Introduction:

Dungog Shire Councils first preference is to stand alone. Council has previously been part of merger proposals with Gloucester and Maitland Councils.

The Minister for Local Government upon receipt of reports from the Delegate and Boundaries Commission in relation to the Dungog – Gloucester accepted the recommendations that this proposal not proceed.

In relation to the Dungog – Maitland merger the Minister for Local Government is in receipt of the Delegates report and the Boundaries Commission report which endorsed the merger of Dungog and Maitland Councils, however the Minister has deferred a decision in relation to this matter to enable the merger proposal to merge with Council to be considered.

In response to the merger proposal document as submitted by Port Stephens Council and the hearings conducted by yourself as part of the merger inquiry process Dungog Shire Council will respond to the heads of consideration and also to some of the comments that are within the merger proposal document or made by members of the public at the hearings.

Heads of Consideration

Sec 263(3)(a) Financial advantages or disadvantages

Background Comments:

The total estimated output of the Dungog Shires economy is estimated at $563Mil., from a local economy perspective the latest figures (2015) identify that the gross revenue that is generated by businesses and organisations in Dungog Shire is agriculture accounting for 16.6% or $93.266Mil1.

The next industry sector is rental, hiring & real estate services at $78.6Mil or 14%. What the statistics don’t tell us is the one resource that is exported daily from the Shire and that is the value of water.

With 1618km2 of the Shire within a drinking water catchment, the drinking water catchment limitations impede economic development across a number of spheres for example agriculture as many intensification activities are problematic from a developer perspective.

The Dungog LGA which was involved in the now defunct Tillegra Dam saga for years, is witnessing a very slow recovery as some 6,000Ha was effectively sterilised through numerous property acquisitions by Hunter Water. There has been no major agricultural activity or investment occurring on much of the land since November 2006 and in some circumstances much earlier. Hunter Water in late 2015 sold their land holdings to six buyers, there is hope that investment in the lands moving forward will benefit the local economy into the future.

1 REMPLAN Economic Profile Dungog Shire. www.economicprofile.com.au/Dungog (output Dungog)

1 | Page Business case comments:

The business case analysis as undertaken by MorrisonLow on behalf of Port Stephens Council still shows that this merger will come at a cost to the communities of both LGA’s despite government financial support.

The analysis identifies that the Net Present Value using a discount rate of 9.5% results in a negative NPV of $2.4Mil over 9 years and extrapolated out to 20 years the figure is $12.2Mil, which Port Stephens emphasises is less than both of the other two merger proposals of Dungog/Maitland, Port Stephens/Newcastle.

Irrespective of the financial modelling utilised it is only as good as the foundation stones upon which it is developed, whilst the utilisation of Councils annual financial reports and 10 year financial plans provide the basis upon which to build the model. The reality is that within the local government industry various elements can influence future financial modelling.

In the cases utilised Dungog Shire Council has now a series of changes that need to be made to our forward financial projections particularly in relation to our financial position as it is continuing to evolve in light of “un-funded natural disaster renewal and recovery arrangements” with no decisions in relation to several elements of the Councils claim for which monies have been expended. Secondly the recent financial grants $10Mil committed to the Dungog LGA for the regional road network, which in both instances are not included in the financial modelling of this Council’s operations.

The business modelling as provided by the NSW Government on 21 June 2016 that has been undertaken by KPMG highlights a net financial saving of $17Mil over 20 years. The projected service savings are predominantly related to staff reductions $4.1Mil, and redeployment of staff into other service functions $12.8Mil. However as stated previously without the right foundations upon which to base the model, the Council has not formed a view as to the accuracy or reliability of the business modelling undertaken by KPMG.

The MorrisonLow model like the KPMG model has not been through a rigorous review by Council officers, we provided input into the Dungog/Maitland merger but have not undertaken any desktop assessment this time around with MorrisonLow. The assumptions are based upon their work and the body of evidence in respect of merger costs with input from Port Stephens Council only.

A ratepayer perspective:

The Port Stephens Council merger proposal for the majority of Dungog Shire Council ratepayers is the most affordable outcome if you are comparing Dungog to Maitland & Port Stephens Council. However within either comparison it is evident that the business rating category in Dungog Shire is structured well below that of our neighbouring Councils and the most significant financial impact would be within the business community of Dungog Shire.

A copy of the comparisons between Dungog/Port Stephens & Maitland Councils 2015/2016 rating structures outlines the impact based upon relevant land value ranges of the various rating categories and sub-categories of the Dungog LGA. This was included in the presentation handed to you on 8th June 2016 and is detailed below:

2 | Page Rating Comparative Dungog/Port Stephens/Maitland

$1,758.78 Business Dungog LV $90,000 $2,189.67 $798.58

$2,715.65 Farmland LV $500,000 $2,040.50 $1,728.65

$2,086.95 Maitland Rural Res LV $325,000 $1,448.48 Port Stephens $1,149.90 Dungog

$657.86 Village Res $619.64 LV $80,000 $454.55

$829.88 Residential Dungog LV $90,000 $653.47 $603.53

$0.00 $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 $3,000.00 As mentioned at the hearing in Dungog depending upon what rating category and the land value of the property the impact will differ, however if the new entity could equalise the rating structures by applying the current Port Stephens rate structure to the land values of Dungog Shire Council this results in an increase of 28.95% to the total yield of Dungog Shire Council.

