanagement• ruralbushlandprograms

• Strongnoxiousweedmanagementprogram(around10timesQCC’sbudget),• RegionalweedmanagementasLeadAgencyfortheSouthEastWeeds

ActionProgram($20Mprogramoverfiveyears)• Weedmappingexpertise(WinneroftheNSWLocalGovernmentweed

managementawardtwiceinthelastthreeyears)• Innovativeuseofdronesforweedmapping,includingcontractingservices

tootheragencies• Developmentofinnovativeonlinetools(interactiveplantidentificationkey,

WeedSpottersportaldevelopedincollaborationwithACT,interactivemapsofweedinspectionprioritiesunderdevelopment)

• Advancedinspectionreportingsoftwaredevelopedin-housewithparticipationinBiosecurityInformationSystemstate-widetrialsandworkinggroup

• Leadingresearchintoweedcontrolbehaviourchangeprograms,includingastrialCouncilandregionforDPIroll-out;PalerangresearchprojectonGorseandcasualemployeeundertakingPhD

• AdvancedGeographicInformationSystemcapability,including• AdvancedArcGISlicencefacilitatingcomplexspatialanalysiscapability

(industry-leadingsoftwarenotusedbyQCC)• In-houseproductionofmandatorybushfirepronelandmaps(QCC

previouslyusedconsultants)• In-houseproductionofmandatoryLEPmapsacrosslargeruralareas


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• Captureandanalysisofultra-highresolutionaerialphotography(PalerangisthefirstandcurrentlyonlyCouncilinAustraliawithCASAcertificationtooperateunmannedaerialvehicles)forarangeofnaturalandbuiltassetmanagementapplicationsplusinnovativeweedinspectionandreporting/engagementcapacity

• In-houseproductionofinnovativenaturalresourcemanagementmaps,suchasnativevegetation,farmdamandwaterpollutionsources

• In-housedevelopmentofGISdatacapturesoftwareforarangeofapplicationssuchasweedinspections,nativevegetationtype/condition,on-sitesewagemanagementsystems,builtassets

• ActiveinvolvementinregionalStateoftheEnvironmentWorkingGroup,includingassessmentofapplicablespatialdatasets

• UseofunmannedaerialvehiclesforweedmappinginreservesandpotentiallynoxiousweedsurveysofprivatelandaswellasobtaininguptodateaerialphotographyofsmallareasforCouncilprojectsorinvestigations

• Wellestablishednoxiousweedsandon-siteseweragemanagementsystemsinspectionprograms

• Ruralstrategicplanningexpertise

Giventheareatobecovered,thedistancesinvolved,andQueanbeyan’slocationwithinthegeographicareaunderconsideration,itwouldmakelittlesensetoattempttomanagethedeliveryoftheseruralservicesfromQueanbeyan.This,however,wouldappeartobethenaturalcorollaryofanysuggestiontoreducestaffnumbersinBungendore.ItwouldalsoindicateafailuretoappreciatethedifferencebetweenthetwoCouncilsandthefactthatthereisalreadyverylittleoverlapinstafffunctions.

ThesuggestionbyQCCthatstaffpositionsinBungendorenotbepreservedalsocompletelyignoresthecontributionthatthecultureofanorganisationmakestoitsservicedeliverycapability.Thedevelopmentofasuccessfulandeffectiveservicedeliveryorganisationisnotjustamatterofcollectingtogetheragroupofindividuals,evenappropriatelyskilledindividuals,andassigningthematask.Trueexcellenceineffectiveservicedeliveryisverymuchmoreaboutorganisationalculturethanitisaboutsize.

7.3 ServiceDeliveryImpact

Ofcourse,theimpactofanychangeonservicedeliverywilldependontheservicebeingdelivered.Iftheserviceweregenerallydeliveredfromacentrallocation,anybenefitwouldclearlybelimitedduetotheincreaseddistancesinvolved.Iftheserviceweredeliveredlocally,therewouldbenofundamentalchangeandhence,onceagain,littlebenefit.

NothinginthepresentProposalidentifieshowservicelevelswouldorevencouldimproveundertheprevailingcircumstances,andthesignificantadditionaldistancetotheCouncilHeadOfficewouldadverselyimpactbothontheabilityofCounciltoprovideservices,andresidentstoavailthemselvesoftheseservices.

Anypotentialtoachieveeconomiesofscalewoulddiminishifmorestaffwererequiredtoaddresstheissueofdistance.Therewouldbeasimilarimpactifstafftimewerewastedtravellingtoaremotelocation.Sucheconomiescanonlybeachievedifservices


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canbedeliveredwithinanexistingspheretomoreresidentswithminimalincreaseincosts.SuchisclearlynotthecaseinthepresentProposal.

ItisalsoimportantinthiscontexttorecognisethereputationthatPalerangCouncilenjoyswithrespecttosomeoftheservicesitcurrentlydelivers.Thisisanothercasewherethereappearstobeanassumptionthatbothpartnersintheproposedrelationshipdeliver,orcouldeasilybeadaptedtodeliverthesamerangeofservices.AscanoftheservicesandcapabilitieslistedinSection7.2aboveshouldrevealthefollyofsuchanassumption.

Palerang,forexample,regularlywinsawardsfortheworkundertakenbyitsenvironmentalservicesdivision.Itwasrecentlyappointedastheleadagencyforthe$20millionSEWeedsActionProgram.Similarly,Palerang’sroadengineeringcrewiswidelyregardedasthebestintheregion,regularlybeingawardedRMScontracts.Thisisanoutstandingachievementanditisessentialthatitberecognisedthat,indissolvingthePalerangCouncilorganisation,evenjustindestroyingitscultureaswouldbeinevitableinamergerscenariowherestaffpositionswerenotprotected,thiscapabilitywouldbelost,tothedetrimentoftheentirePalerangcommunity.

TheindependentfinancialanalysisprovidedinSection2abovefurtherindicatesthatanewCouncilwouldhaveareducedfinancialcapacityandthusbeinnopositiontosupportthedeploymentofanyadditionalresourcesthatmightberequiredtomaintainexistingservicelevelsinanexpandedcouncilarea.

