Report on a Potential Merger: Break O'day And

REPORT ON A POTENTIAL MERGER: BREAK O’DAY AND GLAMORGAN-SPRING BAY COUNCILS

OCTOBER 2009

LOCAL GOVERNMENT BOARD

LOCAL GOVERNMENT BOARD REPORT ON A POTENTIAL MERGER: Between the BREAK O’DAY and GLAMORGAN-SPRING BAY COUNCILS

This publication is available online at: www.dpac.tas.gov.au/lgboard The Chairperson Local Government Board GPO Box 123 HOBART TAS 7001

Contents Membership of the Local Government Board ...... 6 Abbreviations ...... 7 Executive Summary ...... 8 Chapter 1. Introduction and Review Procedure ...... 12 1.1. Scope of the review ...... 13 1.2. Review Methodology ...... 15 Chapter 2. Context of this review ...... 17 2.1. Financial Sustainability of Councils ...... 17 2.1.1. National Context ...... 17 2.1.2. Tasmanian Context ...... 19 2.2. Local Government Reform ...... 21 2.2.1. National and International Context ...... 21 2.2.2. Tasmanian Context ...... 24 2.2.3. Mergers ...... 25 2.3. The Board’s approach ...... 27 Chapter 3. East Coast: Background information ...... 28 3.1.1. Comparative statistics ...... 28 3.2. Break O’Day Council...... 30 3.2.1. Council Financial Performance ...... 30 3.2.2. Employment ...... 30 3.2.3. Population ...... 30 3.2.4. Age Profile ...... 31 3.2.5. Area ...... 31 3.2.6. Roads ...... 31 3.2.7. Townships in the Municipal Area ...... 31 3.3. Glamorgan-Spring Bay Council ...... 33 3.3.1. Council Financial Performance ...... 33 3.3.2. Employment ...... 34 3.3.3. Population ...... 34 3.3.4. Age Profile ...... 34 3.3.5. Area ...... 34 3.3.6. Roads ...... 34 3.3.7. Townships in the Municipal Area ...... 35

Chapter 4. Financial Analysis ...... 36 4.1 Current and long-term viability of the stand-alone councils ...... 39 4.1.1. Financial Overview of Break O’Day Council ...... 39 4.1.2. Financial Overview of Glamorgan-Spring Bay Council ...... 40 4.1.3. Revenue and rating in the two councils ...... 41 4.1.4. Services ...... 42 4.1.5. Infrastructure gaps and conditions ...... 43 4.1.6. Grants ...... 44 4.1.7. Board findings with respect to the short-term and long-term viability of the two stand-alone councils ...... 46 4.2. Long-term viability of a merged council ...... 48 4.2.1. Revenue and Rates ...... 48 4.2.2. Grants ...... 48 4.2.3. Efficiencies under a merged council ...... 50 4.2.4. Non-efficiencies & Costs ...... 52 4.2.5. Board’s findings regarding the financial position of a merged council ...... 56 Chapter 5. Benefits and Impacts for the Community ...... 58 5.1. Economic benefits and impacts ...... 58 5.1.1. Economic characteristics of the municipal areas ...... 58 5.1.2. Role of the councils in stimulating and facilitating the local economy ...... 59 5.1.3. Infrastructure ...... 61 5.1.4. Tourism ...... 62 5.1.5. Land Use Planning ...... 63 5.1.6. Board Findings and Recommendations on Economic Development ...... 65 5.2. Social benefits and impacts ...... 67 5.2.1. Communities of interest and sense of community ...... 67 5.2.2. Social Service Provision to the East Coast ...... 69 5.2.3. Board Findings and Recommendations ...... 72 5.3. Environmental benefits and impacts ...... 73 5.3.1. NRM ...... 73 5.3.2. Waste Management...... 74 5.3.3. Catchments ...... 75 5.3.4. Board Findings and Recommendations ...... 75 5.4. Governance and Community Representation ...... 76 5.4.1. Governance ...... 76

5.4.2. Representation ...... 77 5.4.3. Board Findings and Recommendations on Governance and Representation ...... 79 Chapter 6. Conclusions and Recommendations ...... 80 Appendix1: Tasmanian Local Government Areas ...... 84 Appendix 2: Written Submissions ...... 85 Appendix 3: Verbal Submissions ...... 86

Membership of the Local Government Board Local Government Board members involved in this review were:

MEMBERS

Brent Armstrong Chairperson Immediate past General Manager of the Hobart City Council, a position held from 1997-2008

Lynn Mason Local Government Association of Tasmania nominee Past President of the Local Government Association of Tasmania and Mayor, Flinders Council, 1996-2002

Paul West Local Government Managers Australia nominee Current General Manager of the Kingborough Council and former General Manager of the Waratah-Wynyard Council

Alistair Scott Director of Local Government Director of Local Government and Deputy Director of the Local Government Division

Liz Gillam Member with local government experience Formerly Deputy Director of Local Government and senior policy practitioner at the Local Government Association of Tasmania.

EXECUTIVE SUPPORT

Rachel Nielsen Project Manager

Patricia Zapotocky Executive Officer

Margaret Young Executive Assistance

Abbreviations AAVs Assessed Annual Values

ABS Australian Bureau of Statistics

The Commission State Grants Commission

ALGA Australian Local Government Association

EHO(s) Environmental Health Officers

FAGs Commonwealth Government financial assistance grants

LGAT Local Government Association of Tasmania

NTD Northern Tasmania Development

STCA Southern Tasmanian Councils Authority

TICT Tourism Industry Council Tasmania

Executive Summary

Review Methodology The Board determined that it would conduct the review requested by the Minister for Local Government in two stages: 1. a review of the potential merger between the Break O’Day and Glamorgan-Spring Bay Councils 2. a review into guiding principles providing insight into further voluntary mergers. This report relates to the first stage of the review requested by the Minister. The Board conducted community consultation in accordance with the requirements of the Local Government Act 1993 and the request from the Minister. It invited public submissions and held five public hearings on the east coast. The Board also held discussions with key stakeholders and met with the two councils. Independent consultants, KPMG (Tasmania), were engaged to undertake an independent analysis of the financial position of the two councils and the potential financial benefits and impacts of a merger. As requested by the Minister, the Board also considered the economic, social, environmental, governance and community representation benefits and impacts of a merger, noting that these matters were linked and interdependent.

Financial Sustainability The Board considers that a merger should only be considered where it will lead to: i. long-term financial sustainability; enabling the council to provide services that meet community expectations and statutory requirements ii. benefits for the community such as improved governance, community capacity-building, improved service delivery or improved management practices including asset management and long-term financial planning and human resource management. The Board does not believe that the proposed single merged east coast council would be substantially more sustainable than the two existing stand-alone councils. The Board was not convinced that if a merger were to proceed, that the position of the merged council would be strong enough to ensure against the prospect of further mergers in the east coast region. It considered that the need for a merged council to provide an improved level of services would reduce the theoretical cost efficiencies realised by a merger and that the size of the combined municipal area would most likely create additional significant ongoing staff and travel costs – even in the event that the one-off costs of a merger were fully covered by the State Government. The Board is not convinced that the potential savings identified by KPMG would be sufficient to address the issues currently facing the stand-alone councils.

Benefits and Impacts for the Community Submissions received by the Board, indicated general support for mergers where they can deliver, amongst other benefits, service improvements, economies of scale, a cost-saving to ratepayers and improved governance. Submissions have argued that evidence of these benefits should be established before the specific merger proposal was supported. Some submissions argued that such benefits would not be achieved from the east coast merger proposal. The Board identified no significant community benefits in the form of potential economic, social and environmental benefits. The Board also noted the concerns of some communities, arising from experiences in previous mergers, that more isolated areas may be adversely affected by a merger. While the Board considered that some impacts on local representation could be mitigated through the implementation of measures such as the creation of community consultation boards or wards, there were likely to be some negative impacts on current representation, due to the geographic nature and dispersed population centres of the proposed merged council area.

Governance and Leadership The Board considers that improvements in governance will come from leadership and the allocation of resources for professional development and training to ensure good decision making processes. The Board appreciates that in making the request to the Minister for a review, the councils were attempting to take control of the future of their municipal areas and they are to be commended for this. However, the Board had no confidence that the two individual councils were committed to a (voluntary) merger process, even if such was recommended by the Board. Indeed, both councils appeared to rely on the view that either council could withdraw from the process at any time. Of further concern to the Board was that there appeared to have been no joint discussion between the two councils as to what would be achieved from the merger in terms of the strategic advancement of the area and its communities. There was no evidence that either council had familiarised itself with the situation, operations and workings of the other council. There appeared to have been no recent consideration by the councils of alternatives to the proposed merger. Certainly communities within the respective council areas did not appear to have been presented with a case in supporting the potential benefits of a merger nor information as to why the councils requested the Board review into a voluntary merger. The Board heard community concerns about a lack of public engagement in the merger process. Some submissions proposed a referendum or poll to ensure consultation with the communities involved particularly as it would impact on their democratic representation. It is the view of the Board that, even if the two councils needed to seek assistance in conducting research to progress a merger, a united and committed approach could have been expected from the councils, including a far greater level of community awareness of what was being proposed than appears to have been the case.

Summary In summary, the Board does not consider that it was provided with any compelling and long-term rationale for the merger of the Break O’Day Council and Glamorgan-Spring Bay Council and concluded that the imposition of the costs and impacts of the proposed merger cannot be justified at this time. Recommendation 1: That the Break O’Day Council and the Glamorgan-Spring Bay Council not be merged to form a new council. As the Board is not recommending a merger, and a merger cannot proceed without a positive recommendation, the Board has not addressed the transitional arrangements for a merger process. The Board considered that the potential benefits of other options to enhance council sustainability, the delivery of council services and the sustainable development of the municipal areas should be considered as part of its report on the guiding principles for future council mergers, to be undertaken immediately after its review of the potential merger. The Board is of the view that potential mergers should not be considered in an ad hoc manner. In the course of carrying out this review the Board has identified a number of issues: cost to ratepayers and taxpayers of a Board review (and preparation for a Board review) where a proposal is not viable impacts on communities eg community concern and confusion due to lack of consultation, information sharing and preparation election deferral impacts (cost, delay, impacts on potential candidates) impacts on councils (difficulties in attracting staff, political mileage from mergers as an election issue by individuals - prior to the community being fully informed as to the potential benefits and impacts of a merger) the exclusion of alternative municipal areas and parts of municipal areas regardless of the merits of such alternate proposals. Submissions to the Board have proposed a range of alternatives to the potential east coast merger including: i. a wider review incorporating boundary adjustments as part of the review ii. mergers with alternative councils neighbouring the two east coast councils such as the Dorset, Sorell and Tasman Councils iii. a combination of these options. The Board considers that it is problematic to consider the potential merits of a merger proposal without considering the merits of alternative options, particularly where there is at least another willing party. An ad hoc process may create a scenario where struggling councils may be excluded from voluntary merger negotiations on the basis of poor performance and not be able to find a willing merger partner. Recommendation 2: That the future of the Break O’Day Council and the Glamorgan-Spring Bay Council be considered as part of a future strategic examination of the structure of Tasmanian local government.

A number of submissions to the Board recognised the need for change to achieve better services, more integrated planning across a range of areas, and improved governance at the local level and in the broader local government sector. The Board commends the Break O’Day and Glamorgan-Spring Bay Councils for taking a first step in exploring one of the alternatives open to the councils to bring about change. In the course of conducting its review, the Board has identified a growing awareness of the need for change, and an openness within both local government and the community to embrace change in the sector. Whilst there was a noticeable lack of broad-based support for this particular merger proposal, the need for change is recognised broadly in the community and in all spheres of government. State and Commonwealth governments share with local government, a desire to bring about effective and sustainable local government. It is clear to the Board that a holistic approach to the consideration of merger and other proposals to put local government in Tasmania on a more sustainable basis is required. Recommendation 3: That following the work currently being done by the Local Government Board on guiding principles, consideration of changes to the structure of Tasmania's municipal areas be undertaken in a holistic and inclusive manner and involve the State and local government in consultation with their communities.

Chapter 1. Introduction and Review Procedure The Local Government Board is an independent body established under the Local Government Act 1993 (the Act). The Board’s specific review into the benefits and impacts of a potential voluntary merger between the Break O’Day and Glamorgan-Spring Bay Councils was initiated by the Minister for Local Government on the request of the two east coast councils. The review was conducted under the process set out in Part 12A of the Act for reviews of councils, including specific reviews of (voluntary) merger proposals. The respective requests from the Break O’Day and Glamorgan-Spring Bay Councils to the Minister included that the investigation should: provide the councils with a clear understanding of the social, economic, environmental impacts and benefits of the consequences of a voluntary merger between the two councils in their entirety give broad consideration to maintaining local representation, if a voluntary merger was supported. The requests also specified that the councils wanted the process to include extensive community consultation.

Section 214A of the Act provides that any review may take into account any one or more of the following matters: (a) the governance and operations of a council (b) the boundaries of the municipal area and any electoral district (c) the naming of the municipal area, council and electoral district (d) the declaration of a municipal area or part of a municipal area as a city (e) the naming, or changing of the name, of a city (f) the creation or abolition of a municipal area or electoral district (g) the division of the municipal area into electoral districts (h) the combining of two or more municipal areas, parts of two or more municipal areas or two or more electoral districts (i) the creation or abolition of councils (j) the election of councillors of a municipal area (k) the total numbers of persons to be elected as councillors of a municipal area or in respect of each electoral district (l) any other factor (m) any matter referred to it by the Minister.

The Minister requested that the scope of the review should include, but not be limited to the following:

i. the social, economic and environmental benefits and impacts of a merger between the Break O’Day and Glamorgan-Spring Bay Councils ii. the representative interests of both communities iii. community representation in a merged council iv. the costs associated with the creation of a merged council v. human resources and transitional arrangements for a merged council vi. impact on existing regional arrangements vii. other measures to enhance council sustainability, the delivery of council services, and the sustainable development of the municipal areas viii. guiding principles providing insight for further voluntary mergers.

1.1. Scope of the review The Board published a set of guidelines outlining the scope of its review which addressed the matters raised in the Minster’s request. The review guidelines specified that the Board would consider potential: 1. financial benefits and impacts for the two municipal areas 2. economic benefits and impacts for the east coast 3. social benefits and impacts for the two municipal areas 4. social benefits and impacts for the east coast 5. environmental benefits and impacts for the two municipal areas 6. environmental benefits and impacts for the east coast 7. benefits and impacts on governance and community representation for the two municipal areas in any potential new merged council 8. short-term costs associated with the creation of a merged council 9. transitional arrangements, including human resources, for a merged council 10. impact on existing regional arrangements. And that the Board would also consider: 11. the interests of both communities 12. further options to enhance council sustainability, the delivery of council services, and the sustainable development of the municipal areas 13. guiding principles providing insight for further voluntary mergers of other councils.

NB: The Review guidelines note that: social, environmental and economic benefits and impacts are linked and interdependent. The Board considers that ‘benefits and impacts’ in this context include not only any potential advantages of any potential merger but also other implications or outcomes for the two communities.

1.2. Review Methodology The Act provides that the Local Government Board can carry out a review in any manner that it thinks appropriate.

The Board determined to conduct its review in two stages:

1. a review of the potential merger between the Break O’Day and Glamorgan-Spring Bay Councils

2. a review into guiding principles providing insight for further voluntary mergers.

The Board will submit a separate report to the Minister with respect to each of these areas.

This report sets out the Board’s review methodology, findings and recommendations with respect to the first stage of the review: the potential merger between the Break O’Day and Glamorgan-Spring Bay Councils. The Board conducted community consultation in accordance with the requirements of the Act and the request of the Minister. The review commenced with a public notice on 3 July 2009. Affected councils were notified by letter, 30 days before the commencement date. The public notice identified the subject matter of the review, provided information on how the guidelines for the review could be obtained and invited written submissions with respect to these before the closing date of 31 July 2009. The Board held five public hearings in St Helens, Triabunna, St Marys, Swansea and Bicheno. Hearings were held both within and outside working hours to facilitate community access. Notice of the public hearings, in August and September were provided in: three state-wide daily newspapers local and state-wide radio interviews brochures direct mail-outs to all community groups in the east coast area flyers provided to the east coast councils for distribution. Opportunity was provided for verbal submissions to be made to the Board, either in respect to issues raised in a written submission or instead of a written submission. The Board received a total of 84 submissions, 36 as written submissions and 48 as verbal submissions including 17 from councillors of the two councils. Both councils determined not to provide written submissions to the Board, nor did the councils provide any information to the Board regarding the degree of community consultation undertaken or supporting reasons for the councils’ requests to the Minister for a review. Indeed concern was expressed by a number of people making submissions to the Board that the councils had not consulted their communities before seeking the review. The Board met with the two councils, as part of the public hearing process. The Board took comment from individual councillors in attendance, as well as seeking specific information from both general managers. 15

The Board also received representation from key stakeholders including: relevant State agencies other Tasmanian councils and local government bodies tourism council staff unions. Independent consultants, KPMG (Tasmania), were engaged through a competitive request for quotation process to undertake an independent financial analysis of the: current financial position of the two councils the potential financial benefits and impacts for the two municipal areas from a merger. The KPMG report is available from the Local Government Board web page at www.dpac.tas.gov.au/lgboard Other information analysed by the Board included: background information on the Break O’Day Council and Glamorgan-Spring Bay Council the local and national context in which mergers are being considered the outcomes of previous merger processes conducted in Tasmania, interstate and internationally.