This would yield an additional $1.5Mil however it is not sufficient to fund the required asset renewals and address the infrastructure backlog of Dungog Shire Council with an additional $3.4Mil still required annually to address the asset renewals.

Obviously the NSW Government is looking to assess the future financial impact of mergers upon communities which is the basis behind the four year rate-peg moratorium. However, the future impact within the Dungog LGA in relation to the residential categories needs to be carefully assessed.

The Office of Local Government Comparative performance indicators 2013/14 reveal that the average residential rate in Dungog Shire is $745.00 whereas Port Stephens is $908.56 and Maitlands’ $980.39. However there is a need to analyse more closely the residential rating composition for Dungog Shire amongst the various residential sub-categories.

Council has previously argued with the OLG as regards this misinformation, the largest residential assessment pool for Dungog Shire Council is the rural residential/lifestyle blocks the following chart reflects the growth in rates assessments.

3 | Page Residential Rates Assessment No's Sub Categories 2,000 1,800 1,600 1,400 1,200 Numbers

Rural Residential 1,000 Dungog Res 800 600 C/Town Res

Assessment 400 Village Res 200 ‐ 2001/02 2002/03 2005/06 2009/10 2012/13 2014/15 2015/16 Financial Years

The following graph represents the Councils position in terms of land values across the residential rating category.

Land Values Residential Category

$600,000,000

$500,000,000 Rural Residential $400,000,000 Dungog $300,000,000 Clarence Town

$200,000,000 Village

$100,000,000

$0 As a consequence of this enormous gap between rural residential and the other 3 residential sub-categories the overall residential rates yield is significant as regards the level of distortion. With the urban areas rates ranging between $108 to $200 below the reported average, whereas the average rural residential rate is $264 above the average residential rate reported for Dungog Shire Council.

No. Calculated Rate Rate Sub category Land Value Range Average LV Assessments on average LV Residential Village $31,900 to $489,000 348 $117,920 $549.54

Residential Clarence Town $34,300 to $284,000 334 $111,069 $632.77

Residential Dungog $20,075 to $625,000 941 $97,515 $642.47

Residential (Rural) $4,850 to $1,335,000 1,863 $271,500 $1,014.22

4 | Page As previously mentioned in the event of a merger there will need to be a serious review of the service levels that the new entity would be proposing and an appropriate revenue strategy developed in relation to such which would include a dialogue with the community.

The service levels will take time to resolve as will the engagement with the community on service level expectations and their willingness to pay for higher service levels than previously afforded. With the rural economy playing such a major role within the Dungog LGA decisions will also have to take into consideration the impacts rate increases will have on rural communities.

Councils Improvement Plan highlighted that general rates would have to increase by 13% p.a for 6 years (108% cumulative rate-peg limit inclusive) to meet the Governments benchmarks. In light of the natural disaster event of 21 April 2015 Council officers had no time to undertake any engagement process in respect of this matter. Councils consultants at that time were reliant upon additional information in relation to the Councils asset management plans which was delayed as the executive manager infrastructure & assets was extensively involved in the natural disaster event.

The funds raised by the special rate variation would have been applied back into the renewal of infrastructure with Councils asset management plans identifying that an additional $4.9Mil was required annually to meet the infrastructure renewal requirements of the Council going forward.

The ongoing deferral of renewal works in relation to road infrastructure and the consequence of the State Governments Regional Road cost shifting have placed this Council in a maintenance spiral.

Whilst the Council has upgraded a component of the regional road network in recent years from special grant funds there will be a need to ensure the protection of this asset into the future with appropriate asset management strategies and intervention levels so as to prevent those upgraded road segments reverting back to its once deplorable condition.

Accordingly this would support the Dungog Shire Councils stance that the four year rating moratorium should not be part of this merger proposal.

Financial Elements – Procurement/Purchasing/Services

The distance between the principal centres would pose a series of challenges from a management perspective let alone a cost efficiency perspective. Councils other major outlay annually relates to plant hire as the Councils heavy fleet operation is minimal, with annual tenders called for plant hire both wet & dry, hourly rates are provided from a pool of some 30 odd companies.

The likelihood of generating any savings/economies from a combined fleet would have to be discounted in view of Dungog Shires fleet operation which is relatively small, this is aside from the distances between depots. Port Stephens Council depot at and Dungog some 56Km’s away, with large components of infrastructure further away.

Furthermore the likelihood of achieving the level of savings from combined purchasing as highlighted within the KPMG analysis is negligible in view of both Councils involvement with Hunter Councils for regional procurement, aside from other purchasing networks that are accessible to Councils.

5 | Page Whilst there may be a synthesising of a number of roles over time there will need to be adjustments as regards services provided and that could threaten some external NGO’s that work within the Dungog LGA now.

Financial Element - Staffing

From an employment cost perspective Port Stephens 2014/15 costs were $41.7Mil (419 staff) equates to $99,489 per employee, compared to the employee costs of Dungog Shire being $5.1Mil (65 staff) equates to $78,923.