ThepotentiallackofelectoralrepresentationofthePalerangarea,asdiscussedinSection10below,willalsocompoundtheproblembysignificantlyreducingthelikelihoodofequitablerepresentationofrealcommunityneed.

Withconsiderationofthesefacts,itquicklybecomesapparentthat,ratherthanprovidinggreatercapacity,thepresentProposalwillinfactcripplethenewCouncilfromtheoutset.


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8 CouncilStaffLegislativeCriterion(e2)Theimpactoftheproposalontheemploymentofthestaffbythecouncil

AllPalerangstaffintheareaimpactedbythepresentProposalareemployedinruraltownswithpopulationsoffewerthan5,000andassuchthesepositionsareprotectedunderSection218CAoftheLocalGovernmentAct.TherelevantstaffnumbersandassociatedcostsarepresentedinTable8-1below.

Table8-1 StaffNumbersandCosts

FTEStaff AnnualCost

Bungendore 81 $7,100,000Braidwood 46 $3,644,145CaptainsFlat 2 $146,913Nerriga 1 $32,379

Total 130 $10,923,447

ThissituationwillhaveanimpactonanewCouncil’sabilitytofindefficienciesthroughstaffreductionswithinthecurrentPalerangarea.AnystaffreductionwouldneedtobefoundintheexistingQCCorganisationandthatinturnwouldimpactonanewCouncil’sabilitytosimplymaintainservicelevelsinthecurrentQCCarea,letaloneexpandservicecapabilitiestotakeinanynewarea.

However,weunderstandthatQCCislobbyingtohaveBungendoredeclaredasanurbantown,andnotsubjecttotheprotectionsunders218CA.TheyproposethattheBungendoreofficewouldbeshutdownandusedforanexpandedlibraryandRuralFireServiceoffice.TheQueanbeyanofficedoesnothavethecapacitytoabsorbthe82staffcurrentlylocatedinBungendore,andthiswouldbewheretheywouldintendtofindthe63.4FTEstaffsavingsidentifiedbutnotdocumentedbyLKS.Inotherwords,thereislikelytobealossofover60jobsinBungendore.WestronglycontendthatBungendoreiscurrentlydefinedasaruraltownforthepurposesofs218CA.However,QCCseemsdeterminedinitssubmissionstooverturnthissituationsothatitcandecimatetheBungendoreofficeandusethestaffsavingsforservicesinQueanbeyanandtoovercomeitspoorfinancialsituation.

Clearlythen,thepresentProposalwillhaveanegativeimpactontheemploymentofcouncilstaff,whichwillalsohaveflowoneffectswithinthewidercommunity.

8.1 PotentialtoConvertStafftoLowerPaidFrontLinePositions

Ofthe$22mpotentialsavingsclaimedbyKPMG,$16marefromreductioninemployeecosts.KPMGacknowledgesthatruralCouncilsmustmaintainstaffpositionsinruraltowns,butclaimthatsavingsarepossibleinconvertinghigherpaidmanagerialandcorporatepositionsintofrontlineservicedeliveryroles.Thisisphasedinover4years,butOrionmodellingshowsthatannualsavingsof$1.9mafteryear4wouldbeneededtocreatetheclaimed$16minsavings.


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However,thiscompletelyignoresthefactthatPaleranghasaleanstructurealreadywithafocusonfrontlineservicedelivery.

AnanalysisofthePalerangwagesstructureispresentedinTable8-2.

Table8-2 PotentialSavingsfromCorporate/ManagementStaffconvertedtoFrontLine

ActualAnnualSalaries SavingsPotential

OutdoorStaff(FrontLine) $5,396,281 Indoor–FrontLine $576,383 Indoor-Technical(espRural) $2,647,678 Indoor-Managerial 1,135,816 $425,044Indoor-Corporate $1,167,288 $126,697

Total $10,923,446 $551,741

ThedatapresentedinTable8.2showthatthemaximumpotentialsavingsfromconvertingcorporateandmanagementpositionstofrontlineservicedeliveryrolesaftera4yearperiodwouldbe$552,000peryear.ThiswouldbeinadditiontotheGeneralManager’srolewhichisaddressedelsewherebyKPMG,butamountsto$250,000peryearafterredundancycosts,notthe$6massumedbyKPMG.

ExamplesofPalerangstaffwhoprovideservicesnotprovidedbyQCCinclude:

Palerangcurrentlyhas10staff+contractorsinvolvedinweedmanagement,comprising:

• Coordinator~30%fteGrade24$101,000• ProjectOfficerx2Grade18$85,000• SnrWeedsOfficerGrade14$73,000• Weedsofficerx2Grade13$71,000• Weedcontrollerx3Grade5$49,000• ProjectOfficerGrade14casual• Multiplecontractors(weedcontrol,regionalweedsworkshopfacilitator)

Draftnoxiousweedsbudgetfor2016/17is$735,000,whichissignificantlygreaterthanQCCsbudgetforthisservice.

Resourcesfor2016/17draftbudgetincludeapproximately(includingoverlapwithweedsbudgetsabove):

• Coordinator~20%fteGrade24$101,000• SnrEnvironmentalOfficer~25%fteGrade14$73,000

Excludingoverlapwithweedsprogram:• Coordinator~5%fteGrade24$101,000• SnrEnvironmentalOfficer~10%fteGrade14$73,000

Queanbeyancurrentlyprovidesitswastecollectionservicewithcontractors,whereasthisisanin-houseserviceprovidedbyCouncilstaffinPalerang.QCCofficershave


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indicatedthatamergerofQueanbeyanandPalerangwouldresultinalloftheseservicesbeingprovidedbycontractwouldfurtherimpactonprojectedstafflevels.


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9 RuralCommunitiesLegislativeCriterion(e3) Theimpactoftheproposalonanyruralcommunitiesintheresultingarea;

GiventhatthePalerangLGAisentirelyruralinnature,anyimpactonPalerangresidentsisanimpactonaruralcommunity.ThemostunfortunateaspectofthepresentproposalisthatalltheimpactsonPalerangresidentsarenegative,ashavebeenexpandedoninotherSectionsofthissubmission.