Chapter 2. Context of this review The Break O’Day Council and Glamorgan-Spring Bay Council requests for a Local Government Board review have arisen in the context of several statements from the State Government that it will provide support for those Tasmanian councils that are prepared to work together and come forward with voluntary merger proposals. This chapter considers the context in which reform initiatives are being explored by Commonwealth, State and local governments alike. These initiatives, which aim to deliver reform beyond that possible at the local level, include: regional alliances and governance, voluntary mergers and resource-sharing options within the local government sector State government initiated amalgamations of councils in Western Australia, Victoria and Queensland Commonwealth government reform initiatives such as the Local Government Reform Fund intended to assist councils to implement nationally mandated financial and asset management and planning frameworks. 2.1. Financial Sustainability of Councils 2.1.1. National Context The Australian Local Government Association (ALGA) has highlighted a range of growing pressures on local government. In 2006, ALGA commissioned PricewaterhouseCoopers to review the overall financial sustainability of councils across the country. This report, the National Financial Sustainability Study of Local Government, raised serious concerns about the financial sustainability of councils and identified a significant need for cash injections from other levels of government, specifically recommending the pursuit of a community infrastructure fund to assist councils with their ageing infrastructure. The role and definition of local government has continued to evolve since its inception in Australia in 1840. In 2008, the Productivity Commission identified that: ‘local governments are increasingly providing services beyond their traditional role of services to property, to include greater involvement in human services, planning and regulatory functions’. ALGA has argued that local government’s functions have increasingly been expanding, particularly over the last decade, in response to the changing expectations of local and regional communities resulting in real and serious financial challenges for the sector. These challenges include: the pressure on local government to meet emerging and increasing expectations of the community in respect to services and infrastructure a 14.5 billon1 infrastructure renewals backlog across the nation

1 As estimated by PricewaterhouseCoopers in 2006, National Financial Sustainability Study of Local Government.

the level of cost shifting to local government from other levels of government various constraints placed upon local government by state legislatures that restrict the ability of local government to raise revenue, including rates capping the capacity of local government to further increase its own-source revenue raising efforts (noting it is already raising close to 90 per cent of its maximum theoretical benchmark for rate revenue and that the capacity of rate payers to pay more rates is a key constraint) the level of general purpose funding grants (FAGs) from the Commonwealth Government. The Commonwealth Government is currently conducting a comprehensive review into Australia’s future taxation system which aims to examine and make recommendations to create a tax structure that will position Australia to deal with current and future demographic, social, economic and environmental challenges and enhance Australia's economic and social outcomes. The review will consider how revenue can be raised so as to do least harm to economic efficiency, provide equity (horizontal, vertical and inter-generational), and minimise complexity for taxpayers and the community. The review panel is chaired by the Secretary to the Treasury, Dr Ken Henry AC. The Panel is to report to the Treasurer in December 2009 and has, to date, received over 1000 submissions. ALGA has provided a submission to the review outlining the role of local government in the Australian taxation system and highlighting the importance of taxation revenue for the provision of essential local government services and infrastructure at the local and regional level.

Financial and Asset Management Frameworks Current national initiatives to address sustainability of councils include the announcement of a $25 million national reform fund with two purposes: 1. to assist councils implement financial and asset planning and management in accordance with the enhanced financial and asset management and planning frameworks agreed to by the Local Government and Planning Ministers’ Council 2. to support reforms to council operations through greater regional cooperation and collaboration. Funds are being made available by the Commonwealth Government on a competitive basis. States and territories are to develop initial project proposals in partnership with state and territory local government associations and submit these by 30 November 2009. The newly established Australian Centre of Excellence for Local Government (ACELG) will support successful reform projects by providing technical assistance and resources, as well as promoting best practice. Project proposals will be reviewed by the Commonwealth Government, with support from ACELG. The implications of these initiatives in the Tasmanian context, are discussed below in 2.1.2.

2.1.2. Tasmanian Context

Access Economics Review of Sustainability of Tasmanian Councils Following the release of the national PricewaterhouseCoopers report and similar studies in NSW, SA and WA, in 2006 LGAT commissioned Access Economics to analyse the financial sustainability of Tasmanian Councils. The independent study provided a snapshot of councils’ performance at that point in time, the issues impacting on their financial sustainability and detailed a range of proposed initiatives that would assist in improving their long-term sustainability. It investigated the major financial stressors on councils and highlighted an infrastructure backlog and the provision of increasing services to the community as the key challenges facing council finances. The report identified areas of improvement regarding sustainable financial management strategies and suggested a range of actions for councils to consider, some of which could be implemented within the sector and some requiring external assistance. Some Tasmanian councils were found to be under pressure in terms of broad financial health. Similar to the findings of the National Financial Sustainability Study of Local Government undertaken by PricewaterhouseCoopers undertaken in 2006, the report identified that those councils were generally likely to: i. exhibit minimal (or negative) growth ii. have limited access to rate revenue due to relatively smaller populations iii. have limited access to essential asset management skills iv. face expanding service provision due to rising community demands. Access Economics recommended a series of action statements to enhance the overall financial sustainability of Tasmanian councils in terms of financial governance policies and processes including: the development of 10-year financial plans, improved asset management practices, the establishment of audit committees and the development of service policies. The report also identified the need to more closely scrutinise rates and charges, including developer charges, with a view to resolving the appropriate mix of revenue-raising and expenditure savings options councils are prepared to consider.

Auditor-General’s Findings

The most recent Auditor-General’s report Local Government Authorities, Including Business Units and Other State Entities 2007-2008, found that a number of Tasmanian councils continue to budget for deficits. The report noted that: 17 councils had incurred operating deficits in 2007-08 12 councils recorded a deficit for a minimum of three successive financial years. The report noted that a number of councils continue to incur deficits before capital grants, contributions and revaluation increments. The Auditor-General observed that this position cannot be sustained over the medium to long- term and that action is needed to increase revenues or reduce costs to the point where all costs are covered from normal operating revenues.

The Auditor-General has indicated that, to ensure long-term financial sustainability, a council is expected to, as a minimum, budget for a break-even operating result and then to meet its budget expectation. The report also raised concerns about the level of reinvestment in infrastructure assets. The Auditor-General believes that councils should have asset replacement programs that are consistent with depreciation charges being incurred. A low level of reinvestment in existing infrastructure assets is an indicator that the council may not be sufficiently rating to maintain the current level of infrastructure and services. These findings indicate that a number of Tasmanian councils need to take action to improve their financial positions and that they may need to consider more wholesale responses to improve their performance and sustainability in the long-term.

Premier’s Local Government Council The State Government and LGAT are progressing a joint business case for financial and asset management funding under the national reform fund, building on a previous $70 000 in funding provided under the Stronger Councils, Better Services initiative. This initiative was a joint State Government and LGAT project aimed at strengthening local government in Tasmania. The initiative’s four areas of focus were: i. sustainable business ii. better services iii. good governance iv. a new role for the Local Government Board. The State Government committed $200 000 to support the initiative in 2008. The Government is undertaking ongoing work as part of the project on asset management and financial planning with LGAT. This funding was utilised for an analysis, in six pilot councils, of barriers to implementing a common specified framework for long-term financial planning and strategic asset management planning in all councils in Tasmania. The outcomes of this analysis have been developed into a costed implementation plan which will be used to form the basis of a joint business case for Tasmania. Substantial implementation of the frameworks by December 2010 will be mandatory for all Tasmanian councils. The Premier’s Local Government Council is in the early stages of initiating a work program focused on enhancing the sustainability of the local government sector through the development of sustainability objectives and indicators. It is intended that such indicators would assist councils to: assess their financial, community and governance performance identify priorities and allocate resources identify best practice be accountable to ratepayers and residents access data to support grant applications.

These indicators will be developed with regard to other work around the long-term financial and asset management planning frameworks and a review of the Measuring Council Performance in Tasmania (KPI) project. 2.2. Local Government Reform 2.2.1. National and International Context During the past three decades the number of local governments in Australia has reduced from just over 900 to approximately 600. During the 1990s state governments initiated inquiries into the potential benefits of council amalgamations. The outcomes of these inquiries ranged from forced amalgamation to voluntary resource sharing arrangements.

Victoria Radical local government reforms were undertaken in Victoria from 1993-1995. The newly- elected Kennett government initiated and implemented a program of reform that included boundary reviews2 and reduced the number of councils from 210 to 78. An appointed Board was responsible for implementing the program which included the dismissal of existing councils and the installation of a commissioner/s to administer each new body for the 18 month transition period.

South Australia The South Australian (SA) Government in 1996 adopted a more consultative approach to major reforms which delivered a reduction in council numbers from 118 to 72. As in the Tasmanian reforms of 1993 and the Queensland reforms of 1994, the SA Government canvassed the views of both constituents and council prior to final decisions and established a local government Board to determine the outcomes. The SA Government addressed concerns that the reforms would impact upon representative democracy of local government by subsequently enacting legislative provisions that required all municipal areas to establish community consultative mechanisms.

Queensland The Queensland Government recently implemented major reform of the State's local government system in 2007. This followed its concerns about the long-term financial capacity of some councils and the slow pace of local government led reform. In 2005 the Local Government Association of Queensland, concerned about local government sustainability, instigated a reform of local government, seeking partnership from the State. Some 118 councils agreed to investigate their long-term future, through the Size, Shape and Sustainability (SSS) initiative. However, the Queensland Government considered that the program had failed to deliver timely, meaningful reform and established an independent Local Government Reform Commission to make recommendations on the most appropriate structure and boundaries for local government in Queensland.

2Dollery B E, Garcea J and Lesage Jr E C, ‘Local Government Reforms in Australia’, Local Government Reform: A comparative analysis of advanced Anglo-American Countries, 2008.

In March 2007, the Minister for Local Government wrote to all mayors asking them to assess progress on the local government led reforms. A subsequent Queensland Treasury Corporation financial sustainability review of 105 Queensland councils found 40 per cent to be 'financially weak', 'financially very weak' or 'financially distressed'. The Queensland Government established an independent Local Government Reform Commission to make recommendations on the most appropriate structure and boundaries for local government in Queensland. All local governments were reviewed by the independent Commission, excluding the Brisbane City Council. On 27 July 2007, the Commission provided its recommendations to the Queensland Government on the name, class, boundary and electoral arrangements for the new local government areas in Queensland. The Queensland Government accepted the Commission's boundary recommendations to reduce the number of councils in Queensland from 157 to 73 at the council elections on 15 March 2008. Initially local governments in Queensland have been critical of the forced amalgamation process, but a recent independent survey (of 30 of the 31 amalgamated councils) conducted on behalf of the Local Government Association of Queensland has shown that council mayors and chief executives are generally positive about the potential outcomes of reforms. This report indicated that 78.6 per cent of respondents believed there was potential to achieve stronger and more efficient, effective local government within five years. However, one in five respondents said they expected no benefits from amalgamation.

Western Australia On 5 February 2009 the Western Australian Government announced a program for local government reform based on a voluntary reduction in the number of individual councils. Councils were invited to: offer clear intentions for voluntary amalgamations by 5 August 2009 consider reducing the total number of elected members to between six and nine in a merged council form appropriate regional groupings of councils to assist with the efficient delivery of their services. The WA Government also proposed a range of other reform measures related to sustainability, representation and capacity building and linked the program to a recently announced Country Local Government Fund. A steering committee established to progress the reform package has been asked to report to the Minister by December 2009. The West Australian Local Government Association (WALGA) has indicated that the reforms were initiated by the local government sector itself and has already resulted in greater resources sharing and amalgamations of some councils. WALGA and the overwhelming majority of the local government sector in WA support the need for reform but are adamant that participation needs to be voluntary to ensure community support and help enhance the prospect of any changes being sustainable in the long term.

New Zealand Local government legislation introduced by the New Zealand Government in 1989 initiated the first substantial structural reform for more than a century. The reforms dramatically reduced the number of local government bodies by more than 80 per cent and introduced a structure 22 of separately elected multi-purpose territorial and regional government with largely discrete functionalities3. New Zealand has a unitary form of government with a single house of parliament which sets out the powers of local government by statute. There are 85 local authorities consisting of 12 regional councils and 73 territorial authorities (cities and districts). The reforms were implemented by the Local Government Commission. The chair of the Local Government Commission highlighted three keys to the success of the reforms: 1. the Local Government Commission had adopted a flexible approach to reforms 2. it had been willing to support local solutions over its own preferred approach 3. political backing from the Government to implement the Local Government Commission’s proposals. The newly formed Local Government Association also supported the reforms on the basis that the Government would address the issue of local government funding and powers once consolidation was completed. Further reforms were initiated by the New Zealand Government in 2007 with a Royal Commission of Inquiry on Auckland Governance. The Commission’s report and recommendations, issued in early 2009, proposed the dissolution of the Auckland Regional Council and all seven territorial authorities in Auckland and the creation of a new single unitary authority called the Auckland Council. The commission proposed an overarching authority holding all the powers and responsibilities of the former bodies, all council assets and staff and unifying planning, rating and representation for the city. The proposal also included some boundary changes. In April 2009 the Government issued its decision on regional governance, adopting the Commission’s proposal for a unified structure but rejecting a proposal for six local councils to operate within the larger local authority but provide services and advocacy for communities. This proposal was dismissed as creating unnecessary and costly duplication of service delivery, and creating an organisation too large to allow effective grassroots community representation. Instead the Government proposed the establishment of 20 to 30 community boards across the region. The exact number of boards and their boundaries are to be determined by the Local Government Commission as well as the boundaries of the Auckland Council and its wards by April 2010. In the meantime the Government commenced its legislative program: the Local Government (Auckland Council) Act 2009 (NZ) was passed on 22 September 2009.

3 Dollery B E, Garcea J and Lesage Jr E C, ‘Local Government Reforms in Australia’, Local Government Reform: A comparative analysis of advanced Anglo-American Countries, 2008.

2.2.2. Tasmanian Context

History of Reform Prior to 1993, attempts to restructure local government boundaries in Tasmania were unsuccessful. Major inquiries were carried out in 1939, 1960 and 1974, all of which recommended substantial reductions in the number of Tasmanian councils. However, the recommendations arising from these inquiries were not implemented. It was not until 1993 to 1995 that major reform of the sector was achieved. In 1993, following the report of the Local Government Advisory Board, major boundary reform resulted in the number of councils in Tasmania being reduced from 46 to 29. Simultaneously, a new Local Government Act introduced significant changes, most importantly giving councils the general competency powers that local government had been seeking for some time. The Modernisation of Local Government was part of a significant reform platform that included a suite of resource management legislation and there was a very strong momentum for change. A subsequent attempt at boundary reform in 1997 by the Tasmanian minority Liberal Government was unsuccessful. Analysis of these reforms (Haward and Zwart)4 has suggested that the respective success and failure of the two reform processes was directly linked to the level of support from and influence that local government was able to exert on the process. However, in both the 1993 reforms and the proposed 1997 reforms, local government was extensively involved. Local government was represented on the Boards of enquiry which made the recommendations and had the opportunity to make submissions to those Boards. The 1993 process may appear to have involved local government to a greater extent due to the extensive consultation processes associated with the development of the new Act. Further, as the 1993 proposals proceeded to implementation, the transition processes were also strongly collaborative and supported by the State Government. It should be noted that although local government criticism of the 1997 process was perhaps more vehement, there were significant pockets of resistance to the 1993 proposals, including a legal challenge. Unlike the legal challenge to the 1997 reforms, this was unsuccessful.

Current Policy The present State Government has a policy that it will not impose amalgamations on councils. A cooperative approach with the local government sector on the matter of sectoral reform is the preferred approach of all political parties. Under the Act, all merger proposals, voluntary or otherwise, require a supporting recommendation from the Local Government Board, as the Minister cannot make a recommendation to the Governor if he has rejected the Board’s recommendation on a matter.