In the context of economies/diseconomies of scale there will obviously be duplication of some roles however there are certain gaps in an organisational context within Dungog Shire Council (e.g. no human resources staff, no safety officer etc.) which as a consequence of any merger, highlights the potential for additional resources being required at commencement of the new entity. Otherwise the additional load may fall upon some Council personnel in respect of having an extra 65 staff to administer coupled with an extra 9,000 residents to service.

There will be the need for wage harmonisation to be undertaken, which based on the above figures indicates a degree of disparity. Dungog with limited funds over the years has had to compete with the attractions of neighbouring Councils and has not been able to keep pace with the wages growth of neighbouring Councils. This could result in a “trade-off” between parties as regards conditions of employment etc. The MorrisonLow business case estimates this figure at $800,000 which ultimately is borne by the community.

Port Stephens Council which has undertaken extensive service reviews across the organisation as part of their business improvement process may suddenly find that as a consequence of the merger diseconomies of scale emerge as a consequence of having to maintain the service levels which their community currently experiences into the future coupled with the legacy costs that this merger will incur particularly in relation to employment protection.

Financial Risk

In relation to the Financial Assistance Grant2, there is a difference between the 2 LGA’s to the extent of $83 per resident between Port Stephens & Dungog Shire. Should the merger proceed there is a potential funding loss of approximately $754,000 p.a for the merged entity.

Council has already commenced Class IV proceedings in the L&E Court in relation to Martins Creek Quarry, this is likely to be a protracted court case and significant costs are involved in this case a merger with any Council will see the new entity inherit this financial risk as the matter has to be resolved.

The Council has a number of redundant landfills that require remediation into the future coupled with a number of gravel quarry sites that will need rehabilitation, the financial impacts of these matters is not included within the Councils forward financial plans.

Councils Sec 94 plan and the commitments to the new Council as regards the Councils contribution towards forward works will be a significant liability in the future. The current Plan

2 NSW Grants Commission whttp://www.olg.nsw.gov.au/commissions‐and‐tribunals/grants‐ commission/grants‐resources Table of Financial Assistance Grants to NSW Local Governing Bodies 1991/92 – 2015/2016

6 | Page was based upon more than ambitious population forecasts and the plan is very extensive as regards future community assets.

Sec 263(3)(b) The community of interest and geographic cohesion in the existing areas and in any proposed new area:

The challenge is to define what is the community of interest/or what are the communities of interest and then the correlation to geographic cohesion.

Both LGA’s are part of the broader NSW Planning context of the , with Port Stephens being extensively included in lower Hunter planning documents, whereas Dungog Shire has in the past been included within the Upper Hunter planning framework and strategic projects such as the Upper Hunter Land Use Strategy and the Upper Hunter Economic Diversification Strategy.

Background:

Dungog township is the principal centre in terms of regional infrastructure within the Dungog LGA with facilities such as the local hospital, aged care facility, High School, however there are several other distinct communities in the Shire, Gresford, Clarence Town & Paterson with different services available in each community.

From an urban hierarchy perspective the urban centres of the Dungog LGA would be defined as lower order urban centres. Meaning that they provide a limited range of goods and services to local residents and surrounding rural areas.

The proximity of the Dungog LGA to the lower Hunter labour markets and retail centres was highlighted in the 2004 report3 on the economic leakage from the Shire prepared by the University of Newcastle. With studies showing that between 55% and 60% of spending by Dungog Shire households leaks from the Dungog Shire.

With the current $380Mil retail expansion underway at Greenhills (East Maitland) which will see major retailers establish in the area as opposed to the major shopping precincts of Charlestown or Kotara. In the context of current economic leakage with the growth in the southern areas of the Shire the leakage rate would probably be higher than previously assessed by the Newcastle University.

3 Strategic Connections: Economic Flows and Industrial Development in Dungog Shire. Produced by Centre for Urban and Regional Studies, University of Newcastle 28 January 2005.

7 | Page Dungog Shire is a net exporter of jobs, i.e the data provided by REMPLAN4 extracted from 2011 census statistics identifies that there are 2064 local jobs of which 1635 are filled by local residents. The census identifies that 3721 residents are employed accordingly 56% of these people leave the Shire for work everyday, the majority (67%)of whom work in the lower Hunter LGA’s of Maitland (480), Newcastle (422), Lake Macquarie (71), Cessnock (57) & Port Stephens (337).

Accordingly the KPMG financial analysis report as provided to Council on 21 June 2016 is incorrect as it is quoting 3,721 local jobs.

Geographic Cohesion:

i.) Regional Perspective

We are neighbouring LGA’s depicted within the relevant documentation, Port Stephens Council has utilised the environment as evidence of the geographic cohesion. The two main river systems of the Dungog LGA being the Paterson and Williams rivers flow from within the Dungog LGA into Port Stephens LGA.

The mapping on Page 6 of the merger proposal document virtually has the entire Dungog LGA in an environmentally sensitive areas which is not correct, as Dungog Shire Council does not have an environmentally sensitive layer in our LEP mapping. The drinking water catchment does not encapsulate 95% of the Shire as depicted in the map.

If we remove the geo-political boundaries both areas are part of the much larger Hunter region. If we look at geographic cohesion and communities of interest from a regional perspective and then narrow down the comparisons and elements of the linkages should become more evident.