Contrarytoclaimsmadeinthevariousproposals,independentanalysisindicatesthatanyformofmergerwillresultinanetfinanciallosstothenewentity.

GiventheimbalanceinpopulationbetweenPalerangandQueanbeyan,alossindemocraticrepresentationforPalerangcommunitiesisinevitable.

Giventhedifferentnatureofthetwoorganisations—PalerangCouncilbeingaruralCouncilandQueanbeyanCityCouncilbeinganurbanCouncil—thereisnoreasontobelievethattherewillbeanyimprovementinanyoftheservicesbeingdeliveredintoruralcommunities.Infact,thereiseveryreasontobelievethattherewillbeasteadydeclineinthestandardoftheseservices.ThecurrentQueanbeyanCityCouncilstructurehasnocapacitytodeliverthestyleofservicesrequiredbythePalerangcommunity.AnymaintenanceofcurrentservicelevelswillbeentirelydependentonthedegreetowhichthecurrentPalerangCouncilculturecanbeincorporatedintotheorganisationalstructureofthenewentity.UnfortunatelyforPalerangresidents,mergersinvariablyresultintheadoptionofthecultureofthedominantpartner,whichinthiscaseisQueanbeyanCityCouncil,attheexpenseofthatoftheminorpartner,whichinthiscaseisPalerangCouncil.

GiventhedistancesinvolvedthereisnoreasontobelievethatanyservicesdeliveredthroughanurbandeliverymodelinQueanbeyanwillbemoreaccessibleorrelevanttoPalerangresidents.

ThepresentProposalmustnecessarilyreducethefocusofanewCouncilonlocalruralissuesbythemerefactthatasignificantlylargermajorityofthepopulationwillbelocatedintheurbancentreofQueanbeyanandtheoperationsoftheQueanbeyanCityCouncilorganisationwouldlogicallyfocusontheareasmostlikelytomaximisereturnsonorganisationalinvestment.


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10 WardsLegislativeCriterion(e4) Thedesirability(orotherwise)ofdividingtheresultingareaorareasintowards

WardsaregenerallyseenasamechanismforguaranteeingalevelofrepresentationfromdifferentareaswithinaLocalGovernmentArea.Inthepresentcase,however,theywouldlikelyhavelittleimpactinthisregard.

TheentirePalerangarea,whetherornotawardsystemwasinplace,wouldcomprisearound25%§§ofthepopulationofthenewCouncil.Asaconsequence,thenewCouncilwouldbedominatedbytheinterestsoftheurbanpopulationofQueanbeyan.Assuch,wardswouldnothelptoimprovetherepresentationoftheruralsegmentofthecommunity.

Nonetheless,underathree-wardsystem,theonlyconfigurationpossiblewithanine-memberCouncilasproposed,withapopulationlessthanone-thirdthatofthenewcouncilareawouldnotevencompriseasinglewardinitsownright—eventhewardcontainingtheentirePalerangarea,wouldneedtoincludepartofthecurrentQueanbeyanareatosatisfytherequirementtoincludeonethirdofthepopulation.

Infact,itmaybearguedthat,withoutwards,arepresentativefromthePalerangareamightbeabletodrawsupportfromawiderconstituencyandthusbeinabetterpositiontobeelected.Itremainsaninescapablefact,however,thatnomatterwhatsystemwasinplace,Palerangresidentswouldhavelittlecontroloverpoliciesthatimpactedthem.

§§BasedonpopulationestimatesinthepresentProposal.


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11 DiversityLegislativeCriterion(e5)Theneedtoensurethattheopinionsofeachofthediversecommunitiesoftheresultingareaorareasareeffectivelyrepresented

Forthereasonsoutlinedelsewhereinthissubmission,duetothepopulationsinvolved,thisislargelynotpossibleatthecouncillorlevelunlessindividualPalerangcommunitiesshareviewswiththoseofthemorehighlypopulatedandthusdominanturbanareas.GivenourearlierdiscussiononthenatureofthePalerangdemographic,thisisunlikelytobethecase.

Simplybyvirtueofthesizeofthepopulationgroupsinvolvedthen,thepresentProposalcannotguaranteethattheopinionsofthePalerangcommunitiesinvolvedwouldbeeffectivelyrepresented.ThefactthatthereisnobroadercommunityofinterestthatembracestheimpactedpopulationsleadsoneonceagaintotheconclusionthatthepresentProposaldoesnotprotecttheinterestsofPalerangresidents.


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12 OtherFactorsLegislativeCriterion(f)Anyotherfactorsrelevanttotheprovisionofefficientandeffectivelocalgovernmentintheexistingandproposednewareas

12.1 OrganisationalCapacityandServiceDelivery

WehaveseenthatthefinancialbenefittoPalerangresidentsisminimalatbest,eveniftheycouldberealised.Thesortsofsavingsbeingforecastaresimplynotgoingtohaveanylongtermimpactoninfrastructurebacklogbecause,inthepresentcase,asisthecasewithmostruralcouncils,thisistheresultofthelongtermfailureoftheState’sfundingmodelforregionalinfrastructure.UntiltheStateaddressesthatfundingissue,anythingelsewillbeashorttermfixatbestthatwillnotresolvetheunderlyingfundingproblem.

Anyincreaseincapacity,therefore,wouldhavetocomethroughinternalefficiencies,andthisbringsustoanotherflawinaproposaltomergeageographicallylargeruralLGA,witharelativelysmallbutmoredenselypopulatedurbancouncil.

Itisgenerallyrecognisedthatefficienciesinservicedeliverycorrelatewellwithpopulationdensity—increasesinpopulationdensityleadtoimprovedefficienciesinservicedelivery.ButwhatthepresentproposalwouldhaveusbelieveisthatwewillgainefficienciesbymergingQueanbeyanCitywithasparselypopulatedruralarea30timesitssizeandwithapopulationdensity80timeslower.

ThereareproblemshereforbothpartiesinthisProposal.Mostnotably,however,inthecaseoftheQueanbeyanLGAweareproposingtosignificantlyreduceitsoverallpopulationdensity.Thelogicalconclusionthenisthatthiswillmakeitlesspracticalandmoredifficult,andhencemoreexpensive,todeliverservicesthroughoutthenewarea.