4 Haward M and Zwart I, ‘Local Government in Tasmania: Reform and Restructuring’, Australian Journal of Public Administration, 59(3):34–48, September 2000 24

2.2.3. Mergers Whilst the Board has not undertaken a detailed review of the academic analysis of mergers, a broad review has indicated that opinion on the potential benefits of mergers is divided. Historically, argument in support of mergers in Tasmania and elsewhere has been founded in the anticipated benefits ranging from economies of scale, to more objective decision making, and ensuring a sufficient number of suitable candidates for election. Opinion is also divided on the actual outcomes that have been realised following amalgamations. It has been argued that economies of scale in a local government context are difficult to measure at best and are variable across particular functions of local government. While some functions may have large fixed costs and low labour costs, yielding the types of economies that might be realised in a private production context, others may have low fixed costs yet high labour costs resulting in diseconomies of scale5. Further the role of administrative units across multiple local government functions raises difficulties in assigning the precise administrative cost associated with each service in financial accounts. As a result, the true cost of providing functions can often be understated, while a category such as ‘overheads’ can lose its meaning. Equally the measurement of ‘outputs’, while readily measurable in a factory context, is more complex when ‘measuring’ the outputs of, for example, a community development officer. The Local Government Board 1997 amalgamation review report considered the outcomes of the 1993 Tasmanian restructures in five councils and identified a range of positive outcomes including: reductions in the level of debt an increase in the level of reserve funds reductions in the level of administrative expenses (despite the broadening of managerial and other professional skills available to councils). The review noted however that even within the four years since the amalgamations, changes in the external climate for councils meant that a long-term view of reform would be required to ensure viability for councils of at least 25 years. As part of the 1997 review, a state-wide telephone survey was conducted with a random sample of 1048 respondents including residents in each Tasmanian local government area. This was followed by focus groups involving participants in the survey. The survey indicated general support for mergers and a potential reduction in the number of Tasmanian councils. However, concerns were expressed about the loss of jobs, less attention to local issues, disadvantage to small rural councils and a loss of community identity following local government reform. Additional surveys of Victorian and South Australian residents undertaken by the Local Government Board in 1997 indicated that while the majority of Victorian residents surveyed considered that the reform process required some degree of initial compulsion, South

5 Byrnes J, ‘Council Size and Cooperation’, University of New England, for the Local Government and Shires Associations of New South Wales 25

Australian residents were more cautious about such a process. Levels of public support for amalgamation were higher in South Australia and the cooperative basis of reform in that State was thought to be the reason. Findings in the surveys indicated that a slight majority of respondents in each of the three states favoured amalgamations and that this support increased over time following amalgamations. Of primary concern to Tasmanian respondents was the quality of council services and value for money. The benefits desired from amalgamations were primarily lower rates and an increased range of services. It is notable that at the time of the Tasmanian survey, respondents expressed concern about a lack of information regarding the benefits and disadvantages of Local Government restructuring, upon which to make an informed decision. Submissions received by the Board in this review of the east coast councils are in line with the findings of the public submissions to the 1997 review, in that they indicate general support for mergers where they can deliver, amongst other benefits: service improvements, economies of scale, a cost-saving to ratepayers and improved governance. Submissions have argued that evidence of these benefits should be established before the specific merger proposal is supported, while submissions have attempted to provide evidence either in support of or refuting the likely benefits from the east coast merger proposal. Submissions to the Board have raised concerns that financial efficiencies could be at the expense of customer service. These concerns appear to derive from previous negative experiences following the last round of amalgamations in 1993 after which residents in some localities identified a reduction in services and local representation. The Board notes that surveys in other states confirm that post-amalgamations in the 1990’s, communities may have experienced a deterioration in services. This has been attributed by some in the sector to financial stress caused by excessive restrictions on revenue-raising and other financial pressures on the sector generally6. Submissions have also asked the Board to consider whether: larger councils are necessarily better, noting that strong local relationships are a positive factor in local government for both staff and elected members7. a reduction in council numbers is necessary and if mergers are a ‘one size fits all approach’. small operations may exhibit more adaptability in meeting local needs and expectations and delivering maximum performance for expenditure8.

6 Local Government Board 1997 Review of Councils Report, Interviews with CEOs of Vic and SA councils post amalgamation. 7 Submission 19 8 Submission 19

2.3. The Board’s approach The Board’s terms of reference require that the Board examine the merger proposal on its merits, as it cannot be assumed that efficiencies and benefits will automatically accrue from a merger. The Board considers that for a voluntary merger proposal to proceed, the following potential outcomes must be demonstrated: long-term financial sustainability, enabling the council to provide services that meet community expectations and statutory requirements. benefits for the community, such as: enhanced governance community capacity building improved service delivery improved management practices including, asset management, long term financial planning and human resource management. The Board has sought to establish whether these outcomes would be achieved by: i) commissioning a financial analysis from KPMG specifically seeking information on potential efficiencies and costs of a merger between the two east coast councils ii) requesting that the councils provide information regarding the specific areas where potential cost savings and efficiencies could be realised iii) inviting KPMG to make its own assessment in respect to potential cost savings and efficiencies and the projected financial sustainability of the two councils both as stand-alone councils and in a merged council scenario iv) undertaking its own analysis based on the evidence requested above, through public submissions and with regard to interstate and Tasmanian precedent with respect to mergers and amalgamations. The Board has also given specific consideration to the potential impacts on communities from a merger. Interstate and previous Tasmanian precedents have demonstrated that the impacts of mergers on councils and communities are not inconsiderable. The Board therefore considers that merger proposals should only be supported where they provide long-term strategic and operational benefits. In relation to the short-term costs and transitional arrangements associated with the creation of a merged council, the Board considers that detailed examination of this issue is contingent on the merits of a merger being established as set out above.

Chapter 3. East Coast: Background information 3.1.1. Comparative statistics

Municipal Area Break O’Day Glamorgan-Spring Bay Estimated Residential Population 6311 4464 20089 Median Age of Residents(yrs) 45.9 48.7 (2007) Projected population 2032 7961 5443 Population Growth 2001-06 (%) 1.5 1.6 Size of the Municipal Areas (km2) 3 521 2 587 Persons Per sq km 2 2 Municipal Property Valuations10 $56 997 118 $62 647 949 Unemployment rate (per cent) 6.7 3.6 (2008) Main Industry primary industries and primary industries and manufacturing, property manufacturing (viticulture, and business services forestry and fishing) and tourism Council Number of councillors 9 9 Total Budget Revenue(2009-10) $9 813 880 $8 884 000 Average Residential Rates $1 051 $1 285 (2007-08) Total Financial Assistance Grants $2,375,796 $1 168 746 (2008-09) Assessed Annual Values $66 243 812 $55 717 28411 (2006-07) Rateable Assessments 6100 5 431

9 Australian Bureau of Statistics Regional Population Growth, Cat. No 3218.0 10 State Grants Commission Annual Report citing the Office of the Valuer-General; Data averaged for 1 July 2006 and 1 July 2007

11 Glamorgan-Spring Bay Council Annual Report 2006-07

(2007-08) Road Length (km)12 Unsealed 348 147 Sealed 223 19813 Total 571 345 Bridge Deck Areas14 7246 m2 1 933 m2 Revenue (2007-2008) Rates (per cent) 53.3 59.4 Grants (per cent) 28.2 20.7 Fees (per cent) 9.6 19.0 Other 8.9 0.9 Cost of Debt Ratio 1.1 1.415 Council Employees FTEs16 61 42 Figures sourced from the Report Of the Auditor-General, Local Government Authorities and Other Public Bodies, and Measuring Council Performance in Tasmania, DPAC; and the ABS.*Cost of debt ratio is a measure of a Council’s ability to service debt; the lower the ratio, the higher the capacity to service debt.

12 Appendix 4, State Grants Commission Annual Report 2008-09, 13 Glamorgan-Spring Bay Council Annual Report 2006-07 14 Appendix 4, State Grants Commission Annual Report 2008-09, 15 Glamorgan-Spring Bay Council has advised that this will be substantially reduced following transfer of water and sewerage debt. 16 Exclusive of water and sewerage employees

3.2. Break O’Day Council The Break O’Day Council was created in 1993 when the former municipal areas of Portland and Fingal were amalgamated with some minor adjustments which excluded Avoca, Royal George and Rossarden in the south west and Musselroe Bay in the far north east. The Break O’Day Council area comprises the eastern portion of the Fingal Valley and coastal zone from the Denison River in the south, to Eddystone Point in the north17. The municipal area shares boundaries with Dorset Council in the north, Launceston City and Northern Midlands Councils to the west and Glamorgan-Spring Bay Council in the south. The resident population of just over 6,300 people more than doubles during the November to April tourist season. 3.2.1. Council Financial Performance The 2007-08 KPI Report indicates that the Break O’Day Council raised approximately 53.3 per cent of its income from rates and charges compared to the average of all Tasmanian councils of 52.2 per cent. 18 The 2007-08 KPI Report figures also indicates that Break O’Day Council had a cost of debt ratio of 1.1 per cent. Cost of debt ratio is a measure of a council’s capacity to service debt; the lower the ratio the higher the capacity to service debt. The average cost of debt ratio for all Tasmanian councils for this period was 1.0 per cent. Figures in the 2007-08 KPI Report indicate that Break O’Day Council had an average residential rate of $1 051. The average residential rate for all Tasmanian councils was $1 224. The 2007-08 audit was completed by the Auditor-General with no major issues outstanding. 3.2.2. Employment As at December 2008, the Break O’Day Council municipal area had an unemployment rate of approximately 6.7 per cent, down from 7.6 per cent in December 2007. The State average for December 2008 was approximately 4.4 per cent. Break O’Day Council has stronger employment in the primary industries and manufacturing sector and less in the property and business services sector. The Council employs a staff of 61 full time equivalents (FTEs) compared to 42 in Glamorgan- Spring Bay Council and the State average of all councils of 125.6 FTEs. 3.2.3. Population As at 30 June 2008, the Break O’Day Council municipal area had a population of 6 311 residents, 1.3 per cent of the total Tasmanian population.

17 Report of the Auditor-General No.1 of 2009 Volume 2 18 Note that these figures are prior to the removal of water and sewerage.

The ABS estimates that between 2001 and 2006, the Break O’Day Council population increased by 437 or 1.5 per cent. The Tasmanian population increased over the same time period by 0.8 per cent. Demographic Change Advisory Council modelling based on high, medium and low scenarios shows that in the medium scenario, the population of Break O’Day is projected to grow by 27 per cent by 2032. The population density for Break O’Day Council was two persons per square kilometre which is the same as the population density for Glamorgan-Spring Bay Council. 3.2.4. Age Profile The age profile for the Break O’Day Council municipal area indicates an older population than the average of all Tasmanian council areas. The median age of the Break O’Day Council population was 45.9, higher than the Tasmanian average of 38.8. 3.2.5. Area The Break O’Day Council municipal area covers 3 521 square kilometres. The Tasmanian average for all councils is 2 343 square kilometres. 3.2.6. Roads The Break O’Day Council municipal area has 546 kilometres of council-managed roads. The Tasmanian average is 486 km. 3.2.7. Townships in the Municipal Area The distinct townships in the municipal area are as follows: St Helens: is the largest settlement on the east coast and is the service centre for the northern part of the municipal area, providing community and tourist services and employment activities, including a port. It is the main support town for Scamander, Beaumaris, Binalong Bay and the Bay of Fires, and provides residential and retirement living dwellings19. A major commercial centre, St Helens includes a significant commercial and light industrial base and an airport which is used extensively by the air ambulance, for export of live produce from the town, as well as private and charter flights20. St Helens has experienced a significant increase in development and residential construction over recent years and continues to attract private sector investment as the community grows21. St Marys: serves a sub-regional role, providing retail, community and tourist services, employment activities (including forestry in the surrounding area) and residential living opportunities. It is the main support town for many of the municipal area’s inland settlements such as Fingal and Mathinna22.

19 Vision East Stakeholder and Community Consultation Paper 20 General Review of Break O’Day Council Report, Local Government Board 2005 21 General Review of Break O’Day Council Report, Local Government Board 2005 22 Vision East Stakeholder and Community Consultation Paper, 2009

The St Marys community has enjoyed a significant increase in population in recent years. This is primarily due to the significant increase in real estate prices in the coastal areas of the municipal area and the fact that property prices in the St Marys and Fingal Valley areas have been relatively low. This town provides services to the rural and urban community and includes extensive recreational facilities and a viable commercial centre. St Marys also enjoys a fully serviced hospital and community centre with one resident General Practitioner. Binalong Bay: is the major gateway to the Bay of Fires, being located at its southern end. It provides a range of permanent and holiday homes, although it has minimal retail or tourist services, relying instead on St Helens23. Beaumaris, Scamander and Falmouth: are coastal settlements that are popular for holiday homes. They are seen by the community as having service and tourism roles but limited opportunities for growth24. This comprises a coastal strip with a major concentration of ocean frontage and accommodation adjacent to the Scamander River. The community, as with St Helens, experiences a significant increase during the November to April tourist season. 25 The majority of this area receives limited services of water and sewerage reticulation as well as waste removal. However, the water supply is not fully treated. There is no water or sewerage service at Falmouth. 26 Fingal: is a small inland settlement, with a notable stock of heritage buildings. It is viewed by the community as having service and tourism roles but again limited opportunities for growth27. The Fingal community is a strong commercial centre with the Cornwall Coal Company and significant agricultural activity providing significant employment opportunities for the town. The centre is fully serviced with fully reticulated water and sewerage and a community centre which provides family based care throughout the northern and north east region28. Four Mile Creek: has evolved from a former shack community into a more permanent settlement, although it does not have many services or facilities and has limited potential for growth29. Ansons Bay: is the northernmost settlement in the municipal area, and like Binalong Bay is another entry point for visitors to the Bay of Fires. It is a holiday resort town with a small settlement30.

23 Vision East Stakeholder and Community Consultation Paper, 2009 24 Vision East Stakeholder and Community Consultation Paper, 2009 25 General Review of Break O’Day Council Report, Local Government Board 2005 26 General Review of Break O’Day Council Report, Local Government Board 2005 27 Vision East Stakeholder and Community Consultation Paper, 2009 28 General Review of Break O’Day Council Report, Local Government Board 2005 29 Vision East Stakeholder and Community Consultation Paper, 2009 30 Vision East Stakeholder and Community Consultation Paper, 2009

3.3. Glamorgan-Spring Bay Council The Glamorgan-Spring Bay Council area was proclaimed a municipal area under the Act and combined the former municipal areas of Glamorgan and Spring Bay. The municipal area stretches from Runnymede in the south to the Denison River just north of Bicheno. It is bounded on the east coast by the Tasman Sea and is bordered to the south by the municipal areas of Sorell and Southern Midlands and to the north by Break O’Day. The population serviced by the Council is approximately 4 400 in an area of 2 587 square kilometres. However, during the summer months the population increases threefold, especially upon the return of owners of holiday homes and caravans31. Transport access is via the Tasman Highway from north and south and via the Lake Leake Highway to the west. Tourism is a significant industry; featuring the Freycinet National Park, Maria Island, as well as fishing, grazing, forestry, aquaculture, with a more recent focus on cash cropping including viticulture, olives and walnuts. 3.3.1. Council Financial Performance The 2007-2008 KPI Report figures indicate that the Glamorgan-Spring Bay Council raised 59.4 per cent of its income from rates and charges compared to the average of all Tasmanian councils of 52.2 per cent. Comparatively the Break O’Day Council raised 53.3 per cent of its revenue from rates 32 Figures drawn from the 2007-2008 KPI Report indicate that, at 20.7 per cent the Glamorgan- Spring Bay Council was less dependent on income from grants than the average of all Tasmanian councils which was 27.0 per cent. The 2007-2008 KPI Report figures also indicate that the Glamorgan-Spring Bay Council had a cost of debt ratio of 1.4 per cent. Cost of debt ratio is a measure of a council’s capacity to service their debt; the lower the ratio the higher the capacity to repay debt. The average ratio for all Tasmanian councils was 1.0 per cent. Figures shown in the 2007-2008 KPI Report indicate that Glamorgan-Spring Bay Council had an average residential rate of $1 285. The average residential rate for all Tasmanian councils was $1 224. The 2007-2008 audit, undertaken by the Tasmanian Auditor-General, indicated that the council was continuing to incur deficits before capital grants suggesting that the council was not raising income at sufficient levels to cover all of its operating costs including depreciation. The report suggested that the council would need to consider ways to increase revenues or contain costs.

31 Report of the Auditor-General No.1 of 2009, Volume 2 32 Note that these figures are prior to the removal of water and sewerage.

3.3.2. Employment As at December 2008 the Glamorgan-Spring Bay Council municipal area had an unemployment rate of 3.6 per cent. The State average for the same period was 4.4 per cent. Comparatively, unemployment in Flinders was 2.7 per cent and in Southern Midlands 4.9 per cent. The employment profile from the 2006 census for Glamorgan-Spring Bay Council differed from the profile of the average of all Tasmanian council areas. Glamorgan-Spring Bay Council showed stronger employment in the primary industries and manufacturing sector and lower in education, and health and community services sectors. The Council employs 42 full time equivalents (FTEs) excluding water and sewerage services, compared to 66 in Break O’Day Council and the State average of all councils of 125.6 FTEs. 3.3.3. Population As at 30 June 2008, the municipal area had a population of 4 464. The average population of Tasmanian municipal areas, was 17 156. The Demographic Change Advisory Council estimates that between 2001 and 2006, the Glamorgan-Spring Bay Council population increased by approximately 340 or 1.6 per cent. Over this same period the Tasmanian population increased by approximately 0.8 per cent. Demographic Change Advisory Council modelling based on high, medium and low scenarios shows that in the medium scenario, the population of Glamorgan-Spring Bay is projected to grow by 24 per cent by 2032. The population density for Glamorgan-Spring Bay Council was two persons per square kilometre. 3.3.4. Age Profile The age profile of the Glamorgan-Spring Bay Council area showed a population that differed significantly from the average of all Tasmanian council areas. Compared to the Tasmanian average, Glamorgan-Spring Bay Council showed a lower percentage of its population in the 0- 14 and 15-24 age groups and a higher percentage in the 25-64 and 65+ age groups. The median age of the population was 48.7 compared to the Tasmanian average of 38.8. 3.3.5. Area The Glamorgan-Spring Bay municipal area covers 2 587 square km compared to the Tasmanian average of 2 343 square km. 3.3.6. Roads The Glamorgan-Spring Bay municipal area has 345 kilometres of council-managed roads. The Tasmanian average is 486 km.