Professor Dollery in his various works has rejected the notion of boundaries defined from an environmental perspective, to quote “we are neglecting the sociological and economic communities of interest if it is limited to an environmental linkage.”5 Port Stephens Council in the merger proposal document has concentrated on the environmental element.

Transport

There is no public transport linkage from the Dungog LGA to Port Stephens centres of population.

The transport links between Dungog and Raymond Terrace are limited to the road transport network only, through the utilisation of a regional road known as MR301, the road also traverses through Clarence Town. Traffic count data for Council reflects that there are more daily vehicle movements on the western side (MR101) towards Maitland 3,557 AADT than MR 301 towards Seaham/Raymond Terrace 2,526 AADT and beyond.

4 www.economicprofile.com.au/Dungog Employment 5 Brian Dollery & Lin Crase “Is bigger local government better? An evaluation of the Economic case for Australian Municipal Amalgamation Programs”No. 2004‐04 Working Paper series in Economics, University of New England School of Economics.

8 | Page The Newcastle regional airport is utilised by the entire Hunter region it is approximately a 1 hour drive from Dungog to the airport.

Health

The Hunter New England Health Service is an extensive health network that services over 870,000 people and spans across 25 LGA’s.

Dungog Community Hospital is part of the broader Hunter Cluster and is then managed as part of the lower Hunter sector which includes Maitland & Cessnock Hospitals all allied health services such as community nursing, community health, dietetics etc. are provided into the Dungog LGA from either Maitland Hospital or East Maitland Community Health Service.

Whereas in the Port Stephens LGA the Tomaree Hospital is the local hospital for some of the Port Stephens Community. The Tomaree hospital is part of the Greater Newcastle Cluster with allied health services dispersed across the LGA in Raymond Terrace and .

The Tomaree hospital has two local health committees namely Port Stephens East and Port Stephens West, they both operate under Hunter New England Healths’ local health committee structure and terms of reference.

The Dungog Health Forum which is facilitated by Council is a different structure to the other local health committees which have been established by Hunter New England Health. The information raised by Councillor Wall in relation to this at the Dungog hearing was incorrect. Local Health Committees are engagement and health promotion mechanisms for HNEH.

The Dungog Health Forum has worked with all different health providers in the Dungog LGA and assisted them in the lobbying of the other tiers of Government, supported local GP recruitment, advocated at both State & Federal levels in relation to mental health support within the Dungog LGA, made submissions to the recent Federal Governments review of Rural and remote areas classification scheme for General Practitioners. None of which are roles performed by local health committees.

Emergency Services

Policing within the Dungog LGA is provided by Port Stephens LAC on the eastern side of the Shire, whereas the western side of the Shire is based within the Central Hunter Command.

Bushfire Control is managed by the Lower Hunter District based in East Maitland and covers the four LGA’s of Dungog, Maitland, Port Stephens & Cessnock.

NSW SES whilst there is a local SES base in Dungog the SES is managed by the lower Hunter region comprising the same four LGA’s.

NSW Fire & Rescue, the Dungog, Salamander Bay & Raymond Terrace brigades are part of the Metropolitan North Zone. The Dungog NSWFR is the primary rescue agency and attends to incidents within the Dungog LGA and into areas of the former Great Lakes Shire LGA including the localities of Stroud & Stroud Road.

9 | Page Sport, Recreation, Cultural

Sporting codes in the majority have cross border rivalry as they are predominantly related to the broader Hunter region e.g Hunter Valley football, coalfields rugby league. However some sports are based upon local competition (cricket) or are structured into zones (lawn bowls) from a state level.

From a cultural perspective depending upon what genre, many of the features are based on a regional basis e.g Newcastle Entertainment Centre, Newcastle Regional Gallery, Newcastle Regional Museum, Cessnock Performing Arts Centre, Maitland Regional Art Gallery, the Hunter Valley wineries like Hope estate or Bimbadgen estate host international performers annually.

Council is also a financial member of the Upper Hunter Arts organisation which comprised the Councils of Gloucester, Singleton, Muswellbrook, and Dungog. Each Council financially contributes to this organisation on an annual basis, Port Stephens and Maitland Councils are not affiliated with any Regional Arts Board.

Council refutes the assertion made by Port Stephens Council that the populations of the Dungog LGA all tend to recreate to the east in the Port Stephens LGA’s Tomaree and Tilligery peninsulas (page 7) of the merger proposal. It is not factually substantiated, as there are residents of the Dungog LGA that have a greater association with the former Great Lakes LGA with units, permanent onsite caravans owned by a number of local residents in that LGA in Forster, Tea Gardens, Hawks Nest and Tuncurry.

ii) Local perspective

The composition of Dungog Shire comprises the principal localities of Dungog, Clarence Town, Gresford, Paterson, Vacy, Martins Creek.

Each area has their own unique characteristics and their own local communities of interest, with 4 historical societies in the Dungog LGA and three Council owned museums reflects a certain characteristic of sense of place. The local communities can rally together for major activities or they can stand alone.

There are a range of organisations that are local or shire based such as the Dungog Shire District Chamber of Commerce or the Dungog & District Neighbourcare Inc. to local organisations like the Gresford Community Group or Paterson Progress Association as further examples.