Manyissues,however,comeintoplayhere,notleastofallstaffingandtravellingdistances.Therecanbenoeconomiesofscaleifmorestaffarerequiredtoaddresstheissueofdistanceorstafftimeiswastedtravellingtoaremotelocation.Sucheconomiescanonlybeachievedifservicescanbedeliveredwithinanexistingspheretomoreresidentswithminimalincreaseincosts.Inthepresentsituation,thisisclearlynotthecase.

FromtheperspectiveofcurrentQueanbeyanresidents,therewouldcertainlybenoperceivedbenefitinbroadeningtheCouncil’soutlooktoembracetheneedsofruralresidents.TheseruralresidentsarenoteconomicallydependentonQueanbeyanatanylevel,andaswehavenoted,bringlittleeconomicbenefittoQueanbeyan.

FromtheperspectiveofPalerangresidents,mergingwithasignificantlylarger,urbancouncilmustnecessarilychangethefocusofthenewCounciltoamoreurbanoutlook.Thisistheonlywayanyeconomiesofscalecanbeachieved.

TherisktoPalerangresidentsthenisthatanewCouncilwouldhavelittleincentivetodoanythingmorethanincreasethelevelofservicesprovidedinitsurbancentre.Thismightbeacceptableforurbanresidents,butisofnobenefitwhatsoevertomost


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Palerangresidents.AshasbeennotedinSection3,CanberraistheprimaryexternalcentreofinterestandwillremaintheurbanfocalpointforthelargemajorityofPalerangresidentswhateverhappens.

TherealityisthatthosePalerangresidentswhoareintrueneedofimprovedservices,thosewhoareunabletoavailthemselvesofservicesinCanberra,willbetheoneswhosuffermostfromthisservicedegradation.IftheycannottraveltoCanberra,theycertainlywillnotbeabletotraveltoQueanbeyaneither.Theywillsimplyhavetogowithout.

ItisimportanttonoteagainatthispointthatboththePalerangandQueanbeyanCouncilorganisationshavebeenrecognisedbyIPARTinthiswholeprocessasbeingfinanciallyviable,‘financiallyfit’inthecurrentvernacular.Their‘notfit’statusarisespurelyandsimplybecausethetwocouncils,throughtheirownindependentassessmentefforts,determinedthat,contrarytotheMinister’sassertions,therewasnothingtobegainedbymerging.

Thetwoorganisations,however,areinfactfitfordifferentpurposes—oneisfitasaruralcouncil,theotherasanurbancouncil,andthefocusofeachisclearlyquitedifferent.

Oneisstructuredtodeliverrelevantservicesintoamoresparselypopulatedruralarea,andtheothertodeliverrelevantservicesintoamoredenselypopulatedurbanarea.Theessentialservicesaredifferentandthedeliverymodelisdifferent,sothereisverylittleduplicationofresources,andthuslittleopportunitytofurtherreducestaffinglevels.

Wearenottalkingabouttwoadjacentmetropolitancouncils,witheffectivelyidenticaloperationalcharacteristics.Wearedealingherewitharuralcouncilandanurbancouncil,andmoreoveraruralcouncilthathasnodependenceontheurbancouncilinquestion.

Assuch,mergingthetwoCouncilsinanyway,contrarytothefundamentalgoalofthiswholeexercise,willclearlyonlyhavethepotentialtodegradetheperformanceofboth.Thebiggerpartnermightmanagetoholditsground,butthatjustmeansthatthesmallerpartnerwillsuffermore.

EfficienciesthatcanbegainedinthepresentenvironmentthroughcollaborationorcooperationareeitheralreadybeingachievedthroughexistingarrangementsbetweenthetwoCouncils,orcanbemoreappropriatelyprovidedwithinthecontextoftheCanberraRegionJointOrganisationofcouncilstowhichwewillrefermoreinamoment.

ClearlythenamergeroffersnobenefitwithregardtoimprovingthecapacityofeitherCouncil,infactquitethecontrary.

12.2 StrategicPlanning

ThevariousmergerProposalsmakereferencetoimprovementsthatmightbemadeinstrategicplanning.Thebottomline,however,isthatifthestrategicplanningoreconomicdevelopmentisnotdirectedspecificallyintothePalerangarea,itwillbeoflittlebenefittoPalerangresidents,because,aswehaveseen,QueanbeyanissimplynotamajorfocusforthelargemajorityofPalerangresidentsforanythingmuchmorethan


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groceryshopping,whichinitselfwillreducewiththeopeningofamajorsupermarketinBungendorelaterthisyear.

AsnotedinSection3,ourresidentsurveysindicatethat:• TwiceasmanypeoplegointoCanberraforeducationalpurposesasgointo

Queanbeyan;• Aroundthreetimesasmanypeopledonon-supermarketshoppinginCanberra• MorethanfourtimesasmanypeopleseekhealthcareinCanberra• MorethanseventimesasmanypeopleseekentertainmentinCanberra

Asaconsequence,enhancingbusinessopportunitiesorservicedeliveryoptionsinQueanbeyanoffersverylittlebenefittoPalerangresidentsatall.

Ifwearetalkingaboutimprovingmoregeneral,regionalcapabilities,however,thenthereareperhapstwoissuesthatmustbeconsideredhere.First,howaretheregion’sinterestsandprioritiesmanagedinthecurrentenvironment,andsecond,howwilltheybebettermanagedasaresultoftheproposedchange.

Ataregionallevel,bothPalerangandQueanbeyanCouncilsbelongtotheCanberraRegionJointOrganisation(CBRJO).Underthisumbrella,bothworkcollaborativelywiththeACTgovernmentandothercouncilsintheregion.ThroughinitiativessuchastheCapitalRegionLivingcampaign,theCanberraRegionbrandingandpromotion,andjointmeetingswithStateandFederalMinisters,theCBRJOhasestablisheditselfasthevoiceoftheregion.NomergerorboundaryadjustmentinvolvingPalerangandQueanbeyanCouncilswouldchangeanythingatthislevel.