3.3.7. Townships in the Municipal Area The Glamorgan-Spring Bay municipal area is made up of a string of distinct, coastal townships33: Swansea: is the most centrally located settlement on the east coast, and has a number of civic and business functions. It is a coastal town with a number of heritage buildings. Swansea is a major community and tourist service centre and a holiday resort town. Bicheno: is one of the larger settlements on the east coast and supports a relatively strong local fishing and tourism industry. Government and support services in the town are limited by its proximity to Swansea and new development has been slow to take up available opportunities. Bicheno is a major community and tourist service centre. Triabunna: is the second largest town on the east coast next to St Helens and is the gateway to Maria Island and the civic centre for the municipal area. Its sheltered harbour and port facilities support a diverse industrial base that includes fishing, forestry, timber processing, and light general industry. Triabunna is seen by the community as a settlement that has a diverse economic and community base but lacks the holiday and heritage focus associated with other east coast towns. The town is a major community centre that serves a sub-regional role. The area contains many historic buildings from Tasmania's colonial period. Maria Island can be reached by a short ferry ride from Triabunna. Orford: is a smaller settlement located within close proximity to Triabunna and is the gateway to the east coast from the south. The townships of Orford and Triabunna are approximately 80 kilometres north of Hobart or a one hour drive. The town is primarily a residential and holiday resort town. Coles Bay: is the settlement closest to the Freycinet Peninsula and has a primarily tourist and holiday function with some aquaculture and fishing. Coles Bay is primarily viewed by the community as a holiday resort town. Buckland: is an inland town with heritage buildings which also has a number of service functions. Little Swanport is a small settlement halfway between Triabunna and Swansea. Swanwick: is a community located very close to Coles Bay and is an area under particular development pressure.

33 Vision East Stakeholder and Community Consultation Paper, 2009

Chapter 4. Financial Analysis The financial analysis of the potential merger, prepared by KPMG, provided the basis for the Board’s consideration of the financial sustainability of the two stand-alone councils and of a merged council. The Board was also assisted by public submissions, information from the two councils and analysis of other relevant reports such as the Auditor-General’s Reports and the Local Government Division’s Measuring Council Performance in Tasmania (KPI) reports. KPMG was requested to undertake a financial analysis with respect to: i. the current financial sustainability of the Break O’Day Council (excluding water and sewerage management but including any potential dividends) ii. the current financial sustainability of the Glamorgan-Spring Bay Council (excluding water and sewerage management but including any potential dividends) iii. the projected long-term (20-year) financial sustainability of the Break O’Day Council iv. the projected long-term (20-year) financial sustainability of the Glamorgan-Spring Bay Council v. the projected long-term (20-year) financial sustainability of a voluntarily merged council. The Terms of Reference for KPMG’s review included that it: 1. document the assumptions underlying the analysis and risks associated with these assumptions 2. assess the viability of the councils 3. consider infrastructure gaps and condition 4. consider the basis of depreciation 5. assess the rating history and rating policies of the two councils 6. determine the fixed cost per ratepayer (current and projected) 7. consider the impact on funding (for example State and Commonwealth Government grants) 8. consider the demographic profiles of the municipal areas (eg population and economic growth and tourism) 9. estimate the savings from a merger (both within council operations and to ratepayers) 10. estimate the potential economies of scale through: a. cost savings (population size v expenditure on general operations) b. efficiency improvements (improved quality and range of services) 11. consider the financial management and asset management systems 12. identify any other potential financial benefits and impacts. After meetings with the general managers and senior finance staff of each council, KPMG developed a financial model for a merged council and assessed the financial performance of this scenario compared with the current arrangements.

The Board commissioned the independent financial analysis of the two councils and modelling of a merged council in the expectation that the two councils would support the review by providing: comprehensive financial information some underlying consideration of the structure and operations of the proposed merged council. The Board considers that this expectation was justified by the fact that: a. the two councils requested the review b. the information sought related to budget estimates, financial plans and asset management information that should be available in councils being managed in accordance with best practice. However, with the exception of a limited financial analysis of the potential financial position of a merged council prepared by the Glamorgan-Spring Bay Council General Manager, both councils undertook little or no preparation of information for the Board review. The Board has also been advised that the councils failed to respond, in a timely manner, to requests from KPMG for information to assist in the financial analysis undertaken at the request of the Board. The council’s failure to provide robust information could be attributed to their expectation of a merger potentially taking place. However, with a couple of exceptions, such as the Break O’Day Council strategic plan and the appointment of a Corporate Services Manager at Glamorgan-Spring Bay Council, there is no evidence that work has been placed on hold in expectation of a merger. In fact in some cases the contrary seemed to be the case, for example the change of rating methodology at Glamorgan-Spring Bay Council. In the Board’s view, the KPMG report therefore necessarily contains certain caveats regarding the use of the information in the report. These include: That KPMG has not conducted an independent audit of the information provided by the councils and cannot verify the accuracy of the information upon which it has relied. The 2008-09 financial statements for councils are yet to be audited by the Auditor-General. Break O’Day Council financial data contains some high level estimates based on the 2007-08 actual results as the council had not prepared its accounts at the time of the report. KPMG has highlighted anomalies in the information and views received from the councils about the adequacy of asset renewal funding and the appropriateness of depreciation as a proxy for the diminution in value of the assets. Water and sewerage data was removed from financial statements but this has required reliance on estimates due to data limitations in their accounting and reporting systems. Estimates of the financial implications of distributions from the newly formed water corporations are indicative only as independent valuation is yet to occur. Financial Grants estimates are based on indicative and qualified advice from the State Grants Commission.

In the event a merger proceeded the councils would need to undertake further due diligence work34. In accepting the KPMG report, the Board has noted these caveats and has taken these into account in making its own analysis of the merger proposal.

34 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009

4.1 Current and long-term viability of the stand-alone councils 4.1.1. Financial Overview of Break O’Day Council Key findings in the Auditor-General’s Report for 2007-08 for the Break O’Day Council included that: The Council’s operating margin was above the expected benchmark of one in all four years, with the Council generating increased operating surpluses before capital grants. An operating margin above the benchmark indicates a council generating sufficient revenue to fulfil its operating requirements. The self financing ratio was above 30 per cent in all years under review. (A positive ratio indicates that the Council generated operating cash flows which contributed towards its capital expenditure programs.) The Council generated the majority of its operating revenue from its own sources. However since 2005-06 the percentage of own source revenue has decreased due to an increase in the level of grant funding received in 2006-07 and 2007-08. The Council was able to meet all short-term liabilities in all four past years. KPMG found that the Break O’Day Council has ‘historically adopted conservative financial management practices and would be likely to continue to function as a stand-alone council provided it adheres to a long-term financial strategy based on significant real rate increases and with current service levels’. KPMG has identified a potential long-term financial outlook for Break O’Day Council showing: increased rate revenue in excess of operating expenditure by approximately $40-$100k p.a. over the next 20 years maintenance of minimum cash reserves of between $7-8M, as per current council policy renewal of existing assets to an approximate level of 80-100% per cent of depreciation each year generation of an annual operating surplus of no more than $500K stable equity maintained at around $80M35. This overall outlook is based on key assumptions which include: that fees and charges are held constant, in real terms over the 20-year model that the Council takes no new loans that operating costs continue to increase at less than rate income by $40K p.a. from 2011-14 to $100K p.a. from 2015-2028. that asset replacement and renewal occurs at about 80-100 per cent of depreciation36.

35 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009 36 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009 39

The Board notes that the Council’s minimum cash reserve is maintained only to provide cash reserves in emergency situations. 4.1.2. Financial Overview of Glamorgan-Spring Bay Council Key findings in the Auditor-General’s Report for 2007-08 for the Glamorgan-Spring Bay Council included that: The Council’s operating margin was below the expected benchmark of one in all four years and was declining, which represented increased operating deficits before capital grants. An operating margin below the benchmark indicates a council might not be generating sufficient revenue to fulfil its operating requirements. The Council experienced negative underlying result ratios over the period reflecting the operating deficits before capital grants in all four years under review. Although it is not unusual for a council to incur operating deficits, the council’s estimates for that year reflected that it had budgeted for a surplus. The Auditor-General noted in his report that to ensure long-term financial sustainability, he would expect a council to as a minimum budget for a break-even operating result and then meet its budget expectation. The Auditor-General identified Glamorgan-Spring Bay Council as one of 12 councils in Tasmania which continued to incur deficits before capital grants, contributions and revaluation increments. He noted that these 12 councils had recorded a deficit for a minimum of three successive financial years. The self financing ratio was between 14-20 per cent in the years under review. (The ratio shows net operating cash flows generated by council as a percentage of operating revenue. A positive ratio indicates that the council generated operating cash flows which contributed towards its capital expenditure programs.) However while the ratio each year was positive, cash flows generated were below the depreciation expense. The Council generated the majority of its operating revenue from its own sources. The Council’s current ratio was below the benchmark of one in three out of the four years indicating that a council may experience difficulty in meeting all short-term liabilities. The KPMG report found that Glamorgan-Spring Bay Council has recently adopted large rate rises and reviewed its operating costs to improve its financial results. The report found that a ‘long-term financial strategy based on modest real rate increases with current service levels should enable it to continue to remain as a stand-alone council, all other things being equal’. The potential long-term financial outlook for Glamorgan-Spring Bay Council identified by KPMG showed: increased rate revenue in excess of operating expenditure by approximately $10-$20k p.a. over the next 20 years maintenance of minimum cash reserves of between $1-1.5M renewal of existing assets to an approximate level of 90 per cent of depreciation each year

generation of an annual operating surplus of no more than $300K stable equity maintained at around $50M asset replacement and renewal occurring about 80-100 per cent of depreciation37. The Board notes that the Council’s minimum cash reserve is maintained only to provide cash reserves in emergency situations. 4.1.3. Revenue and rating in the two councils The two councils currently apply different rating methodologies. Break O’Day Council applies a general rate utilising the Assessed Annual Value (AAV) method, as provided under the Act. In contrast Glamorgan-Spring Bay Council for the 2009-10 financial year implemented a new modified minimum rate which to all intents and purposes equates to a ‘flat residential rating system’.38 KPMG assessed an estimated fixed cost per ratepayer for both councils using operating expenditure as a proxy for ‘fixed costs’ and the number of rateable residential properties as an indicator of the number of ratepayers. Break O’Day Council cost per ratepayer equated to $2 502, compared to $2 777 for Glamorgan-Spring Bay residents39. The 2007-08 KPI Report data reflects that rates and charges represented 53.3 per cent of Break O’Day Council’s total revenue and 59.4 per cent of Glamorgan-Spring Bay Council’s total revenue, compared with the small council group average of 45.7 per cent indicating a relatively higher reliance on this source of revenue. At $2 583 average revenue per capita Glamorgan- Spring Bay Council is the second highest rating council in the small council group. The KPMG report highlights potential capacity to increase rate revenue within the Break O’Day municipal area in excess of operating expenditure by approximately $40k-$100k p.a. over the next 20 years40. However several Break O’Day councillors expressed a reluctance to implement further rate increases in the short-term. This may reflect an approximate 30 per cent increase in rating on rural properties, highlighted by the General Manager, in the municipal area in this last year. Glamorgan-Spring Bay Council significantly increased its rates income in 2006-07 to address negative operating results41. The Council is aware that it cannot continue to operate effectively

37 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009 38 While the Board notes that the LGAT has requested an independent review of the valuation and rating system, which when undertaken could result in potential changes to rating practice in Tasmania, this review has yet to commence. The following analysis is therefore conducted on the basis of the present rating approaches in both councils. 39 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009 40 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009 41 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009

41 without containing further increases in operating expenses. As a result of the shift to ‘flat rating’ 54 per cent of non-vacant residential properties will pay the same rate irrespective of AAV, compared with 12 per cent under the former policy. All other non-vacant residential properties will be rated under this new policy over the next 3-5 years. This policy is not intended to increase rates revenue in total but rather to provide what the council believe is a more ‘equitable’ rating system that is more comparable to a flat service charge. However, regardless of the ongoing dialogue in the sector as to whether or not ‘flat-rating’ does in fact deliver more equitable outcomes, the Board notes that the impact of a flat-rating system is likely to present some constraints on the potential for further rate increases because of the expected impact particularly on lower-socio economic groups in the municipal area. 4.1.4. Services Management in both councils identified that resource constraints are resulting in the delivery of sub-optimal service levels in some areas (eg verges and paths and regulatory services). The Board also noted information provided by staff that in both councils that some departmental areas were either understaffed or have just enough staff, with no resources free to assist the set up of a any new merged council. In addition, this understaffing has led to a backlog of work. This was supported by some submissions: ‘Telephone calls can fail to get a response for up to four days and then only with reminder calls and emails. This is not a criticism of council employees. It is likely that this is all that can be done given the size of the task.’42 Some submissions highlighted difficulty for some community members in accessing onsite council services or offices, providing an example of a reduction in the opening hours of the Glamorgan-Spring Bay Council Offices at Swansea43 and identifying that travel to alternative council offices may be prohibitive due to the cost of petrol. The Board noted that the views expressed by council staff and the community about the inadequacy of existing council services, and staffing in both municipal areas contrasted with the views of councillors. KPMG notes in its report overview letter that they were: ‘advised that some current service levels to residents and visitors in the region and some management and staffing practices within each of the councils may be less than desirable. There would appear to be limited scope to address such deficiencies with the financial resources available to each stand alone council.’44

42 Submission 29 43 Submission 29 44 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009

The KPMG report notes further that a new council ‘may deploy some of the savings from other areas to bolster resources in development, environmental and regulatory services’45. The provision of environmental health services is a good case in point. Council Environmental Health Officers play an important role in relation to food safety, public health, environmental protection and emergency response. The Board noted comments made by the General Manager of Break O’Day Council that acknowledged that the level of environmental health inspections may be sub-optimal. In his submission to the Board, the Director of Public Health, Dr Roscoe Taylor noted that the area is mostly rural and remote and subject to large summer populations due to the influx of tourists at that time, which in turn increases the need for environmental health services. He advised that in his view, the Break O’Day Council and Glamorgan-Spring Bay Council do not currently have enough environmental health staff to fully deliver their obligations under the Public Health Act 1997 and the Food Act 200346. While supporting the merger, Dr Taylor states that a council with the area and population proposed, should have no less than two fully qualified EHOs. Currently each council has a part-time EHO (0.4% FTE) and Break O’Day Council also has a full-time Environmental Health Support Officer. The Board notes that the KPMG report proposes just one EHO (1FTE) in the merged council, despite noting that the councils have identified regulatory and inspectorial services as areas which may be presently under resourced. 4.1.5. Infrastructure gaps and conditions

Break O’Day Council Break O’Day Council uses the Moloneys Asset Management Systems to document and assess the condition of some of its infrastructure assets including footpaths, street signs and street furniture but does not have a comprehensive asset management system that would allow it to evaluate fully the condition of all its infrastructure. The KPMG report indicates that changes in staffing and other resource constraints have resulted in ‘some issues with the integrity of the data’47. The Council does not have up-to-date long-term asset management plans and relies on the ‘book’ depreciation (that is it utilises accounting depreciation as a proxy for the real diminution in value of the municipal areas assets) which may not necessarily reflect the true condition of the assets. The Break O’Day Council General Manager has indicated that, anecdotally, bridges are in good condition and roads are in fair condition but there are particular challenges to fund upgrades to Binalong Bay Road and Ansons Bay Road. It is his view that any major infrastructure gaps in the

45 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009 46 Submission 41 47 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009

43 municipal area have been significantly decreased by the removal of water and sewerage. However there is a desire by management to provide a higher standard of road, stormwater and public facilities. KPI Report data and the Auditor-General’s report data indicates that capital expenditure as a percentage of depreciation has been around 70 per cent over the last five years, which is less than its objective of 90-100 per cent. The Board is concerned that the Council’s reliance on ‘book’ depreciation may not necessarily reflect the true condition of the assets and that there are no projections available. It agrees with the KPMG report conclusion that asset management data at Break O’Day Council is therefore open to question.

Glamorgan-Spring Bay Council Glamorgan-Spring Bay Council has a long-term asset management plan that is based on the Moloneys Asset Management Systems for road, kerb, footway etc network and AusSpan (TasSpan) software for bridges. The Council considers it is generally on track with asset renewal expenditure other than in footpaths and kerbing and channelling. The KPMG report flags that the Moloneys Asset Management Systems indicate that the current capital renewal funding for roads in Glamorgan-Spring Bay Council was 51 per cent of the long- term average requirement. KPI Report data and the Auditor-General’s report data shows such funding for all assets has been adequate. The KPMG report concludes that this may indicate that funds have been allocated to other assets such as water and sewerage, rather than roads. 4.1.6. Grants While all Tasmanian councils pursue some small ad hoc grants for capital and community development programs, the bulk of grant funding is distributed by the State Grants Commission. In 2009-10 Tasmanian councils are eligible for a share of three pools of funding through the State Grants Commission: $30.9M Base Grants (Commonwealth Government funded) $31.5M in Identified Local Road Funds (ILRF) (Commonwealth Government funded) $1.5M in Heavy Vehicle Motor Tax Revenue (State Government funded). In 2008-09 Break O’Day Council received a 3.9 per cent share of total FAGs across Tasmania, the Glamorgan-Spring Bay Council received a 1.9 per cent share48.