The number of local community organisations within the Councils database totals 133 and this excludes the NSW Rural Fire Service brigades of the Shire. Obviously some organisations have much stronger regional and state affiliations e.g Country Womens Association, Lions Club etc.

There are countless events that occur throughout the Shire on an annual basis all with local organisations behind each activity. The LGA hosts two annual shows Gresford & Dungog with local A&H Committees, two annual rodeos Gresford & Dungog, two golf clubs and committees Dungog & Paterson, there is the Gresford & Paterson Performing Arts Society, the Dungog Art Society annual art show, Festival Dungog and the Gresford Billycart derby.

10 | Page The iconic James Theatre is one of the major local cultural attractions and featured prominently throughout the years of the Dungog Film Festival and it now hosts the Dungog Festival. The James Theatre is supported by a Council Sec 355 Management Committee and The Friends of the James Theatre Inc. who work with Council in relation to fundraising and preservation of this venue.

The Council some years ago established Dungog Shire Events Inc. to support many of the local event organisers in relation to risk management practices, public liability insurance, local event equipment trailer, barricades etc., Council has focussed on the organisation becoming self sufficient with as little staff involvement and financial support as practicable, however the organisation will still need continued staff support in the future.

Sec 263(3)(c) Existing historical & traditional values in the existing areas:

Prior to white occupation the lands around Dungog Shire were occupied by indigenous sub- groups of the Wonnarua and peoples in the Dungog area it was the Gringai tribe6. Today there are four local aboriginal land councils within the Dungog LGA, the Worimi, Karuah, Wonnarua & Mindaribba. The ATSI population at the 2011 census7 was 4.5%.

There are families within the Dungog LGA today that can link with the first European settlements of the Williams, Paterson and valleys. European exploration into the area began around 1801 when Colonel William Paterson first surveyed the area along the Paterson & Williams Rivers, first settlers in the Paterson area were cedar getters who established a settlement around 1812. Paterson was the third town site to be surveyed in the Hunter Region (after Newcastle & Maitland) it was not proclaimed until 1823. The first land grant in Dungog was to a Mr Mackay in 1824, this was followed by land grants to the Hookes, Chapmans, Windeyers, Dowlings and Verges. Present day Dungog streets are named after these families. If you follow the historical links of Maitland you would find that the areas in the Dungog LGA were settled by many people that had their origins in Maitland.

Traditional industries were associated with the land, timber gathering, stock raising beef, pigs & horses, wine production, vegetables & fruit production, tobacco growing all were early activities of the pioneers. The ports of Paterson & Clarence Town were utilised to transport product to the more populous centres with highly prized timber being sent across the world. The Clarence Town ship building industry grew and the first ocean going steam ship to be built in Australia was built at Clarence Town

As Australia developed with extensions of road & rail networks that improved the connectivity of rural areas to major regional centres. These changes resulted in the decline of the shipping ports as rail transport opened more markets for local producers. The depression era resulted in many of the roads within the Shire being built under employment schemes.

Government policy was also directed towards improvements in education and health which contributed to the growing population of the Shire.

6 Dungog Shire Community Profile 1994 7 www.censusdata.abs.gov.au/census_services/getproduct/census/2011/quickstat/LGA12700?opendocument& navpos=220

11 | Page From a historical perspective Dungog Shires population in 1966 was 59508, by 1976 it had reduced to 5718, with the Department of Planning projections for 2001 being 5,400, by 1996 Census the population was 7,658, 2011 census 8,318 people. The estimated residential population is now 9,1089. The average age of the population in 1966 was 33, the median age is now 44.

NSW Planning 2013 population projections predicted that the population by 2031 would increase to 9800 which from 2011 to 2031 represented a 15.3% change, somehow when the 2014 projections were released in May 201510 the forecast projection for 2031 is now 8800 representing only a 2.8% change.

Since the 2011 census there has been 254 new dwellings approved in Dungog Shire which is a positive trend for future population growth.

Yearly Comparison ‐ Dwellings 90 80 70 60 50 40 30 20 10 0 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

In 2012 when the Council worked with the community on the development of the community strategic plan, the values of the people in terms of protection of the rural lands, protection of the heritage features of the Shire, protection of the scenic qualities and protection of the waterways were strongly emphasised throughout along with the protection of our rural character i.e. no over-development.

There are still a number of Dungog residents that can talk about their education and travelling on train to attend Maitland Boys High school on a daily basis, as a high school in Dungog was not established until 1971. The dairy & timber industries were significant in terms of local employment in Dungog, with a local milk factory in operation until the late 1980’s, the timber mill at Maxwells Creek survived until September 2008 when it was closed by Boral with the loss of 46 local jobs.

Historically Dungog Shire is part of the lower Hunter urban hierarchy, however the makeup of the Shire still comprises traditional rural communities and as previously reported agriculture accounts for $93Mil annually within the local economy.

8 Dungog‐ A Social Profile Hunter Regional Community Information Service April 1981 9 ABS Estimated Resident Population 2014 10 Planning NSW Website Research & Demography Population Projections

12 | Page Whereas in contrast Port Stephens has witnessed significant population growth that has threatened traditional rural industries like the oyster growing region of Port Stephens which has struggled as a consequence of contamination from human waste & septic systems.