Atanimportantlevel,thestrengthofcouncilsinSENSWliesinacknowledgingtheinfluenceofCanberraandtheACTontheregion,addressingtheuniqueneedsoftheirrespectivecommunities,andworkingtogetherunderthebannerofregionalcooperationtoharnessthoseindividualbenefitsforthegoodofthebroaderregion.

ThepresentProposaldoesindeednotemembershipoftheCanberraRegionJointOrganisation(CBRJO),butfailstoacknowledgethatmost,ifnotallofthesupposedbenefitsofmergingarealreadybeingrealisedthroughPalerang’sandQueanbeyan’srespectiveinvolvementwiththisregionalorganisation.Theclaimthatamergerwillprovidethesebenefits‘withoutrelyingonvoluntarycollaboration’isanonsense,sinceitisproposedthatJointOrganisationmembershipwillindeedbecompulsory—notthatsuchanapproachhaseverbeennecessaryfortheCBRJOmembercouncilstocooperateandworktogetherconstructively.

IthasbeenthepositionofPalerangCouncilthroughouttheFitFortheFutureprocessthatworkingwithinaregionalJOprovidesthegreatestopportunitytobothsatisfytheuniquelocalgovernmentneedsofruralandurbanresidentsinourregionandprovideaviableinterfaceforhigherlevelsofgovernment,includingourneighboursintheACT.

Also,asnotedelsewhereinthissubmission,PalerangCouncilishighlyregardedasaregionalpartnerwithexternalagenciessuchasRMSandtheNSWDepartmentofEnvironment.Inthiscontext,PalerangCouncilprovidescapabilitiesthatarenotavailableinneighbouringCouncils.DissolvingthePalerangCouncilorganisationatanylevelwillseverelydiminishthesecapabilities,ifnotdestroythemaltogether,andthey


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willbelosttotheentireregion.InthecaseofRMScontracts,thereiseverypossibilitythatthesewouldbelosttolocalgovernmententirely.

Quitecontrary,therefore,totheclaimofbuildingamoreeffectivepartnerforotherlevelsofgovernment,thepresentProposalfailstorecognisethefinancialrealityfacingtheproposednewCouncil.ItcompletelyignoresthesignificantregionalbenefitsinretainingthePalerangCouncilorganisationanditsexistingcapabilities,andtheflow-onbenefitsofexistingstructureswithintheSENSWregion.


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13 DataAnalysis13.1 ReplicationofKPMGFigures

Thefollowingarethedataandassumptionsusedtomodelthefinancialdetailspresentedinthissubmission.ThemodelhasbeenverifiedbyreplicatingthefiguresprovidedbyKPMGandthenusedtoproduceamoreaccurateforecastofthefinancialconditionoftheproposedmergedentity.

13.1.1MaterialsandContracts

Table13-1 Assumptions:MaterialsandContracts

Materialsandcontractsexpenditure-savings KPMGAssumption ORIONModel

AssumedpercentageofpopulationtransferredtoQueanbeyan 100% 100%

Savingsappliedto100%ofPalerangbudgetforecast,100%ofQueanbeyanbudgetforecast

100%ofPalerangbudgetforecast,100%ofQueanbeyanbudgetforecast

AnnualbudgetgrowthbeyondCouncilforecast Notstated 1.9%

Efficiencysavings Upto3% 1.9%Scaleefficiency(howmanyofthebudgetitemscanachievesavings) 80% 80%

Phase-inofsavingsYear1&2:one-thirdYear3:two-thirdsYear4:fullsavings

Year1&2:one-thirdYear3:two-thirdsYear4:fullsavings

Discountrate(tocalculatetodaysvalueoffuturepayments) 9.50% 9.50%

Netpresentvalueofsavings

$4,743,885

1. Assuming1.9%annualgrowthinmaterialsandcontractsforbothPalerangandQueanbeyanbeyondQueanbeyan’sforecastingperiod(2023).Thisequalstheforecastlong-termpopulationgrowthratiosandwaschosenduetoQueanbeyanbudgetforecastusingfluctuatingannualgrowthratesmakingitdifficulttoapplytheirmethodologytotheforecastperiodbeyondtheofficialbudgetforecast.

2. Savingsareappliedto100%ofthePalerangbudgetformaterialsandcontractsreflectingthefullmergerscenario

3. SavingsareappliedinfulltotheQueanbeyanbudget

4. Agrossannualsavingsrateof1.9%isassumed

5. SavingsarephasedinasdetailedinKPMGfinancialevaluationassumptionspaper,with⅓savingsinyears1and2,⅔inyear3andfullsavingsbyyear4.

6. Thesavingsareonlyappliedto80%ofthecostsasperKPMGpaper7. Discountrateof9.5%*** *** LocalGovernmentReform,Mergerimpactsandanalysis,NSWGovernment,December2015(p.9)


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8. Netpresentvaluecalculationonsavingscashflow:Modellingoutcome:

Discountrate 9.50%

NPV $4,743,885

KPMGoutcome:$5m

13.1.2EmployeeBenefits

Table13-2 Assumptions:EmployeeBenefits

Salariesandwagesexpenditure-savings KPMGAssumption ORIONModel

AssumedpercentageofpopulationtransferredtoQueanbeyan 100% 100%

Savingsappliedto100%ofPalerangbudgetforecast,100%ofQueanbeyanbudgetforecast

100%ofPalerangbudgetforecast,100%ofQueanbeyanbudgetforecast

AnnualbudgetgrowthbeyondCouncilforecast Notstated 2.8%

Efficiencysavings(regionalcouncils) 3.7%to5.0% 3.7%forPalerang5.0%forQueanbeyan

Scaleefficiency(howmanyofthebudgetitemscanachievesavings) 100% 100%

Phase-inofsavings

Year1-3:VoluntaryattritionYear4andforward:

reducingbackofficeduplication

Year1-3:Voluntaryattrition(1.9%)

Year4andforward:assumedefficiencysavingsrate(3.7%&5.0%)

Discountrate(tocalculatetodaysvalueoffuturepayments) 9.50% 9.50%

Netpresentvalueofsavings

$15,562,804

9. Assuming2.3%annualgrowthinemployeebenefitsforbothPalerangandQueanbeyanbeyondQueanbeyan’sforecastingperiod(2023).ThisequalstheforecastsalaryincreaseusedbyKPMG.