48 Pg 34, Annual Report for 2008-09, State Grants Commission

Table 4.1.6a Total Grants for Break O’Day Council and Glamorgan-Spring Bay Council 2007-08 & 2008-09 $ 2007-08 2008-09 Base Grant Component Break Glamorgan- Break Glamorgan- O’Day Spring Bay O’Day Spring Bay Council Council Council Council Per Capita (30 per 111 938 76 982 115 043 80 884 cent) Relative Needs (70 1 042 900 360 247 1 022 855 312 622 per cent) Total Base Grant 1 154 839 437 229 1 137 898 393 506 Road Grant 1 192 329 672 294 1 211 585 782 046 Base Grant adjustment +13 085 +4 954 -6 879 -2 379 Road Grant adjustment +13 229 +7 459 -6 858 -4 427 Total Grant Provided 2 373 482 1 121 936 2 335 746 1 168 746 Base Grants The individual council base grants for both councils are currently trending downwards, reflecting enhanced revenue capacity arising from substantial increases in total assessed annual value (AAV) for those municipal areas relative to the state average. Both are experiencing reductions in base grant funding and are gradually moving towards a minimum base grant. The Commission currently applies caps and collars within the Base Grant Model to contain the impact of large movements in grant outcomes between distribution years. Due to the current downward trend in grant outcomes for both councils, the Commission has indicated that its expectation is that a base grant for each council will be no less than 10 per cent below the previous year entitlement due to the continued application of the 10 per cent collar.

Table 4.1.6b Base Grant Trends Council 10 per cent Collars 2007-08 2008-09 2009-10 Break O’Day -Before 1 169 150 1 159 644 1 000 007 Council -After 1 154 839 1 137 898 1 024 108 Glamorgan-Spring-Before 265 735 80 884 83 258 Bay Council -After 437 229 393 506 354 155 Both the Break O’Day Council and the Glamorgan-Spring Bay Council, with a reliance on grant funding of 25.1 and 19.3 per cent of total revenue respectively, have a relatively lower reliance on grant funding than the average small council (34.9 per cent). The Board noted that the estimated 10 per cent reductions in Base Grant above (which are anticipated to continue until the Glamorgan-Spring Bay Council reaches a minimum grant in 2023 and the Break O’Day Council in 2032) will have a significant impact for both councils. The Board considers that residents can expect to see a decrease in service standards unless alternative revenue raising sources can be found. However, this would be the case whether or not there is a merger.

4.1.7. Board findings with respect to the short-term and long-term viability of the two stand-alone councils The Board notes the findings of the KPMG financial analysis that both councils could continue to function as stand-alone councils. But it notes that with regard to Break O’Day Council this assessment is based on the caveat that the Council would need to adopt policies geared to all of the following: 1. significant increases in rates revenue 2. an increase in asset renewal expenditure 3. operating cost containment 4. minimal new project expenditure beyond current levels. Note: the Council’s continually declining operating result is expected to be balanced out by 2018 due to anticipated growth in rate revenue. In relation to Glamorgan-Spring Bay Council, this assessment is based on the caveat that the Council would need to adopt policies to comply with each of the following: 1. raising revenue in excess of operating costs 2. undertaking asset renewal around current levels of expenditure 3. containing operating costs 4. no expenditure on new projects above existing levels. The Board considers that the KPMG findings, quoted previously, requiring both councils to live within these respective resource constraints will be challenging. For example, KPMG’s modelling requires that the Glamorgan-Spring Bay Council raises rates revenue by 78 per cent over 20 years, contains operating costs to a 61 per cent increase over 20 years and maintains new project expenditure at existing levels. Similarly Break O’Day Council would need to increase rate revenue by 132% over 20 years, and maintain project expenditure and asset maintenance and renewal expenditure to existing levels. However, even on the premise that both councils are able to adhere to these policies, this would still only result in the councils maintaining current standards and would not address any deficiencies with current service levels or asset renewal expenditure. The Board also notes the KPMG report findings that some current service levels to residents and visitors in the region and some management and staffing practices within each of the councils ‘may be less than desirable‘ and that ’there would appear to be limited scope to address any such deficiencies with the financial resources available to each council’. The KPMG financial analysis noted that Glamorgan-Spring Bay Council management expressed concern that the Council is ‘only marginally viable as a stand-alone council due to its reliance on capital grants to support its revenue base’. The Board notes that while Glamorgan-Spring Bay Council’s reliance on grants and contributions appeared to be low, in fact lower than both Break O’Day Council and that of the small council group average of 34.9 per cent, there have been significant rate increases in recent years. This would appear to limit the scope for further rate rises in the near future. The shift to a ‘flat rate’ at Glamorgan-Spring Bay Council may have actually exacerbated this problem rather than alleviated it. The Board also noted the conservative financial management practices adopted by the Break O’Day Council in particular. Whilst prudent financial management mandates that there should

46 be a ‘healthy’ debt to equity ratio in all organisations, there is a case for debt to be seen as a valid mechanism for the provision of long term community physical infrastructure and that a ‘no debt’ policy position may not necessarily be the most effective financial strategy for councils to embrace. Both councils lacked comprehensive financial and asset management plans. In this regard, the Board considers that improved financial management and asset management by both councils would enable them to make better-informed budgetary and asset management decisions and to maximise the provision of council services to their communities. The Board agrees with the views of the general managers that the two councils would continue to struggle to attract sufficiently qualified professional staff and would need to rely on contractual arrangements and resource-sharing with other councils, to meet community expectations and their statutory obligations. The Board notes that contractual arrangements, while necessary are more costly than alternatives. The Board considers that both councils could continue to function as stand-alone councils, but may not have the financial capacity to address issues currently facing them such as sub-optimal service standards, staffing gaps and infrastructure renewal and development.

4.2. Long-term viability of a merged council The KPMG modelling for a merged council is based on the combined financial positions of the two councils together with estimated one-off merger costs and savings from year one and ongoing savings in annual operating expenses from staff restructuring, removal of duplication. The model assumes the retention of service standards at current levels. The model also assumes that the merged council would adopt policies to ensure: rate income increases in excess of operating expenses by $20K to $130K p.a. that fees and charges are held constant, in real terms over the 20 year model a reduction in base grant at the same rate as for the individual councils the repayment of Glamorgan-Spring Bay Council loans and no new loans asset replacement expenditure at around 80-90 per cent of depreciation the containment of operating costs at $20 to $130k p.a. less than rate revenue over the 20 years expenditure of approximately $1M to 1.2M p.a. on new assets over the 20 years49. However the Board notes that this would not allow the merged council to explore appropriate financial strategies for improving the level of infrastructure including the strategic use of debt. 4.2.1. Revenue and Rates The Board considers that there would need to be a transitional period while the disparate rating policies and rating efforts of the two councils are aligned. This would need to be considered in the transitional arrangements for a merged council. A number of submissions raised the potential for savings to ratepayers from a merger as a matter of key interest as to whether or not a merger would receive community support. This was also a finding in state-wide polling conducted in the 1997 review of councils. The Board notes that the 1997 amalgamation review was considering imposing rate capping for the first three years of the new councils. The KPMG report suggests a merged council might theoretically, in the long term, have the capacity to realise a reduction in rates in comparison to stand-alone councils as the merged council could potentially make saving choices to minimise rating increases. The Board considers however that a more likely scenario is that cost savings would not be available to enable a reduction in rates as they would be required to ensure effective service delivery and asset management by the merged council. 4.2.2. Grants The Board sought advice from the State Grants Commission (Commission) on the impact of a potential merger between the two councils on grants funding.

49 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009

Base Grants Base Grant funding is distributed according to six National Principles. Principle 6 of the Commonwealth Government principles is concerned specifically with the treatment of amalgamating councils and states that: “Where two or more local governing bodies are amalgamating into a single body, the general purpose grant provided to the new body for each of the four years following amalgamation should be the total of the amounts that would have been provided to the former bodies in each of those years if they had remained separate entities.” The Commission has advised that it currently interprets this principle to mean that amalgamating councils remain separate within the Commission’s assessments until the end of the four year period stated in the principle, at which point the single merged entity would be assessed on its own merits. A merger would also create issues regarding the collection of data for the two council areas upon which the Commission’s assessments are based. Because of the interrelationship between Commission assessments and the impact that specific decisions about the merger would have on these assessments (eg the location of the administrative centre of the municipal area), the Commission is unable to provide dollar estimates. Based on preliminary, qualified advice from the Commission, KPMG has concluded that in terms of Commonwealth Government financial assistance grants (FAGs) the merged council may be no worse off than the individual councils. This is largely because the Base Grant funding for the two councils in a merged council scenario is expected to decline at the same rate as the sum of the individual councils due to increasing AAVs in that region.

Identified Local Road Fund (ILRF) Grants The distribution of this fund is guided by a single National Principle set by the Commonwealth Government, which is as follows: “The identified road component of the financial assistance grants should be allocated to local governing bodies as far as practicable on the basis of the relative needs of each local governing body for roads expenditure and to preserve its road assets. In assessing road needs, relevant considerations include length, type and usage of roads in each local governing area.” As the Commission’s assessment for these grant funds is based solely on road length data, provided that a merger does not involve any boundary changes, the assessment is simply a process of combining the road lengths of the two councils and applying newly calculated cost adjustors for the new merged council. The Commission has indicated that grant impacts would be minimal overall with the Remoteness Cost Adjustor being the only aspect of the model to impact on grant outcomes to any degree. All other things being equal the Commission considers a merger between the two councils would have a minimal impact on their combined ILRF entitlement.

Heavy Vehicle Motor Tax Revenue Payments The distribution of this fund is based on data from the Freight Demander Survey collected by the Department of Infrastructure, Energy and Resources. The survey provides a measure of tonne-kilometres which is the product of the tonnage carried over local roads and the distance over which it is carried. As the distribution of this pool of funds is based solely on this data and

49 the pool remains unaltered each year, the Commission has advised that provided no boundary changes were involved, a merged council would be entitled to the combined entitlement of its merging councils. 4.2.3. Efficiencies under a merged council The KPMG report50 identifies a potential total saving in the merged council structure of between $900K to $1M per annum. This is based on reduced operating costs in a merged council structure through savings in: staff salaries and on-costs overheads elected members allowances one-off savings, including plant rationalisation.

Staff salary and on-costs The KPMG Report identifies a potential reduction in staffing positions of 15 FTEs for which the potential ongoing saving would be $660 000 p.a. The potential savings are proposed on the assumption that service levels remain constant. Savings from salary and oncosts identified in the KPMG report include: Annual Employee salary savings (General Manager and Corporate Services) of $374 522 Annual Employee oncosts 38.60% (General Manager and Corporate Services) savings of $144 565 Annual Employee salary savings (Works and Infrastructure) of $183 335 Annual Employee oncosts 38.60% (Works and Infrastructure) savings of $70 767 Annual Employee salary savings (Community Development and Visitor Information) of $-19 260 Annual Employee oncosts 38.60% (Community Development and Visitor Information) savings of $-7 43451. This equates to an estimated total of $746 495 per annum. The Board notes that the General Manager of Glamorgan-Spring Bay Council has indicated that he considers that there is scope for potential savings in a merged structure. However, the General Manager of Break O’Day Council has indicated that his council currently has 11 vacant staffing positions and that even a merged council structure would require savings to be

50 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009 51 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009

50 redistributed to fill gaps in essential staffing and service provision, eg IT, and in attracting and training staff to reduce reliance on consultancy. This accords with the views expressed to the Board by the staff in both councils, that while they were managing to fulfil most of their requirements they were under pressure and a lack of spare capacity limited the opportunity for staff to take leave. In light of the differing views expressed by the general managers, the Board found it difficult to accept the potential for savings and staffing levels in the merged entity proposed in the KPMG report. The Board also considers that a merged entity should be seeking to deliver improvements in services, with consequential staffing requirements. Further, while the Board recognises savings could be realised by reducing reliance on external contracting, it does not consider that there is sufficient evidence to support the proposition that a merged east coast council would be significantly more able to attract and retain staff with the necessary expertise.

Operating and Administrative Cost Efficiencies The KPMG report identifies the following potential ongoing savings: public liability insurance ($10 000) IT service plans ($16 000) system maintenance costs ($10 000) audit duplication ($18 000) plant efficiency (to be determined) other (to be determined but including visitor marketing costs of $30 000)52. This equates to an estimated total saving per annum of $84 000 plus plant efficiency and other savings.

Savings in elected member allowances The KPMG report identifies potential savings in councillor allowances of $90 000 based on a reduction in councillor numbers by 50 per cent to nine councillors, each receiving an average of $10 000 in allowances p.a.53. If the two councils were to merge this would result in the merged council being promoted into the next higher category for the determination of allowances. Assuming that the merged council retained nine councillors, the total allowances payable would decrease from $227 689 to $147 592. This represents a saving of approximately $80 000.

52 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009 53 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009

The Board notes that there could be some saving in election costs, as only one election rather than two would be required.

One-off Savings The KPMG report identifies estimated one-off savings from a merger that may be realised in year one. These are solely surplus or duplicate major plant and equipment savings of $250 000. The Board was not provided with detailed evidence of how this conclusion was drawn. However, the Board was not convinced that these savings could be achieved, bearing in mind: that Break O’Day Council indicated that its plant is effectively fully utilised the nature of the equipment involved the distances involved in the proposed municipal area. The KPMG report also flags that further capital savings could be realised from a reduction in building overheads. However, as there has been no detailed consideration of the location of council chambers, works depots, service centres and other council buildings nor consequential building modifications, the Board cannot be confident that such savings will eventuate. Submissions to the Board raised the potential for savings in ongoing operating costs of a merged council in the following areas: purchasing efficiencies 54 production of corporate and management plans, financial reports, occupational health and safety procedures, environmental monitoring and reporting reports to State and Commonwealth Government agencies. The Board considers that these savings would not be a significant proportion of the current annual budgets of the two councils. 4.2.4. Non-efficiencies & Costs

One-off costs of a merger The KPMG report identifies the following one-off costs: HR restructuring costs including: corporate establishment costs ($100 000) redundancy costs ($200 000) recruitment costs ($60 000)55. other restructuring costs including:

54 Submission 9 55 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009

migration of records data systems and system integration ($20 000) Navavision support for finance support system integration ($10 000) integration of planning schemes ($20 000) integration and expansion of asset management ($30 000) integration and expansion of GIS ($20 000)56. The report identifies a net cost in the range of $150 000 -200 000. The Board is concerned that this figure underestimates possible one-off costs. It is not clear what costs would be covered by the projected $100,000 corporate establishment costs. However, the costs associated with strategic planning and the development of a corporate identity for a new council could be expected to more than consume this allocation. The Board also felt that the integration of computer systems in many instances cost more that initial assessments. As noted at 4.2.3, there has been no assessment of the location of council buildings and consequential building adaptations that may be necessary. The associated costs may be considerable. Given the length of service of staff at these councils, the sum allocated for redundancies may also be insufficient. There may also be relocation costs associated with retention of staff members. Retraining costs may also be incurred in relation to integration of systems. As mentioned in a number of submissions, the use of an administrator (as in the Victorian amalgamations) through the merger process may be a preferable option. If so, it is likely that the costs associated with administration would be greater than consequential saving of elected members’ allowances. Alternatively, there may be costs associated with the establishment and operation of local transition committees, similar to those established for the 1993 amalgamations. There may be additional costs from any relevant order, transfer or vesting costs under s214H of the Act.

Ongoing costs Size of the proposed municipal area and Impacts of travel The geographic size of the proposed municipal area and the distances to be covered was raised as a major concern in many submissions. The merged council would have a geographic area of approximately 6 043 sq kms and a length of 234 kilometres. This is by comparison a distance further than that between Hobart to Launceston and not utilising a national highway system. Travel time from end to end would be just over three hours, with projected travel times from St Helens57 to the following towns of:

56 KPMG (Tas), Financial analysis of the voluntary merger of the Break O’Day and Glamorgan-Spring Bay Councils, October 2009 57 Source: Google maps

Orford 2 hrs 13 mins Triabunna 2hrs 06 mins Bicheno 1hr Swansea 1hr 32 mins

The average population dispersal across the municipal area would remain approximately two persons per square kilometre. As noted in Chapter 3, there are numerous population centres of varying sizes throughout this area. Many submissions raised the issue of the impact of increased travel time on staff, elected members and the community. It was also noted that Break O’Day Council residents requiring services not available locally, tended to travel to Launceston, whilst Glamorgan-Spring Bay Council residents travelled to Hobart. There is limited travel through the proposed municipal area to access services. The Board agrees that the size of the proposed municipal area would have a number of potential impacts on any efficiencies and benefits of a merger. Increased travel for staff and the elected members would: be more costly have significant safety implications represent a poor use of real work time. The Board acknowledges that there are ways that increased travel time could be counteracted. Alternative arrangements were considered, such as: the maintenance of existing work depots to reduce travelling times for crews extensive use of electronic communications holding meetings at multiple locations to promote access by the community.