Port Stephens as identified within the Hunter Water Guidelines for development in drinking water catchments, Hunter water highlights “that is under particular pressure from increased urban and commercial development. Water quality in the dam has been declining in recent years. The broader Medowie area is earmarked for increased urbanisation with local and state government anticipating an additional 3,100 dwellings and 6,500 people over the next two decades”.11

The table on Page 9 of the merger proposal “shared values” has only focussed on natural features and waterways there is no evidence of any other synergies articulated within the merger proposal document as regards shared values.

Sec 263(3)(d) Attitudes of residents and ratepayers

The attitudes of people differ, the merger proposal as published lacks any significant research. There are many that believe that Dungog Shire should stand alone however will not express their view publicly.

A petition with 1,800 signatures was presented to you by the Dungog Shire Community Group. Council did not formally acknowledge, accept or reject the petition, which was submitted to the Council meeting of 21 June 2016 for consideration.

At the Inquiry hearing in Dungog you heard from a cross-section of the Dungog Shire, Port Stephens Council has been selling this merger proposal to the community of Dungog Shire through advertorials, mail out campaigns etc.

Surprisingly the majority of Port Stephens residents don’t really have an opinion on the merger with Dungog Shire if attendance levels at the two inquiry hearings conducted within the Port Stephens LGA are an indicator of attitudes of residents and ratepayers. So long as it is not with Newcastle, there have been no public rallies in Port Stephens to support this merger.

Council holds the view that there would be no appetite within the community for the Dungog LGA to become part of the Greater Newcastle Council if the merger of Port Stephens & Newcastle Councils eventuates.

Sec 263(3)(e) Requirements as to local representation for residents and ratepayers

The Dungog LGA is within the State seat of Upper Hunter the members office is situated at Muswellbrook. The Port Stephens LGA is in the State seat of Port Stephens and the Federal seat of Paterson. The Dungog LGA will move from the Federal seat of Paterson to the seat of Lyne as a consequence of the Federal redistribution. This will pose problems for the residents of Dungog LGA as regards advocacy and attendance at offices etc., with the communities of the Dungog LGA travelling some 2 ½ hrs to making representation more difficult.

11 Hunter Water Protecting our Drinking Water Catchments ‐ Guidelines for Development in Drinking Water Catchments 2016 Sec 3.3

13 | Page At a local level Dungog Shire has 9 Councillors and Port Stephens 10. Dungog Shire Council elects their mayor on an annual cycle, the Mayor of Port Stephens is popularly elected. In terms of local representation Dungog Shires representation is at 1 Councillor to 1,012 residents, whereas in Port Stephens the ratio is 1 Councillor to 7,049 residents. Both Councils run under the Ward system with three wards each.

From a local representation perspective, what this highlights is that if a merger between Port Stephens & Dungog proceeds at best the Dungog Shire residents will manage to elect 1 Councillor from the entire Dungog LGA to a newly merged entity.

If a merger of the two Councils is forced upon Council then it is the Councils preference that within the first term of the new entity that an additional ward be established for the entire Dungog LGA so as to assist in the transition of the two entities. It is then for the new entity to determine future representation and structure going forward to the next round of local government elections.

Sec 263(3)(e 1) Any impacts that the merger proposal could have on the ability of the Council to provide adequate, equitable and appropriate services:

Dungog Shire Council provides a Service NSW agency out of the Councils administrative office manned by Council staff, predominantly associated with RMS transactions. Accordingly there is a need to recognise that this service would need to be retained into the future so as to ensure residents of the Dungog LGA have equitable access to NSW Government services should the merger report recommend a merger between Dungog & Port Stephens Councils.

There is likely to be a range of transitional elements that will impact upon a new entity and the service delivery expectations into communities. There are differing levies applicable to the two LGA’s as regards the waste levy imposed by the NSW Government in the Dungog LGA the levy is $76.70 per tonne, whereas in Port Stephens it is $133.10 per tonne.

The merger proposal report on Page 11, there are inaccuracies again with the report and comments made without any substantiation in respect of waste services, there is a waste drop off service at Dungog. Council has also conducted waste and recycle education programs.

In respect of the waste levy and the application thereof the waste levy has a major cost implication and was one of the cost inhibitors that prevented this Council from transporting waste to the Raymond Terrace Advanced Resource Recovery facility when the Council undertook our waste strategy and waste collection tender.

The notion as expressed within the merger proposal to potentially pay-out a waste management contract, would be to the financial detriment of all ratepayers.

As previously commented in relation to the inequity in rating structures until the rating structure is harmonised the levels of service will differ between the areas. Port Stephens Council needs to seriously consider a robust differential rating structure into the future as it will be difficult to justify their current approach to rating structures, if the two entities are merged.

The four year rates freeze will have a detrimental effect on the merged entity and Council has previously resolved that it does not support the four year rate freeze as there is a need to

14 | Page start addressing the renewal programs identified within the Councils asset management plans.

There will be impacts as a consequence if the proposed merger proceeds, in particular financial in terms of the Financial Assistance Grant, whilst the FAG is separately assigned by the two Councils for 4 years past the merger, there is the risk that the level of funding will fall in the future which will impact on services. An approximate calculation on a per capita basis at current rates indicates this would be in the order of $754,000 per annum.