10. Savingsareappliedto100%ofPalerangbudgetforemployeebenefitsreflectingthefullmergerscenario.

11. SavingsareappliedinfulltotheQueanbeyanbudget12.Assumed1.9%savingsineachofthefirstthreeyearstoaccountforthe“voluntary

attrition”outlinedinKPMGtechnicalpaper.The1.9%waschosenbecausethisistheannualrateofgrowthinpopulationandnaturalattritionimpliesnohiring,thereforeachievingefficienciesequaltopopulationgrowthrate.

13.Agrosssavingsrateof3.7%forPalerangand5.0%isassumedforQueanbeyanfrom2019(fourthyear),bothwithintherangesdetailedinKPMGtechnicalpaper

14.Discountrateof9.5%†††

††† LocalGovernmentReform,Mergerimpactsandanalysis,NSWGovernment,December2015(p.9)


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15.Netpresentvaluecalculationonsavingscashflow:Modellingoutcome

Discountrate 9.50%

NPV $15,562,804

KPMGoutcome:$16m

13.1.3Other

16. SavingsofoneGeneralManagerandtwoTier3staffat75%ofGMsalaryisassumedasperKPMGassumptions

17. 38weeksassumedforredundancypayments(KPMGmethodologypage7,"Council-reportedGMsalariesandanassumptionoftwo(2)tier3equivalentemployeesbeingmaderedundantat85percentoftheGM'swage".KPMGmethodologypage7,"Redundancypackagesentitlingtheseemployeesto38weekssalary".)AssumedGMsalary$260K

18. $380,000peryearplus2.3%annualsalaryincreaseisassumedassavingsfromlesscouncillors

13.2 StatisticalAnalysis

13.2.1Methodology

Forthepurposeofthisanalysis,timeseriesdatafromtheNewSouthWalesOfficeofLocalGovernment(OLG)wasused.ThemostrecentdatareleasedbyOLGisforthe2013/14financialyear.

EachcouncilisidentifiedbyOLGasbelongingtooneofthefollowingclassifications:• Metropolitan• MetropolitanFringe• RegionalTown/City• Rural• LargeRural

Duetosimilaritiesofthecouncilswithinsomeoftheseclassifications,wehavegrouped‘Metropolitan’and‘MetropolitanFringe’intoonegroupandtheremainingthreecategoriesintoasecondgroup.Wewillrefertothesegroupsas‘Metro’and‘Rural’inthediscussionthatfollows.

Councilsresponsiblefortheprovisionofwaterandsewerageserviceswillhaveadditionalspecialiststaffthatarenotrequiredbycouncilsthatdonotcarryresponsibilityfortheseservices.Asthiscoulddistorttheoutcomeofanystaffrelatedanalysis,thetwogroups(‘Metro’,‘Rural’)werefurtherdividedintothosethatprovidedwaterservicesandthosethatdidnot.

Thegroupsanalysedaretherefore:• Ruralprovidingwater(95councils)• Ruralnotprovidingwater(14councils)


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• Metroprovidingwater(3councils)• Metronotprovidingwater(40councils)

Goulburn,PalerangandQueanbeyanareallincludedinthegroup‘Ruralprovidingwater’.

13.2.2Analysis

Thecategory‘Metroprovidingwater’onlyhasasamplesizeofthree,whichisconsideredtoosmallforanyfurtheranalysis.AsthiscategoryisnotrelevanttothePalerangProposalsitdidnotreceiveanyfurtherattention.

Table13-3 AnalysisData

Ruralprovidingwater

Ruralw/owater

Metrow/owater

NumberofCouncils 95 14 40FTEper100capita 1.44 0.85 3.06Densitycapita/km2 13 166.4 2868Roadlengthper'000capita 215.3 93.6 3.8

Inlinewiththepropositionthatprovidingwaternecessarilyinvolveshigherstafflevels,itcanbeseenthatruralcouncilsprovidingwaterhaveanFTEper100capitaof1.44whileruralcouncilsnotprovidingwaterserviceshasanFTEof0.85.Incomparison,metrocouncilsnotprovidingwaterhaveanFTEper100capitaof3.06,morethandoublethatofruralcouncilsprovidingwater.

13.3 RegressionAnalysis

13.3.1StaffRatio–Ruralprovidingwater

AsimpleplotofFullTimeEquivalent(FTE)councilstaffagainstpopulationshows(Figure13-1)alinearrelationshipbetweenthetwoforruralcouncilsprovidingwaterservices.


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Figure13-1 PopulationvsFTEStaff(Ruralprovidingwater)

AregressionanalysiscanbeconductedtomeasurehowaccuratelypopulationlevelscanprovideanindicatorofthenumberofFTEstaffinagivencouncil.TheadjustedR-squareoftheregressionanalysiswas93%withastatisticalsignificance,meaningthattheregressionmodelfitsfor93%ofthedata.Goulburn,PalerangandQueanbeyanCouncilsallhaveratioshigherthantheregressionline,indicatingthattheyservicehigherpopulationnumbersperemployee(asignofefficiency).

Figure13-2 FTEper100CapitavsPopulation(Ruralprovidingwater)

PlottingthenumberofFTEsper100capitaagainstpopulationshowsadecreasingrelationship,withsomeeconomiesofscalesavingsbeingpossibleforcouncilswithalowpopulationandhighFTEper100capita.ThisgraphshowsFTEemployeesper

Goulburn

Palerang

Queanbeyan

-20,000

-

20,000

40,000

60,000

80,000

100,000

120,000

0 100 200 300 400 500 600 700 800

Popu

laio

n

FTEstaff

Populaiontostaff,Ruralprovidingwater

GoulburnPalerang Queanbeyan

0.000.501.001.502.002.503.003.504.004.50

- 20,000 40,000 60,000 80,000 100,000 120,000

FTEpe

r100capita

Populaion

FTEper100capitatopopulaion,RuralprovidingWater


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population,andisthereforetheinverseofthepreviousgraph.ThelowerFTEper100capitaisasignofefficiency.AsillustratedinFigure13-2,PalerangisinthelowerendofFTEsper100capita(belowGoulburnandsimilartoQueanbeyan),providinglimitedroomforstaffsavingsfromPalerangtoberealised.ItshouldbenotedthattheseFTEnumbersforPaleranginclude20FTEstaffworkingonRMScontracts.ThereforethePalerangstaffprovidingservicestothePalerangcommunitywouldbeevenlower.