Staffing and services Submissions to the Board highlighted potential benefits from a merger including: increased capacity in attracting more skilled or specialised staff eg recycling, bridge work, waste management, road sealing, re-sealing58 reduced delays in administrative and service delivery, currently due to staffing gaps due to staff leave or delays in staff recruitment59 potential reduction in staff ‘burnout’. Residents highlighted the need to ensure that local standards were maintained. Concerns included that a merger would simply increase the current experience of competition for scarce

58 Submission 9 59 Submission 9

54 resources between townships leading to resentment and fear that smaller townships would be ‘lost’ in larger merged council areas. Other submissions refer to the loss in services and inconveniences experienced as a result of the previous merger. For example the location of council chambers at the southern end of the Glamorgan-Spring Bay municipal area at Triabunna60. Similarly numerous Fingal residents expressed their experience as a loss in direct services and representation to their local area. The Board met with the staff of both councils to discuss potential impacts of merger. The following issues were raised in this meeting and in submissions in terms of impacts on staffing: that staff reductions could exacerbate staffing pressures61 that there was limited capacity within the existing council staffing to deal with the resource requirements of a merger process. Some staff at the council who had been employed by the council during the 1993 mergers advised the Board that the resource implications for the councils were significant and underestimated62 verbal evidence to the Board led it to question whether communities were ready to do without shop-front service centres despite apparently increasing take-up of electronic interfaces such as internet, email and telephone. Submissions were divided as to the effectiveness of telecommunications as a solution to the increased distances and travel costs in the expanded merged council area. The Board considers that whilst local government claims to be the sector closest to the community, it must be available to the community. Access to, and use of, electronic interface services cannot be presumed. Further, there are certain services, primarily relating to councils’ statutory functions, in the areas of building, planning and environmental health that require site visits. Submissions to the Board have highlighted concerns that financial efficiencies could be at the expense of customer service. These concerns appear to derive from previous negative experiences after the last round of amalgamations in 1993 after which residents in some localities identified an alleged reduction in services and local representation. The Board notes that surveys in other states indicate that post-amalgamations in the 1990’s, communities may have experienced a deterioration in services. This has been attributed by some in the sector to financial stress caused by excessive restrictions on revenue-raising and other financial pressures on the sector generally63. Submissions also referred to the impacts that the former merger process of the Glamorgan and Spring Bay council areas on staff through increased travel requirements, new regulation and increased pressures which resulted in ‘unprecedented’ levels of staff movement stress related illness

60 Submission 11 61 Submission 29 62 Submission 29 63 Interviews with CEOs of Vic and SA councils post amalgamation. 1997 Review of Councils Report, Local Government Board

55 and resignations64. Travel has also impacted on staff efficiency through fatigue and consequent reduced work output and constituted a potential health and safety risk. These impacts are likely to be more marked in the current east coast merger proposal as it extends over an even larger area. Mitigation of costs The Board notes that the State Government has indicated that it will support councils considering merger proposals. It has not yet quantified the amount or type of support to be provided. In relation to the 1993 local government reforms, the State Government assisted with transition costs, such as the engagement of project managers to co-ordinate boundary changes, studies relating to the location of council chambers, corporate plans and other external consultancies. The remaining costs of amalgamations were met by councils. Regional service provision arrangements The delivery of services, by the majority of State Agency and local government bodies, follow a three-region Tasmanian model of North, South, & North West regions including: health and education provision police enforcement infrastructure management contracts water and sewerage structures telecommunication services. The delivery of services and operations is geared to a North/South split with the municipal boundary representing the dissection of northern and southern regions. Land use planning is an exception as it follows the three-region model but distinguishes the East Coast as a sub-region. The Board does not consider that regional arrangements would necessarily present a significant barrier to the creation of a merged council. The Board considers that it would have specific implications (including potential cost implications) for which a strategy would need to be addressed in the transitional arrangements of a merger. For example, the matter of continuing participation in either both or one of STCA and NTD including the matter of equity and dividends in these bodies. In some service and operational areas, the creation of a merged council would not necessarily exclude the continuation of two distinct service regions. However the Board does not consider that changes in regional arrangements resulting from a merger would be likely to generate substantial benefits or efficiencies that would support this merger proposal. The Board will consider this matter further in the Guidelines Report with regard to merger proposals generally. 4.2.5. Board’s findings regarding the financial position of a merged council Throughout this chapter, the Board has made a number of comments on the material it has considered in relation to the financial position of a merged council, which are summarised below.

64 Submission 19

However, the Board considers that the lack of timely and robust information made available to KPMG casts doubt on the reliability of assessments and predictions made. In turn, the Board must place a caveat on the conclusions it has drawn as to the current and long-term outlook for the two councils as stand-alone entities or the financial outlook that might arise from a merger. Further, the Board has queried some of the conclusions drawn by KPMG. The Board noted the findings of the KPMG financial analysis that a merged council could theoretically save up to $1 million a year through the reduction in duplicated staffing positions and some plant rationalisation. The Board has difficulty accepting this projection noting:

the contrasting views of the two general managers on the potential for savings from staffing reductions;

that KPMG’s projected staffing level appear to be a minimum based on current service levels, which the Board believes would not be adequate to meet the demands of the enlarged area being serviced. It is the Board’s view that the size and low population density of the municipal area of a merged council would present ongoing challenges to the new council. Costs likely to be incurred, such as travel costs and duplicated staff positions, were likely to consume some of the projected savings from a merger. The Board considers that while some financial efficiencies may be realisable in the merged entity, even if all the one-off costs of a merger were covered through support by the State Government, the theoretical financial flexibilities identified in the KPMG report of up to $1M per annum are a best case scenario and would in reality need to be utilised within the merged entity to:

address existing staffing gaps and pressures in the new council address existing sub-optimal service practices that are unacceptable in the long-term meet new recurring costs resulting from the size of the merged area including travel costs for staff and elected members, increased demand on staff time and the need for multiple service outlets and administration centres. The Board also noted that the savings identified by KPMG depend on the new council practising continued financial restraint for the projected 20-year period. The Board therefore has significant reservations about whether the long-term viability of the two councils would be substantially improved in a merged council scenario.

Chapter 5. Benefits and Impacts for the CommunityEconomic benefits and impacts 5.1.1. Economic characteristics of the municipal areas The local economies of the Break O’Day and Glamorgan-Spring Bay municipal areas are relatively homogenous and are primarily coastal and rural settlements focused on: tourism, agriculture, fishing, forestry, mining, the arts, light industrial and service industry and retirement. A large number of properties in the area are owned by people who reside and are employed outside the municipal areas. In the last ABS census the highest proportion of employment by industry in Glamorgan-Spring Bay Council was: 20% employment in agriculture, forestry and fishing 18% in accommodation and food services 10% in manufacturing65. The proportion of employment by industry at Break O’Day Council was identified as: 16% in agriculture, forestry & fishing 12% in accommodation & food services 12% in retail trade 10% in health care & social assistance66. In both councils approximately 90 per cent of rateable land use is dedicated to primary production67. Glamorgan-Spring Bay Council typically has an unemployment rate that is lower than both the Tasmanian and Australian unemployment rate68. While the unemployment rate has been substantially higher at Break O’Day Council than the Tasmanian and Australian rates in recent years69

65 Employment by Industry (a), 2006 Census Source: Australian Bureau of Statistics, 2006 Census of Population and Housing, Census Tables, Cat. No. 2068.0. 66 Employment by Industry (a), 2006 Census Source: Australian Bureau of Statistics, 2006 Census of Population and Housing, Census Tables, Cat. No. 2068.0. 67 Australian Bureau of Statistics, 2008, Australian Standard Geographical Classification (ASGC) Cat. No. 1216.0 and Information and Land Services, Tasmanian Department of Primary Industries and Water (DPIW) 68The Australian Bureau of Statistics, 2006 Census of Population and Housing, Census Tables, Cat. No. 2068.0 notes that the March 2008 rate for Glamorgan-Spring Bay Council was 3.8% compared to 4.1 in Tasmania and 5.2% nationally. 69 The Australian Bureau of Statistics, 2006 Census of Population and Housing, Census Tables, Cat. No. 2068.0. notes that the March 2008 rate for Break O’Day Council was 7.6% compared to 5.1 in Tasmania, and 4.2% nationally.

5.1.2. Role of the councils in stimulating and facilitating the local economy The Board considers that local government decision-making across the range of council core functions – from land use planning to infrastructure – can play a major role in facilitating economic activity. Councils can also actively stimulate economic activity by, amongst other things: attracting and encouraging new business, supporting and assisting new business, expanding the local market, promoting marketing and event attraction, direct investment, utilising natural resources and developing new uses for old facilities. The two councils’ primary involvement in economic development is through the provision of core services. In addition the councils share a dedicated tourism officer shared between the two council areas. Some submissions assert that both councils have had a very limited role in stimulating the economy on the east coast: ‘Historically the council has had little impact on employment or economic growth; the natural resources and private investments have had more effect’70. Other submissions assert that a merged council would be in a stronger position to influence the economic development of the region. However, no evidence has been provided to the Board to support this assertion, other than that a merged council would be in a position to deliver a more coordinated approach to tourism, planning and infrastructure and service delivery across the whole of the east coast. The last strategic plan for the Break O’Day region for the 2002-2008 period, envisaged a role for the council that included: participating in and supporting employment programs developing a business portal for Break O’Day region (or North East Tas) supporting the St Helens Chamber of Commerce and other community bodies which foster economic advancement providing financial support to the Break O’Day Business Enterprise Centre and being represented on Break O’Day Business Enterprise Board. Economic development did not feature highly in the second partnership agreement signed with the State in February 2009, with the exception of an implementation plan to improve visitor signage and interpretation. The Glamorgan-Spring Bay Council’s strategic plan for July 2006 - June 2011provides broad strategic objectives for an ‘economically sustainable municipality’. The plan identifies that the council will ‘continue to facilitate, promote and market local and municipal business and economic development ideas, innovations and opportunities.’ The plan also makes the completion of actions in the ‘Economic Development Plan’ one of its key performance indicators. However, the Council’s Economic Development Plan expired in 2008.

70 Submission 32

The Glamorgan-Spring Bay Council is also working towards a second partnership agreement that includes economic development functions in respect to the revitalisation of the Triabunna port facilities and capitalising on the tourism potential of the marina precinct. The Council is seeking to explore with relevant State Government agencies, opportunities to progress development of infrastructure and facilities which will be compatible to those proposed by the adjacent private sector development. Glamorgan-Spring Bay Council also works with the Department of Education on initiatives to increase the employment of apprentices and training. The councils are expected to engage, through the partnership agreements program, with the Department of Economic Development, Tourism and the Arts (DEDTA) on the Regional Economic Development and Investment (REDI) plans project intended to develop a clear view of development and investment constraints and opportunities in regional areas. The councils also communicate with DEDTA and industry on business and industry growth and development and DEDTA’ s Investment Attraction Strategy intended to attract a structured approach to proactive investment attraction. Economic development of the southern region is part of the Southern Tasmanian Councils Authority (STCA)’s strategic objectives, which include to: increase integration of inter-council, regional and state government economic development planning for the southern region facilitate cooperation to deliver improvements to the visitor information centre, local level tourism product development, promotion of the southern region and southern zone marketing regions within the region, increased understanding of the impact of visitors and tourists identify opportunities for regional input on the impact of major projects of state significance and projects of regional significance in the south. The STCA has an active role in lobbying State and Commonwealth Government. In addition to a regionally agreed infrastructure investment strategy, the STCA has been involved in the development of the regional planning project and transport strategy. Similarly Northern Tasmania Development(NTD) has entered into a partnership with Commonwealth Government and State Governments to deliver an economic development plan aimed at achieving economic growth in Northern Tasmania. The focus of the plan is to: attract investment and people to northern Tasmania build regional identity encourage business growth in the small and medium sectors through accessing off island markets facilitate business growth through industry collaboration. The plan covers actions for industry sectors in the region including agriculture, aquaculture, manufacturing, forestry, food and beverage, information technology, education and training, fishing and tourism. The Board notes that a merged council would need to resolve whether to affiliate with one or both of the two regional bodies and that this may have impacts for at least one of the organisations and its members.

However, the Board noted the Break O’Day Council’s current proposal to withdraw from its commitment, from July 2011, to fund the regional body on the basis that it believes $240 000 in funding over eight years had failed to deliver substantial gains for its municipal area. 5.1.3. Infrastructure Infrastructure interests in the region included tourism, mining, forestry and rail and passenger transport. Councils also provide local infrastructure and associated services to meet the needs of both residents and tourists through the provision of: parks and gardens public toilets roads and footpaths lighting rubbish removal public area beautification71. The Break O’Day Council signed a second partnership agreement with the State Government in February 2009 in which infrastructure was a key priority including ensuring access through the Georges Bay barway and the main navigation channel in Georges Bay by a program of dredging and sand removal. It also identified the need to undertake planning in respect to the construction of north and south bound slip lanes at the intersection of the Tasman Highway and St Helens Point Road.

A second partnership agreement is currently being pursued with the Glamorgan-Spring Bay Council which also addresses potential improvements in four key locations on the Tasman Highway. The Council also engages with the State on B-double routes.

In August 2009, the Board met with the Secretary of the Department of Infrastructure Energy and Resources who advised the Board that there is nothing critical in terms of infrastructure policy and implementation that would represent a barrier to a merger if the benefits were apparent. He noted that while a merged council might have two infrastructure management contracts, rather than one on the other hand having one decision-making body rather than two could be advantageous.

The State is moving toward regional delivery models but a merged east coast council could be a microcosm of this. Long-term infrastructure planning is likely to be coordinated at the regional level both by State and local government.

71Submission 31

5.1.4. Tourism The Tourism Industry Council Tasmania (TICT) submission to the Board states that tourism is an important component of the Tasmanian and east coast economies and has grown solidly in recent years: Around 300,000 (or one third of all) interstate and overseas visitors went to the east coast in the year to March 2009 and nearly 80% (230,000) of them stayed overnight. This equated to approximately 610,000 visitor nights with an average length of stay of around 2.7 nights. The east coast receives around 10% of all tourism activity in the State, with solid growth of around 15% in visitor numbers over the last three years. This equates to roughly $200m per annum in visitor expenditure and approximately 2,500 jobs (direct and indirect). The east coast is already an identified zone for marketing purposes; taking in the area covered by the two municipal areas plus some additional areas in adjoining municipal areas such as Flinders Island. Tourism Tasmania recently replaced the traditional three administrative zones with five marketing zones intended to better align with visitor perceptions of Tasmania.72. Zone Marketing Groups develop strategies for marketing of individual zones and enter into funding agreements with Tourism Tasmania. Tourism Tasmania has introduced a marketing strategy matching local marketing funding (private sector or local government) on a dollar-for-dollar basis up to $100,000 per marketing zone. The East Coast Zone Marketing Group is chaired by the TICT and includes members from the private sector, as well as local government and State representatives. Identification of the east coast as a specific zone, reflects that it has a specific tourism identity that differentiates it from other parts of the State: Some of the specific elements of the East Coast brand include: coastal activities (kayaking, boating etc), beaches, wildlife, premium food (especially seafood) and wine. The region includes well known “icon” locations such as Bay of Fires (Lonely Planet’s hottest destination in the world for 2009), Freycinet National Park, Maria Island; award winning products such as Bay of Fires Walk and Maria Island Walk; and the soon to be opened super-premium resort, Saffire73. Local government can also provide specific support for visitors and the local tourism industry such as: Visitor information services Planning and new development Destination Planning and development Local industry coordination Localised marketing”74.

72 The other zones being: Hobart and Surrounds, Launceston, Tamar and the North; North West Coast and Western Wilderness.

73 Submission 31 74 Submission 31 62

Both councils are undertaking all of these activities to some degree. The Glamorgan-Spring Bay Council manages its tourism interests in accordance with the Freycinet Coast Tourism Strategy 2004-2010. Break O’Day Council contributes to tourism including: Undertaking ‘Trail of the Tin Dragon’ projects, undertaking works at the St Helens History and Visitor Information Centre and Welborough; project managing funding provided by the State Government for the Bay of Fires Interpretative site. Coordination between the two councils may be further assisted by the fact that the two councils share a Tourism Officer. Both councils are working with the State to align their tourism strategies to the broader zone marketing strategy. The proposed State and Glamorgan-Spring Bay Council Partnership Agreement includes a proposal to form a working group to review the Strategy. The two regional organisations STCA and NTD are also engaged in developing the tourist industry in their respective sectors of the east coast. A number of submissions suggested that a merged council may have more collective bargaining power with respect to infrastructure by virtue of the greater size and population of a merged council area. However, the Board notes that a merged council might actually have less opportunity for funding and ‘voice’ than two small councils working co-operatively. 5.1.5. Land Use Planning As highlighted above, local government planning functions can have a significant impact on attraction of investment to the region and municipal areas. Some submissions question the adequacy of land management and environmental planning procedures in the east coast region and the capacity of elected members in this area. Glamorgan Spring Bay Council’s recent history of a failed call centre and refusals of, or appealed or slow development activities and opportunities, eg Federals Freycinet, Cameron’s Dennison, Solis at Orford to name but a few’75 The State Government has identified that: ‘while the east coast has been subject to substantial development and change, planning schemes, public infrastructure and services have struggled to keep pace with this growth. Decisions about land use and infrastructure have largely been reactive to development applications rather than part of a broader regional planning framework.’(Vision East: Stakeholder and Community Consultation Paper, August 2009 Submissions have raised the matter of aligning different approaches to coastal land management within the two municipal areas, in particular subdivision. One submission asserted that Break O’Day Council has stringent requirements for any development within the 1km (from coast) environmental zone but queried whether Glamorgan-Spring Bay Council has such a policy, claiming that there has

75 Submission 32

63 been extensive subdivision of coastal land in the municipal area76.The Board has not verified the accuracy of these assertions. Submissions also raise the issue of the vulnerability of coastal areas to the impacts of climate change on coastal areas through predicted sea-level rises77 and the significant costs attached to environmental protections in coastal areas.

As an island state, where coastal development and planning is a local government responsibility, the impacts of climate change, including the coastal impacts of sea level rises, are of key importance to local government. A Statewide Partnership Agreement on Climate Change was signed on 16 December, 2008 by Mayor Mike Gaffney, President, Local Government Association of Tasmania and Premier David Bartlett. Tasmania will be the first state in Australia to undertake baseline monitoring, assessment and reporting of carbon emissions across all councils.