The following financial table reflects Councils previous review of the financial assistance grant and calculating the equalisation component of the Grant back to a population base is the most reliable measure that the Council can utilise.

Merged Entity Dungog 9,108 $1,431,407 $157.16 Port Stephens 69,728 $5,185,589 $74.37 Total 78,836 $6,616,996 $82.79

Potential Funding Loss 9,108 $754,055.80 $82.79

From a planning perspective the combining of the SILEP’s and the synthesising of the planning policies of both Councils will take considerable time. Even if outsourced to contractors Council staff would still need to oversee the project and ultimately take ownership in conjunction with the elected Council.

There will be complexities as regards the different boundaries that each LGA works in as regards service delivery & advocacy, as mentioned earlier Dungog Shire is already part of two local area commands for policing being Port Stephens & Central Hunter commands, whereas the Port Stephens LGA is within the Port Stephens LAC.

Whilst both LGA’s may have extensive road networks the Dungog LGA has added levels of complexity and cost due to the steep rugged terrain with many roads not interconnected, the climatic influences of the Barringtons region and rapidly rising waterways, highly dispersive soils and a depleting resource materials base.

Sec 263(3)(e 2) The impact of any relevant proposal on the employment of staff by the Councils of the areas concerned.

Dungog Shire budgets for a Full Time Equivalent (FTE) workforce of 66 plus 1 term contract associated with the natural disaster recovery project management.

In total the FTE comprises:

Administration Centre, Library & VIC 19 Full time & 8 Part Time

Engineering, Depot, Operations Staff & landfill 39 Full time & 2 part time.

Note vacancy p/t position 0.6, recent f/t recruitment 0.2 gap, parenting employee f/t reduced by 0.4

The average age of the Councils workforce is 47 the median age is 50.

By Gender: Female full time 13 Female part time 9

Male full time 44 Male part time 1

15 | Page The workforce operates under an organisational structure that comprises four departments, corporate services, planning & development, environmental services and infrastructure & assets department.

Whilst many Councils have integrated environmental services within the planning & development departments, the span of functions required to be performed coupled with the Councils focus on environmental elements enables the manager and his small team to focus on this broad portfolio from Waste Management to Onsite Sewerage Management Systems through to Noxious Weeds. Whereas, Councils Planning Manager can concentrate on town planning matters only and their time is not so thinly spread across a significant span of roles.

Recruitment of technical/professional staff by Council has been difficult for many years, it was evident when the Council was elected in September 1999 that new Council experienced an organisation that had no qualified town planner, no health & building surveyor despite the positions existing within the Councils organisation structure contractors, were being utilised.

In January 2015 was the first time in the past 10 years that Council has had all engineering positions within the organisation filled. Whilst positions are now filled it does not mean that they all have the necessary skills to properly fulfil their roles. However it will provide a buffer and enable the other staff the opportunity to divest themselves of some of the workload and hopefully focus on future priorities and monitoring of performance of this function. Development engineering is still undertaken on a contract basis of 10 hours per week.

The engineering roles is particularly evident as the Councils auditors issued qualified audit reports to Council as a consequence of not being able to fulfil our obligations in meeting the accounting code timelines for asset valuations, Councils financial reports were qualified in 2013 & 2014.

In the context of the organisation now it needs to be recognised that within the current structure all the technical/professional staff down to & including the rates clerks position in Council there are 14 of 17 positions that are occupied by people (11 full time & 3 part time) that travel into the Shire to attend Dungog Shire Council for work, all within a 1 hours drive of Dungog. They travel from Singleton, Tanilba Bay, Wallalong, Hinton, Farley, Raworth, Medowie & Newcastle.

Both parents working and not able to find employment for the partner, housing affordability, lack of rental accommodation, uplifting of children from schools were all factors that influenced some of the quality candidates to reject Councils offer of employment. It was evident that the lower Hunter had a large commuter population and Local Government was no different, we had to compete in the same market for candidates and we now use such as a tool for attracting key personnel.

One of the biggest challenges should the two Councils merge will be the cultural factors, whilst referred to as a merger, a smaller organisation transitioning into a much larger organisation is viewed as a take-over. The alignment of roles and positioning of staff within a new salary system is going to require significant energies and appropriately skilled personnel to support the transition.

The dynamics of cultural integration amongst the workforce will consume considerable energies of the management team in the formative years of a merged entity. The ability to cost such elements in terms of the costs of the merger are difficult to assess as each merger will have distinct characteristics as regards staff/management relationships. If the

16 | Page management team does not develop the elements of trust and unity early on, the costs of any merger in terms of lost productivity from industrial matters, staff morale and turnover will add significantly.

The KPMG financial model and the business model of MorrisonLow indicate that there will be staff losses somewhere in the future, this is particularly evident in the MorrisonLow report at Year 3 when $1.265Mil is accounted as a staff expense saving. Initially the position of General Manager at Dungog will cease as it is the only senior staff position as defined under the Local Government Act in Dungog Shire Council.