13.3.2StaffRatio–Ruralnotprovidingwater

Figure13-3 PopulationvsFTEStaff(Ruralnotprovidingwater)

TheregressionanalysisforruralcouncilsnotprovidingwaterservicesproducedanadjustedR-squareof90%andcanbeconsideredagoodfit.

Figure13-4 FTEper100CapitavsPopulation(Ruralnotprovidingwater)

AdecliningFTEper100capitacanbeobservedasthepopulationincreasesforruralcouncilsnotprovidingwaterservices.AgainitcouldbearguedthatsomeeconomiesofscalewouldbepossibleforlowpopulationcouncilswithhighFTEper100capita.

-50,000

-

50,000

100,000

150,000

200,000

250,000

0 200 400 600 800 1000 1200 1400

Popu

laio

n

FTEstaff

Populaiontostaff,Ruralnotprovidingwaterservices

0.00

0.50

1.00

1.50

2.00

2.50

- 50,000 100,000 150,000 200,000 250,000

FTEpe

r100capita

Populaion

FTEper100capitatopopulaion,Ruralnotprovidingwatersevices


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13.3.3StaffRatio–Metronotprovidingwaterservices

Figure13-5 PopulationvsFTEStaff(Metronotprovidingwater)

CouncilsinthiscategoryalsohaveastrongfitforthepopulationtoFTEstaffrelationship.AdjustedR-squareforthisgroupis88%.

Figure13-6 FTEper100CapitavsPopulation(Metronotprovidingwater)

The‘Metronotprovidingwater’groupalsoshowsadecreasingrelationshipbetweenFTEper100capitaandpopulation.Ingeneral,MetrocouncilstendtohaveahigherFTEper100capita,mostlikelyduetoadditionalservicesbeingprovidedtotheurbanpopulationthatarenotbeingprovidedbyruralcouncils.

13.3.4Conclusion

Accordingtotheoutcomesoftheregressionanalysis,populationisagoodindicationoftheFTEstafflevelthatmightbeexpectedforallofthecouncilgroupingsinvestigated.Forallgroupings,thereseemstobeadecreasingrelationshipbetweenFTEper100

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

0 200 400 600 800 1000 1200 1400 1600 1800 2000

Popu

laio

n

FTEstaff

Populaiontostaff,Metronotprovidingwater

0.00

5.00

10.00

15.00

20.00

- 50,000 100,000 150,000 200,000 250,000 300,000 350,000

FTEpe

r100capita

Populaion

FTEper100capitatopopulaion,Metronotprovidingwater


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capitaandpopulation,withlowpopulationcouncilsgenerallyhavingahigherFTEper100capitathanlargerCouncils.However,somecouncils(likePalerang)alreadyhavealowFTEper100capitacomparedtothesizeofitspopulation.Savingsonstaffrelatedexpenditurearethereforelesslikelytoberealised.

13.4 OperatingExpenditureRegressionAnalysis

13.4.1Methodology

ThisanalysisinvestigatesthepropositionthatthesizeofacouncilandthenumberofFTEsaregoodpredictorsfortheongoingoperatingexpenditureforacouncil.

IdeallythegrouptowhichGoulburn,PalerangandQueanbeyanbelongwouldbecomparedtoMetrocouncilsprovidingwaterservices.Aspreviouslydiscussed,however,thesamplesizeforthelatteristoosmall.ComparisonwithMetrocouncilsnotprovidingwaterservicesisthereforethesecondbestoption.

13.4.2Analysis

Aregressionanalysisusingpopulation,roadlengthandFTEsasvariablestoestimatetheoperatingexpenditureofcouncilsprovidedtheoutcomepresentedinTable13-4.

Table13-4 OperatingExpenditureRegressionOutcome

Rural

providingwaterMetro

notprovidingwater

AdjustedR-square 97.9% 95.0%Statisticallysignificant?

Population Yes NoRoadlength Yes NoFTEs Yes Yes

Aspreviouslydemonstrated,FTEandpopulationarecloselyrelatedforbothRuralandMetrocouncils,howeverinthiscaseaddingpopulationtotheregressionanalysisprovidesmoreaccuratepredictionsthanwhenleavingitoutforruralcouncils.

Forruralcouncilsthesizeofthepopulation,totalroadlengthandnumberofFTEsareallstatisticallysignificantindeterminingtheoperatingexpenditureofacouncil.ForMetrocouncilsonlytheFTEswerestatisticallysignificantinpredictingcounciloperatingexpenditure.

Withanaverageroadlengthper1,000capitaof215kmforruralcouncilscomparedto3.8kmper1,000capitaforMetrocouncils,itisnosurprisethatroadlengthisstatisticallysignificantinexplainingtheoperatingexpenditureofruralcouncils.

AsillustratedinFigure13-7below,thereissomeevidencethatdiseconomiesofscaleexistintherelationshipbetweenroadlengthanddensitypercapitaforruralcouncils.Councilswithalowdensitytendtohavemorekilometresofroadspercapitathanhigh-densitycouncils.SmallerCouncilsthereforehavelargerresponsibilitywhenitcomestoroadmaintenance.


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Figure13-7 PopulationDensityandRoadLength

ThehigherrelianceonFTEforMetrocouldbeanindicationofmetrocouncilsprovidingadditionalservicesthatrequirehighlevelsoffrontlinestaff.ThisisalsoconfirmedbycomparingthelevelofFTEs,withtheMetrocouncilshavinganaverageof3.06FTEsper100capita,morethandoublethatofRuralcouncilsat1.44FTEsper100capita.

Table13-5 OperatingExpenditureRegressionOutcome

Rural

providingwater

99.0%AdjustedR-square 97.9%Statisticallysignificant?