The National Climate Change Adaptation Initiative Toolkit produced by the International Council for Local Environmental Initiatives identifies sea-level rise impacts as a result of climate change as potentially including:

• damage/loss of essential infrastructure in coastal areas • saltwater intrusion into estuaries, rivers and aquifers • increased vulnerability to coastal erosion, retreat and storms • changes to coastal and estuarine habitat with rising sea level (i.e. tidal inundation) • other ecological impacts • economic Impacts • inundation of coastal lowlands • reductions in water quality in coastal rivers within the shire • loss of private property • higher risk of flooding78. The Board considers that responsibility for an extended coastal strip together with the attendant responsibilities and costs may have a significant long-term impact on the outlook of a merged council.

76 Submission 24 77 Submission 14 78 The National Climate Change Adaptation Initiative Toolkit, International Council for Local Environmental Initiatives, 2008.

Vision East The KPMG report identifies that there could be (unspecified) potential savings from a single land use planning scheme for the entire east coast region. The Board notes with interest progress with ‘Vision East’, a land use framework encompassing Break O’Day, Glamorgan-Spring Bay, Tasman and the eastern coastal and rural parts of Sorell. Recognising that the east coast does not fit into the regional model due to its common set of land use planning, infrastructure and service provision issues that are distinct from North and South planning regions, it has been designated a sub-region. The Vision East Land Use Framework aims to guide development and infrastructure decisions and encourage a pattern of settlement and infrastructure provision that is relevant to the future needs, capabilities and potentials of the subregion. The State Government expects communities to see greater certainty in the planning scheme and experience benefits from an overarching strategic policy framework for long-term land use and infrastructure planning and development control within the region. The overarching vision for the east coast set out in the framework is: To enhance the community and economic potential of the East Coast whilst not compromising its iconic natural and heritage assets or values as a living environment, and to establish a hierarchy of service centres with appropriate infrastructure and transport linkages between the settlements. The vision for the Break O’Day Council municipal area is: Focus development in the key towns of St Helens and St Marys and improve tourist accessibility whilst maintaining a sense of seclusion to protect the iconic coastal and mountain landscapes. The vision for the Glamorgan-Spring Bay Council municipal area is: Maintain Swansea as the service centre that provides diverse employment opportunities, and manage residential growth so as not to compromise the unique environmental and tourism assets. The Board considers that the development of a cohesive strategic policy framework for long- term land use and infrastructure planning and development control will have a significant benefits to planning outcomes in the region. However, it is noted that this initiative is not dependent on a merger proceeding. 5.1.6. Board Findings and Recommendations on Economic Development The Board was presented with little evidence of potential economic benefits or impacts for the two municipal areas and for the east coast in general arising out a merger between the two councils. It also noted the general lack of interest shown by the tourism, agricultural, forestry and fishing industries on the east coast in the potential merger. Apart from the submission from the TICT, no submissions were received from any industry bodies or companies, and few public submissions identified tangible benefits that might accrue from a merger of the two councils. Submissions to the Board have highlighted expectations of a potential benefit to tourism number from a merger including: greater capacity to provide improved facilities to tourists more clout in negotiations at the State and Commonwealth level improved co-ordination and consistency in marketing and strategies and improved liaison with tourism bodies and promotion of the region as a whole rationalisation of tourist structures.

The TICT notes that the east coast destination does not follow local government boundaries and many visitors will experience locations in both municipal areas during a stay on the east coast. It proposes that a number of potential benefits for the sector could derive from a merged east coast council, including: consistent planning and decision-making administrative efficiencies stronger infrastructure and facilities stronger tourism services across the whole east coast destination. However, other submissions have highlighted the disparate interests of the major towns within the two municipal areas, noting also that the previous merger was unsuccessful in developing marketability and improvements for the Glamorgan-Spring Bay area i.e. council was ‘unable to operate under one name, let alone progress a regional view or bring any sense of community of interest to the small disparate towns’79. The Board considers the additional benefits for the tourism sector are likely to be less than proposed by the TICT due to the recent State Government regional planning and tourism programs: Vision East and the Zone Marketing Strategy. The Board considers that the financial constraints, identified in Chapter 4, on a merged council would limit its capacity to provide stronger infrastructure and facilities and tourism services. The Board was informed that the two councils are already co-operating with respect to tourism through participation in a single east coast marketing zone and the engagement of a joint tourism officer. The Board has not been able to identify specific initiatives that could be enhanced by a merged council. The Board considers that improvements in the area of planning, tourism and economic development would largely depend on a council’s capacity to: attract skilled and experienced staff develop its capacity in these areas engage more actively at the State and Commonwealth Government level. The Board does not consider such outcomes to be assured in a merged east coast council. (See 4.2.3 Staff Salary and Oncosts) The Board notes that with the exception of tourism and planning the councils have played a limited role in the economic development of the area. The Board considers that there is limited likelihood of developing capacity within the merged council to support economic growth in the region. It is noted that while the KPMG merged council staffing structure allows for the continuation of a full- time tourism manager there is no specific allocation for a dedicated economic development role. The Board considers that economic development on the east coast, irrespective of a merger, is likely to continue to be influenced by a regional cooperative approach as well as Commonwealth and State Government policies and market factors.

79 Submission 32

5.2. Social benefits and impacts 5.2.1. Communities of interest and sense of community Academic texts widely acknowledge that the concept of ‘community of interest’ has been open to interpretation and has proven difficult to define. In a paper for the South Australian Department of Local Government on ‘The Concept of Community Interest’ (1989) Fulcher cited a paper by Hillery which identified up to 94 definitions of community interest. Fulcher took Hillery’s summary as a useful starting point: ‘Most students (of community) are in basic agreement that community consists of persons in social interaction within a geographic area and having one or more additional ties’. Fulcher proposed her own definition of community of interest encompassing three dimensions: 1. Perceptual: a sense of belonging to an area or locality which can be clearly defined. 2. Functional: the ability to meet with reasonable economy the community’s requirements for comprehensive physical and human services. 3. Political: the ability of the elected body to represent the interests and reconcile the conflicts of all its members. The Board considers this to be a useful definition for the purposes of this review as it addresses the range of concerns raised throughout the review for the Board’s consideration. The Board addresses the three elements of this definition in the following sections: The perceptual experience or sense of belonging is addressed below in section 5.2.1. The functional requirements of communities are dealt with at sections 4.1.4, 4.2.3 & 5.2.2. Political representation of the interests of the east coast community is considered at 5.3.5.

Sense of Belonging or Identity A number of submissions argue that communities are place-centric, rather than municipal area- centric, and predict only limited impacts from a merger on the social fabric of east coast townships80. Surveys as part of the 1997 review of councils found that respondents identified more with their suburb or town than council area. At this time this trend was more marked in the northern region of Tasmania. Tasmanians exhibited a higher level of identification with their council than their Victorian or South Australian counterparts. However, interestingly in the survey, in response to the statement: “It doesn’t matter to me whether council services are provided by my existing council or a new council as long as I am satisfied with the services” 80 per cent of respondents agreed and 14 per cent of respondents disagreed81.

80 Submission 12

Submissions to the Board appeared to confirm that at least amongst the east coast residents who engaged with the Board review, identification with local townships is still strong. By contrast, the Board did not find evidence of a strong unified ‘east coast’ identity or even a ‘Break O’Day’ or ‘Glamorgan-Spring Bay’ identity. The Board believes that this can be differentiated from the west coast, where, while a place-centric dynamic is evident (as it is state-wide), a unified ‘west coast’ identity can be observed, perhaps as a result of its geographic isolation. Rather submissions tended to highlight a trend toward identification with the north in the Break O’Day Council municipal area and with the south in Glamorgan-Spring Bay Council. ‘The Examiner is read in Break O’Day Council and the Mercury is read in Glamorgan-Spring Bay Council’. ‘Each of the towns is culturally and historically unique and different. Even the beers are different.82’ Break O’Day Council residents typically appear to utilise services, shopping and facilities in Launceston and Glamorgan-Spring Bay Council residents appear to be split between Launceston and Hobart, with Swansea residents utilising either. The geographical separation of each of the towns means that people are very reluctant to access basic health, childcare, aged care or other services outside their own town. If a person needs to travel, they will generally access services in either Launceston or Hobart if they are not available in their town. This may be explainable due to their respective distances from each other and the comparatively shorter distance to the major cities of Hobart and Launceston. The Board considers that a merger between the two east coast councils would not have a significant impact on this dynamic. Submissions also expressed concerns that a larger council size as a result of mergers would result in an ‘erosion of personal interaction and connection resulting in loss of identity and individuality at the local level’83. This appeared to derive, in some cases, from the impacts perceived from the previous 1993 mergers on the east coast: ‘communities experienced the mergers in 1993 as social dislocation not cohesion, a loss of sense of community, increased operational costs, loss of service delivery (including infrastructure maintenance) and transparency, with an overall loss of community partnership with and respect for local government.’ The Board was also asked to consider how the strengths and identities of both communities could be retained.

81 Ch 15, 1997 Review of Councils Report Vol 1, Local Government Board 82 Submission 32 83 Submission 34

Preservation of uniqueness, diversity and identity of each town and community should be considered84. Others asked that the Board consider the commonality of interests between localities in the two municipal areas in the merger review.

‘Spring Bay and Sorell areas better reflect a community of interest - with their historical contacts, sporting and cultural activities, farming and forestry industries being quite closely aligned’85

History, climate and socio-economic base are different between Fingal and other rural areas and the East Coast86

The Board concluded that the communities of interest centred on the towns and villages and this would not change with a merger. 5.2.2. Social Service Provision to the East Coast The two councils, in partnership with the State Government are playing an increasingly active role in the facilitation and delivery of health and human services within the municipal areas. These services include: health, aged care, education, domestic violence, mental health, child protection, recreation and sporting facilities, childcare, disability, dental and youth services, environmental planning advice, community development and arts87. The growing role for councils is largely a response to growing community demand and expectation: ‘The geographical separation of each of the towns means that people are very reluctant to access basic health, childcare, aged care or other services outside their own town. If a person needs to travel, they will generally access services in either Launceston or Hobart if they are not available in their town.’88 It is also a response to expectation from other levels of Government. However, councils rely on funding from State and Commonwealth Government to deliver these services. The Commonwealth Government also funds improved access to allied and mental health services at a local level through programs managed by the divisions of general practice in each Tasmanian region. It also provides funding in Swansea and Bicheno for the visiting optometrist scheme as well as the Glamorgan-Spring Bay Regional Health Services with its social worker, psychologist and youth worker. The Department of Health and Human Services (DHHS) funds two acute inpatient beds at the May Shaw Nursing Centre, Swansea. The population of the Glamorgan-Spring Bay municipal area is serviced by a number of residential aged care providers, including the May Shaw Nursing

84 Submission 34 85 Submission 32 86 Submission 8 87 Submissions 9 and 14 88 Submission 32

Home and the May Shaw Hostel, both located at Swansea. The population of Break O’Day is serviced by a number of residential aged care providers, including Medea Park Nursing Home, and Medea Park Hostel, St Helens. The second partnership agreement between the State and Glamorgan-Spring Bay Council includes provision for the parties to discuss positive ageing initiatives and the Positive Ageing Small Grants Program. The State and Council also work together on coordination of service delivery for young Tasmanian and youth health and wellbeing. Population ageing studies have identified that Tasmania’s population is ageing, both due to an increase in life expectancy and the overall proportion of the population reaching 60+ as the baby boomer generation ages. The Board notes that in 2004 Glamorgan Spring Bay Council (18.5 percent) and Break O’Day Council (17.4 per cent) were ranked 1 & 2 respectively out of the 29 councils for the highest percentage of the population above 65 years. The Tasmanian average, by comparison, was 14.3 per cent89. Projections for 2021 estimate that the demographic trend will continue in both municipal areas with Glamorgan-Spring Bay retaining its top position with 26.8 per cent of the population over 65 and Break O’Day Council ranking 7th with 24.2 percent of the population over 65. The projected Tasmanian average was 21.7 per cent of the population over 6590. Submissions have raised concerns about how councils will address this demographic trend eg: ‘The east coast is at risk of becoming a geographically large retirement village without proper consideration and promotion of economically and environmentally sustainable employment opportunities, access to lifelong skills development/education facilities, both real and technological91. This is likely to have significant impacts for service provision by the two councils, which are becoming increasingly involved in the provision of health care and aged care services. In a 2005 report into Population Ageing in Tasmania’s Local Governments92 Jackson & Felmingham identified that Tasmania’s ageing demographic could have implications for revenue raising and infrastructure, facilities and services in Tasmania. These included possible: reductions to local government financial assistance from Commonwealth and State inadequate growth in specific purpose funding reductions to rate revenue due to increases in pensioner rate rebates, pensioner rate and charges supplements or rate deferrals reduction to user charges revenue due to asset rich cash poor long term retirees more and qualitatively different community care services health promotion programs and activities to prevent non-communicable diseases

89 Population Ageing in Tasmania’s Local Governments: A community-level Perspective, Jackson N and Felmingham B, 2005, University of Tasmania 90 Population Ageing in Tasmania’s Local Governments: A community-level Perspective, Jackson N and Felmingham B, 2005, University of Tasmania 91 Submission 32 92 Population Ageing in Tasmania’s Local Governments: A community-level Perspective, Jackson N and Felmingham B, 2005, University of Tasmania

different public library facilities , collections, technologies and programs. The Board considers that this demographic trend and accompanying resource demands would be exacerbated in a merged east coast council. Submissions have asserted that: a stronger voice could be utilised to more effectively negotiate with State and Commonwealth governments and leverage opportunities for services and social care responsibilities93 councils-run health services would be more viable over a larger area94 a larger council has more means of attracting health professionals to the region, reducing reliance on Hobart and Launceston and the impost of travel to these centres95. The Board has considered the issue of the potential for increased bargaining power in a merged council at 5.1.4. It is the Board’s view that while health and other social services may be more viable for municipal areas with a larger population base, the average population dispersal of 2 persons per sq km in a merged east coast council over such a large area, would not significantly improve the viability of such services. The Board also considers that there is potential that the creation of a single east coast council that sits across two regional service delivery boundaries could add an additional layer of complexity in liaison with the Commonwealth Government and State Government.

Impact on community groups Some submissions referred to costs for community groups, organisations and businesses arising from a council name change through a merger which would require alterations to signs, letterhead, uniforms etc e.g. Break O’Day State Emergency Service (SES) unit purchase of attire through community fund raising. Submissions highlighted that they considered it unreasonable to expect the community to fund these changes and requested funding and expertise to be made available if a merger was to proceed. Submissions have also highlighted potential impacts on community assets, some of which have been jointly funded by the respective councils and community groups eg Spring Bay Eldercare units, community halls in the major towns of the Glamorgan-Spring Bay Council area, recreation grounds and club houses, memorial and heritage features and facilities96. East coast community groups, organisations, businesses also use the current municipal boundaries to define north/south regional borders which could have impacts on operational and management of branches. Some residents highlighted a potential need for support and

93 Submissions 9 and 11 94 Submission 9 95 Submission 11 96 Submission 19

71 advice to be available to inform any changes required in regional arrangements as a result of a merger. 5.2.3. Board Findings and Recommendations The Board noted the number of submissions from interested community members and organisations, and the level of concern in some more isolated parts of the two municipal areas at the potential adverse community impacts of a merger of the two councils. In a number of submissions, residents referred negatively to the previous mergers in 1993 to support their opposition to the current merger proposal. There appeared to be a perception amongst residents that service levels and access for residents had actually dropped since the previous amalgamation in 1993. The Board noted that while there appeared to be some acceptance of the need for change, there was little evidence of widespread support for the proposed merger of the two councils. Some residents expressed support for mergers generally but did not support this particular merger or proposed an alternative merger on a north/south division. The Board found little evidence of any strong identification as an east coast community. It considered that the communities of interest in the two municipal areas centred on the individual towns and villages spread throughout the two municipal areas. This would not change with a merger. It also noted the north/south division in the two municipal areas, with communities north of Swansea identifying more with and accessing services in Launceston, and communities south of Swansea looking more to Hobart and southern Tasmania. The Board noted with interest that this north-south division did not coincide with the existing municipal area boundaries and did not believe that this division would be diminished by the creation of a single merged council on the east coast. Indeed, the Board was concerned that the added complexity of delivering services across two health regions could result in services being adversely affected, or alternatively that the residents within the same municipal area, could experience different service standards. While a small number of submissions favoured a merger of the two councils, minimal community benefits arising from a merger were identified in submissions to the Board.

5.3. Environmental benefits and impacts Submissions to the Board have raised the following general issues for consideration in terms of the environmental impacts of a merger: Weed management strategies and the identification of land and seascape areas requiring repair and remediation97. Ongoing improvements to water catchments which need to go beyond each council’s boundary98. Improved cooperation with State and Commonwealth Governments could deliver benefits/improvements in the management of endangered and or vulnerable species and systems99. Carbon emissions due to travel requirements across the combined area of the two council areas. Climate change. Programs addressing environmental management issues are likely to benefit from a regional or sub- regional, rather than a local or municipal, approach. 5.3.1. NRM Natural Resource Management (NRM) is the conservation and sustainable use of natural resources in the areas of water quantity and quality, coastal and marine environments, vegetation and wildlife, rivers, weeds, other pests and disease, soils and landscapes. It is primarily coordinated at the regional level through the organisations, NRM North and NRM South which aim to complement all the ongoing NRM work undertaken by Commonwealth and State governments, local government, individuals, groups and businesses. In the south, STCA also plays a key role in coordinating waste management, weed management and natural resource management functions of the southern councils, including Glamorgan-Spring Bay Council. The STCA also is closely involved in the region in implementing the Southern Tasmanian Weed Strategy 2005-2010, utilising NRM funding. Other strategic objectives set out in the STCA’s strategic plan for 2009-2014, in respect to environment, include: improving the integration of environmental considerations into council planning and decision making maximising opportunities for funding at the local level ensuring NRM decisions are not inconsistent with the needs of STCA member councils improving awareness amounts councils and the community of the impacts of climate change

97 Submission 32 98 Submission 32 99Submission 32

developing strategies to mitigate climate change impacts. NTD however, has far more focus on economic and community development of the region and less on environmental matters. NRM is carried out in the Break O’Day Council municipal area by the Council in accordance with the Break O’Day NRM Strategy, which was an integral part of the council’s expired strategic plan, in partnership with other levels of government, industry and the community.