Sec 263(3)(e 3) The impact of any relevant proposal on rural communities in the areas concerned

The principal township of Dungog has a population of 2,131 which is less than 5,000, the most distant rural properties of Dungog Shire are in the upper Carabolla region of the Shire which is north of on the western side of the Shire.

The retention of an administrative centre at Dungog if the entities are to merge will be important as regards the future provision of services to the surrounding areas. Protection of employment within the Dungog township will be crucial in the long term recovery of the township as a consequence of the April 2015 natural disaster event.

The local businesses in Dungog benefit from the administrative staff that support their business enterprises in terms of daily lunches, grocery purchases etc. any decline in that spend will have a negative impact on local business.

The need to ensure the continuation of the local health forum so as to continue the Councils advocacy role in regards to rural health needs must be emphasised as the Gresford community is still lacking the services of a local GP.

Sec 263(3)(e 4) In the case of a proposal for the amalgamation of two or more areas, the desirability (or otherwise) of dividing the resulting area or area into wards.

If you review the ward structure of Port Stephens Council the current Western ward accounts for more than 50% of the land holding for Port Stephens Council by adding the Dungog LGA to this ward it will account for the majority of infrastructure within the Port Stephens LGA.

If a merger is likely to progress, the Council would want to ensure that the values of our communities are preserved into the future. To enable this to happen the Council would recommend that the Dungog LGA be established as an additional ward within a merged entity with a composition of three Councillors for the first term of the newly merged entity only.

17 | Page Sec 263(3)(e 5) In the case of a proposal for the amalgamation of two or more areas, the need to ensure that the opinions of each of the diverse communities of the resulting area or areas are effectively represented

2011 Census data 12reveals 5.4% of the population was born overseas, predominantly from Anglo/European backgrounds, with English being the first language in the households.

The ATSI population of the Dungog Shire comprises 4.5% of the population. They do not predominate in any locality within the Shire.

Council engages with the 4 Land Councils on matters as they arise dependent upon locality. The Karuah ALC is representative on the Pilchers Reserve Management Committee.

Sec 263(3)(f) Such other factors relevant to the provision of efficient and effective local government in existing and proposed areas.

As mentioned earlier the areas of connectivity and boundaries can result in inefficiencies in relation to Councils obligations to represent their communities should the merger proceed. We are looking at:

Two Local Police Area Commands (Port Stephens & Central Hunter Commands for DSC, Port Stephens Command for PSC LGA), each will require attendance at their community liaison/community safety meetings. The Port Stephens LAC covers the eastern side of the Shire including the principal areas of Dungog & Clarence Town. The conduct of local traffic & road safety meetings will result in coordination difficulties as regards inspections, attendance etc.

Issues as regards the conduct and management of the Local Emergency Management Committee will need to be explored as Dungog Shire has had difficulties in terms of the LEMC committee as regards attendance, whilst Port Stephens LAC has always attended the Central Hunter command has not. The natural disaster event of April 2015 brought to light some issues as regards messages across the two commands.

Both Councils operate within the structure of the lower Hunter Bushfire Zone which comprises the Maitland, Cessnock, Port Stephens & Dungog Councils, Bushfire Risk Management Committee, Zone Liaison Committee where resources and costs are assigned across the respective 4 LGA’s. The zone command is situated on the outskirts of East Maitland.

The distance between centres particularly in times of emergency situations is going to continue to cause the new entity problems, the natural disaster event of 21 April 2015 resulted in Dungog being effectively isolated as a consequence of the flood & storm damage with roads flooded and telecommunications infrastructure failing. Support personnel who would respond to aid in the implementation of the recovery processes could not access the Shire for more than 24 hours. With coronial inquiries to be conducted in the near future the findings of the State Coroner will need to be considered by all Agencies later on.

12 http://www.censusdata.abs.gov.au/census_services/getproduct/census/2011/quickstat/LGA12700?opendocu ment&navpos=220

18 | Page There is no information as regards how Port Stephens will measure the levels of community satisfaction from the Dungog LGA post merger. The population bases will distort the weightings in survey tools that Port Stephens currently utilise.

Conclusion:

It is Councils preferred option to stand alone, however Council does recognise the Governments intentions arising out of their fit for the future program.

The loss of local democracy will be felt within the communities of Dungog Shire in the years to come as the population of Port Stephens will grow significantly, so how will the communities of the Dungog LGA get their voice heard when they will have 1 local Councillor or possibly three ward Councillors against the majority?

The old saying “you don’t know what you’re missing until it is gone “will ring true in the early years as people that used to take for granted contacting their local representative on a range of issues will in the future be joining the queue!

Should the Government determine to merge Dungog Shire Council, the Council wants a seat at the table to ensure that the community values of the Dungog LGA are instilled within the new entity. The ability to influence decision making in relation to such will be difficult without reasonable representation in the founding years of the new entity.

It is clearly evident that the General rates have to rise within the Dungog LGA, the extent of which to achieve the NSW Governments’ benchmarks as calculated by this Council equated to 13% pa over 6 years. This however would not have provided the Council with the scale and capacity to meet all the obligations that the State Government imposes upon Councils.

The Council has recognised that the imposition of a four year rate freeze is both inequitable to the communities involved and compromises the longer term financial sustainability of a merged entity. The Council strongly advocates that the four year rates moratorium be removed if the merger proceeds.

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