Population YesRoadlength YesFTEs Yes

Theregressionresults(withtheparameterssummarisedinTable13.5)indicatethatPaleranghasoperatingexpenditurewhichis$360,832lessthanwhatispredictedbythemodel,indicatingthatCouncilisoperatingmoreefficientlythantheothercouncilsinthesample.Similarly,Queanbeyanoperatingexpenditureisbelowthepredictedoperatingexpenditureby$1,046,087.

Combined,thetwocouncils(P&Q)areoperatingat$1.5mbelowtheoperatingexpendituretheregressionanalysispredicted.

Palerangcurrentlyhave119FullTimeEquivalent(FTE)staff,equatingto0.78staffper100capita.ThisiswellbelowtheFTEaverageforLargeRuralCouncilswithpopulationbetween10,000and20,000whichis1.12FTE.IfPalerangwastooperatewiththesamelevelofFTEspercapitaastheaverageCounciltheirsize,Palerangwouldhavetoaddanadditional53FTEs.

TheimplicationofthisanalysisisthatifamergedCouncilbecomesagenericserviceprovideroperatingasanaverageCouncil,operatingcostswillreverttotheaverageandincreasebyaround$1.5m.

R²=0.72123

-100200300400500600700800900

0 2 4 6 8 10 12 14

Roadlengthper'000capita

(m)

Density(capita/km2)

PopulaionDensityandRoadLength(RuralCouncils)


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13.4.3Conclusion

TheregressionanalysisindicatesthattheunderlyingcostdriversforRuralandMetrocouncilsaredifferent.TheassumptionthatefficiencysavingscanbederivedfromthesamecostdriversforbothRuralandMetrocouncilsseemstobeguidedbyapoorappreciationforthedifferenceinunderlyingcostsapplicabletothetwodifferentgroups.

ThisanalysisthereforeindicatesthattheonlystatisticallysignificantvariableinpredictingtheoperatingexpenditureofMetrocouncilsinthepresentcontextisthenumberofFTEstaff,whiletheoperatingexpenditureforRuralcouncilsisalsocloselyrelatedtotheirpopulationandthelengthofroadforwhichtheyareresponsible.

13.5 FinancialAssistanceGrants

FinancialAssistanceGrants(FAGs)actuallycomprisetwocomponents—theGeneralPurposeGrant(GPG)andtheIdentifiedRoadsGrant(IRG).TheGPGisdistributedonacomplexformulathatisheavilydependentonpopulation,whiletheIRGisdependentonthelengthoflocalroadsinagivenLGA.

ThetotalFAGcanthereforebeestimatedusingamultipleregressionformulathatincludespopulationandroadlengthasvariables.

TheresultsofaregressionanalysisoftheOLGdatafor2015–16arepresentedinTable13-6below.

Table13-6 FAGRegressionOutcome

AdjustedR-square 92.50% Lower

95%Estimate Upper

95%Populationvariable $56.42 $63.32 $70.21Roadvariable(km) $2,285.31 $2,513.32 $2,741.32

The2015-16FAGcanthusbeestimatedforanygivencouncilusingfiguresof$63.32percapitaand$2,513.32perkilometreofroad.Ona95%confidenceinterval,the‘lower95%’and‘upper95%’valuescanbeusedtoestimatetherangeoftheFAG.


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14 AcknowledgementsThissubmissionwaspreparedwiththeassistanceofDavidSpearritt,DirectorORIONConsultingNetwork(Email:[email protected]:www.ORIONco.net).

MrSpearritthas38yearsLocalGovernmentexperienceandnearly25yearsexperienceinCouncilboundariesandamalgamations.HeworkedatBrisbaneCityCouncil(Australia’slargestCouncilandonceanamalgamationof20Councils)for15yearsincludingDirector,PolicyandCoordination,andDirectorofTreasury.

HeisformerlyDeputyLocalGovernmentCommissionerinQueensland,andmanagedthereviewsthatledtothe1990’samalgamationsaroundCairns,Mackay,GoldCoast,Ipswich,Cooloola(Gympie)andWarwick.Healsopreparedtheguidelinesontheapportionmentofassetsandliabilitiesassociatedwithboundarychanges.

Followingthe1995IpswichCity/MoretonShiremerger(135,000population),hewasappointedFinanceDirector/CFOwithIpswichCityCouncilandledreformstoachieveamalgamationsavings,reducingcorporateoverheadsbyover20%.HealsomanagedmajorboundaryreviewsandadjustmentswithneighbouringCouncils.(Thisparticularlyrelatedtoruralandruralresidentialcommunities,whichpreferredtotransfertoruralCouncilsratherthantheurbanfocussedIpswichCouncil).

MrSpearrittwasappointedIndependentReviewFacilitatorfor5Councilregionscovering24Councils,duringtheSize,ShapeSustainabilityreviewsfrom2005to2007.HepreparedsubmissionstotheLocalGovernmentReformCommission(2007)onbehalfoftheLocalGovernmentAssociationofQueenslandandnumerousCouncils.

TheQueenslandGovernmentengagedMrSpearritttodevelopthedraftguidelinesontheallocationofassets,liabilitiesandstaffinvolvedinsplitCouncilsinthese2007reforms,andpreparedtheproposedallocationforthesplitofTaroomShire.

Sincethe2007QueenslandLocalGovernmentreforms,hehasassistedawiderangeofCouncilsinimplementingthemergersandboundarychanges,andachievingoperationalsavings.Healsopreparedsubmissionsforde-amalgamationofill-conceivedCouncilamalgamations,andconductedtheduediligenceontheassetsplitfortheNoosa,TablelandsandLivingstonede-amalgamations.

ThestatisticalanalysispresentedinSection13waspreparedbyThomasBidstrup,Economist&SeniorConsultant,ORIONConsultingNetwork.

PalerangCouncilalsoacknowledgestheassistanceofQueanbeyanCityCouncilandtheirwillingnesstosharetheirdataandtimeduringthedevelopmentofthissubmission.

Finally,MrTurner,Councilwouldliketothankyoufortakingthetimetoreadthesubmissiontothispointandforthespiritinwhichyouhaveundertakenthisinquiry.

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