The Break O’Day Council strategic objectives in respect to environment include: promoting environmental awareness and encourage community participation in management of natural, cultural and heritage assets. developing a land use planning strategy for sustainable development and protection of important cultural, heritage and natural assets. implementing plans and controls to manage and reduce waste and promote the environment health of the region. identifying and implement appropriate actions to protect and rehabilitate the natural environment. Collaborative partnerships are an important part of the council’s NRM program and the regional organisation, NRM North, is a key partner. The NRM Special Committee of the council is charged with overseeing implementation of the Break O’Day NRM Strategy, advising the council and developing NRM partnerships for the municipal area. 5.3.2. Waste Management Break O’Day Council operates: a kerbside collection service utilising wheelie bins to all urban centres and effectively, along the whole length of the coast within the municipal boundary, excluding Ansons Bay. (The service is also provided in rural areas along major routes on request. The kerbside collection service for household refuse is provided by a contractor.) eight waste disposal sites at convenient locations in the municipal area comprising seven waste transfer facilities and one site at Binalong Bay which only accepts green waste.

recycling facilities at the St Helens and Scamander sites and the Council is investigating possible recycling and waste minimisation initiatives. All sites other than the Ansons Bay waste transfer station are controlled by various means. Ansons Bay will become a controlled site in the near future. Waste is transferred from these facilities to the Scamander site where it is sorted, compacted and transported to the Copping landfill in southern Tasmania. The Glamorgan-Spring Bay Council’s waste management operations have evolved from being several landfill sites to waste management and recycling centres. The Council operates: waste management centres in Bicheno, Coles Bay, Swansea and Orford a kerbside collection and recycling service throughout the municipal area (operated internally, the plant and equipment purchased by the Council and employing locals to fill the new positions created).

The Council will continue to promote and implement the waste management strategy and its associated implications. The Copping Refuse Disposal Site Joint Authority has long-term contracts for disposal of waste with both the Break O’Day and Glamorgan-Spring Bay Councils. 5.3.3. Catchments The catchments within the two council areas cross other council boundaries. No information in respect to catchment management was provided by either of the two councils or detailed in any of the public submissions. In its 1997 review, the then Board considered catchments as a relevant factor in developing options for the restructuring of council boundaries. The only matter that was raised in relation to this area was the possibility of inclusion of the Fingal Valley in the Council which was to be responsible for the Esk catchment. In relation to the area under consideration in the current review, the Board notes that catchments are not pertinent. 5.3.4. Board Findings and Recommendations It considered that the current natural resource management arrangements on the east coast, whereby community groups worked with either NRM South or NRM North depending on their location, were operating effectively. Regional cooperation is ongoing in both NRM and waste management functions. The Board considers that there would be no major change in the strategic direction for NRM and waste management arrangements in the two councils. The Board noted the current waste management arrangements of the two councils which transfer waste to the Copping waste management facility in the State’s south-east. The Board did not identify any benefit for improved catchment management as a result of the proposed merger.

5.4. Governance and Community Representation 5.4.1. Governance Governance describes local government process both within local government itself and between local government and its community100. Good governance includes both the decision making and implementation of those decisions. Good governance depends on a sound relationship between the elected members and the council employees, led by the general manager. It has a direct impact on the effective delivery of the full range of local government functions. The Board does not consider that there is a ‘one size fits all’ approach to good governance but considers that certain principles have general applicability to the sector. The Municipal Association of Victoria ‘Good Governance Guide’ of 2004, identifies that good governance requires: councils to be representative of and accountable to their community implementation of policies and programs that reflect a mandate that councils have received from electors performance management in respect to policy enactment community participation in governance mayors and councillors providing leadership to the community and reflecting the community’s collective aspirations a management structure which implements the council’s goals in accordance with councils’ priorities and approved budget provision of services which meet the communities’ needs (sometimes in partnership with other tiers of government) co-operation between local governments101. The CPA Australia’s ‘Excellence in Governance’ Report of 2005 identified the importance of excellence in governance in: underpinning the level of confidence that people have in governments and public services in ensuring the quality of outputs meeting legislative responsibilities ensuring the ultimate accountability of government to the community. In assessing governance practices in both councils during the current review, the Board noted that neither Council had conducted any significant consultation with their communities. Nor did either Council fully take advantage of later opportunities to provide information to the community regarding the Board review process.

100 Good Governance Guide., Feb 2004, The Municipal Association of Victoria. 101 Good Governance Guide., Feb 2004, The Municipal Association of Victoria.

The Board also noted that there was some disconnection between the views of councillors and the views of their communities in terms of service delivery. This appeared to be particularly marked in outlying areas away from the coast. Submissions to the Board highlighted some community expectations of improved performance in a merged council, particularly with respect to: council processes and council decisions making increased opportunities for professional development for councillors and senior council staff. The Board was not presented with any evidence that persuaded it that these opportunities would be likely to be realised as the result of a merger. If a new council were to be created, a significant amount of time would need to be devoted to creating a culture of good governance including consultative and accountability processes, and an effective management structure. However, the Board was not convinced that improved governance would necessarily result from a merger, and was more dependent on: leadership the allocation of resources to professional development and training the development of good decision-making processes. The Board considered that opportunities might also arise from State and Commonwealth Government programs and as a result of the recent establishment of the Centre for Excellence in Local Government in New South Wales. 5.4.2. Representation

Impacts on representation in a merged council Each council currently has nine elected members. Under the Act, councillors represent the whole of their municipal area. They are responsible for acting in the best interests of the community and facilitating communication by the council with the community. Some submissions have proposed that a merged council could deliver a reduction in numbers of councillors of up to nine councillors across the region. This proposal accords with the model suggested by KPMG which proposes nine councillors. Other proposals support such a reduction in numbers but propose that this could be phased in102. In a submission Cr Legge of Break O’Day Council proposed an immediate reduction of six councillors but maintaining12 councillors as a transitional measure, with four ward areas with three representatives in each to provide representation103. Concerns were expressed that a reduction in elected members may result in residents being less effectively represented, including the adequacy of representation for outlying or small areas like Fingal Valley. Some residents of Glamorgan-Spring Bay Council expressed a concern that

102 Submission 9 103 Submission 9 77 with a greater proportion of residents in the north this could result in a larger allocation of resources in the north104 Other residents were apprehensive that a merger could intensify parochialism, through councillors’ intent on representing their own towns, which would make it difficult to have a cohesive council. The Board heard anecdotal evidence that parochialism was problematic in the 1993 merger process of Glamorgan and Spring-Bay council areas105 While the Board accepts that in general a larger population base and fewer councillor positions could increase competition for the role of elected member, the linear nature of the proposed merged area could impose constraints on the type of person able to run for councillor. Some submissions argued that this would be particularly so for councillors who are in full-time employment or are self-employed. A former councillor submitted that this had been a factor after the previous round of amalgamations in the early 1990’s and resulted in resignations and decreased numbers of candidates for election106 The Board noted submissions, regarding the difficulty of providing adequate representation across such geographically large areas. Issues of concern included that the impact of increased travel could result in a reduction in elected member work outputs and could present a significant health and safety risk to staff, and elected members. The heaviest burden of travel is likely to fall on mayors and deputy mayors as their attendance is expected at community meetings and events throughout the municipal area. Submissions also highlight potential difficulties in maintaining communications and a connection across a much larger area. The Board recognised that while councillors do not need to live in an area, they do need to be familiar with it and understand the issues facing the local community. The cost of fuel, depreciation and other costs could also act as a significant disincentive for community members to attend a community or council meeting, in either of the current municipal centres, impacting on direct community engagement and participation in local democracy. Submissions raised distance from centre of government and potential disassociation from issues and impacts as a concern. While the Board considered options that might address issues of access for the community. These included: holding meetings at alternating locations, although this would seem to result either in a proportion of the community (albeit alternately) being disadvantaged each time or holding meetings in multiple locations but this would result in additional costs for councils/ staff and elected members. However, the Board concluded that the expense of these might prove prohibitive in a merged council or present health and safety issues.

104 Submission 14 105 Submission 19 106 Submission 19 78

Electoral Districts (Wards) and Community Consultative Committees Up until the early 1990s, wards were a common feature of even very small councils in this State. There are presently no wards, now known as ‘electoral districts’, in effect in Tasmania. However the Act retains a process for their creation if required. The removal of ward structures in the early 1990s reflects a shift away from sectoral representation by elected members and towards a broader and more objective strategic approach by elected members on behalf of the whole community. The Local Government Board in the 1997 reforms expressed the view that: electoral districts can strongly compromise the political accountability of the Local Government system. Although electoral districts will achieve the objective of ensuring direct local representation, it does nothing to enable residents to hold politically accountable those councillors who are elected from other districts. Some submissions propose the reintroduction of electoral districts within a new merged council; either as a permanent or transitional measure107 These suggestions reflect a concern that particular localities within the new council’s area might not gain direct representation on the body of elected members.

Community consultative committees may be an alternative to a ward structure. This model would allow a merged council to retain its connection with local communities and interests, while retaining a strategic approach to the overall governance of the area. The Board noted the 1997 council review survey findings in Victoria and South Australia, that the increase in the size of the council had not adversely affected the effectiveness of elected member representation or the responsiveness of council services. Councils had introduced a range of initiatives to overcome the impact on residents. A more extensive use of technology such as mobile phones, faxes and lap-top computers, the introduction of community consultative forums, have strengthened, rather than weakened councils' capacities to respond to the needs of residents in a timely and appropriate manner. 5.4.3. Board Findings and Recommendations on Governance and Representation The Board believed that a larger, stronger council would be expected to provide improved corporate support and advice for councillors, leading to better quality local leadership and decision-making, and be better able to respond to emerging local and external challenges. The Board was made aware of a number of sub-optimal governance practices within both councils. However the board considers that improvements in governance will come from leadership and the allocation of resources for professional development and training. It was not persuaded that tangible benefits in local governance and community representation and leadership were dependent on a merger of the two councils.

107 Submissions 9, 11, 12 and 19.

Chapter 6. Conclusions and Recommendations The Board does not believe that the proposed single merged east coast council would be substantially more sustainable than the two existing stand-alone councils. The Board was not convinced that if a merger were to proceed, the position of the merged council would be strong enough to ensure against the prospect of further mergers in the east coast region.

Financial Sustainability The Board considers that a merger should only be considered where it will lead to: i. long term financial sustainability; enabling the council to provide services that meet community expectations and statutory requirements ii. benefits for the community such as improved governance, community capacity building, improved service delivery or improved management practices including asset management and long-term financial planning and human resource management. It considered that the need for a merged council to provide an improved level of services would reduce the theoretical cost efficiencies realised by a merger and that the size of the combined municipal area would most likely create additional significant ongoing staff and travel costs – even in the event that the one-off costs of a merger were fully covered by the State Government. The Board is not convinced that the potential savings identified by KPMG would be sufficient to address the issues currently facing the stand-alone councils.

Benefits and Impacts for the Community Submissions received by the Board indicated general support for mergers where they can deliver, amongst other benefits, service improvements, economies of scale, a cost-saving to ratepayers and improved governance. Submissions have argued that evidence of these benefits should be established before the specific merger proposal is supported. Some submissions argued that such benefits would not be achieved from the east coast merger proposal. The Board identified no significant community benefits in the form of potential economic, social and environmental benefits. The Board also noted the concerns of some communities, arising from experiences in previous mergers that more isolated areas would be adversely affected by a merger. While the Board considered that some impacts on local representation could be mitigated through the implementation of measures such as the creation of community consultation boards or wards there were likely to be some negative impacts on current representation due to the geographic nature and dispersed population centres of the proposed merged council area.

Governance and Leadership The Board considers that improvements in governance will come from leadership and the allocation of resources for professional development and training to ensure good decision making processes. The Board appreciates that in making the request to the Minister for a review the councils were attempting to take control of the future of their municipal areas and they are to be commended for this. However, the Board had no confidence that the two individual councils were committed to a (voluntary) merger process, even if such was recommended by the Board. Indeed, they appeared to rely on the view that either council could withdraw from the process at any time. Of further concern to the Board was that there appeared to have been no joint discussion between the two councils as to what would be achieved from the merger in terms of the strategic advancement of the area and its communities. There was no evidence that either council had familiarised itself with the situation, operations and workings of the other council. There appeared to have been no recent consideration by the councils of alternatives to the proposed merger. Certainly their communities did not appear to have been presented with a case supporting the potential benefits of a merger nor information as to why the councils requested the board review into a voluntary merger process. The Board heard community concerns about a lack of public engagement in the merger process. Some submissions proposed a referendum or poll to ensure consultation with the communities involved as it would have an impact on their democratic representation108. It is the view of the Board that, even if the two councils needed to seek assistance in conducting research to progress a merger, a united and committed approach could have been expected from the councils, including having created a far greater level of community awareness of what was being proposed than appears to have been the case.

Summary In summary, the Board does not consider that it was provided with any compelling and long term rationale for the merger of the Break O’Day Council and Glamorgan-Spring Bay Council and concluded that the imposition of the costs and impacts of the proposed merger cannot be justified. Recommendation 1: that the Break O’Day Council and the Glamorgan-Spring Bay Council not be merged to form a new council. As the Board is not recommending a merger, and a merger cannot proceed without a positive recommendation of the Board, the Board has not addressed the transitional arrangements for a merger process.

108 Submission 34

The Board considered that the potential benefits of other options to enhance council sustainability, the delivery of council services and the sustainable development of the municipal areas should be considered as part of its report on the guiding principles for future council mergers, to be undertaken immediately after its review of the potential merger. The Board is of the view that potential mergers should not be considered in an ad hoc manner. In the course of carrying out this review the Board has identified a number of issues: cost to ratepayers and taxpayers of a board review (and preparation for a board review) where a proposal is not viable impacts on communities eg community concern and confusion due to lack of consultation, information sharing and preparation election deferral impacts (cost, delay, impacts on potential candidates) impacts on councils (difficulties in attracting staff, political mileage from mergers as an election issue by individuals - prior to the community being fully informed as to the potential benefits and impacts of a merger) the exclusion of alternative municipal areas and parts of municipal areas regardless of the merits of such alternate proposals. Submissions to the Board have proposed a range of alternatives to the potential east coast merger including: i. a wider review incorporating boundary adjustments as part of the review ii. mergers with alternative councils neighbouring the two east coast councils such as the Dorset, Sorell and Tasman Councils iii. a combination of these options The Board considers that it is problematic to consider the potential merits of a merger proposal without considering the merits of alternative options, particularly where there is at least another willing party. An ad hoc process may create a scenario where struggling councils may be excluded from voluntary merger negotiations on the basis of poor performance and not be able to find a willing merger partner. Recommendation 2: That the future of the Break O’Day Council and the Glamorgan-Spring Bay Council be considered as part of a future strategic examination of the structure of Tasmanian local government. A number of submissions to the Board recognised the need for change to achieve better services, more integrated planning across a range of areas, and improved governance at the local level and in the broader local government sector. The Board commends the Break O’Day and Glamorgan-Spring Bay Councils for taking a first step in exploring one of the alternatives open to the councils to bring about change. In the course of conducting its review, the Board has identified a growing awareness of the need for change, and an open-ness within both local government and the community to embrace change in the sector. Whilst there was a noticeable lack of broad-based support for this particular merger proposal, the need for change is recognised broadly in the community and in all spheres of government. State and Commonwealth governments share with local government a desire to bring about effective and sustainable local government.

It is clear to the Board that a holistic approach to the consideration of merger and other proposals to put local government in Tasmania on to a more sustainable basis is required. Recommendation 3: That following the work currently being done by the Local Government Board on guiding principles, consideration of changes to the structure of Tasmania's municipal areas should be undertaken in a holistic and inclusive manner and involve the State and local government in consultation with their communities.

Appendix1: Tasmanian Local Government Areas

Appendix 2: Written Submissions 1. Gary Barnes confidential submission 2. Larry and Hannelore Henderson submission number 2 3. Leigh and Christine Miller submission number 3 4. Rebecca Tuck, Barbara Glendowan, Alana Johns and submission number 4 Fiona Ward 5. Fingal District Progress Committee submission number 5 6. Brendan Coyne submission number 6 7. Catherine Walsh submission number 7 8. Margaret Fletcher submission number 8 9. Cr Robert Legge submission number 9 10. B Haley submission number 10 11. Martin Crawford submission number 11 12. Cr Larry Gibson submission number 12 13. Rodger Bartlett submission number 13 14. Hannah Rubenach submission number 14 15. Phil Corby submission number 15 16. Sean Kelly submission number 16 17. Cr Richard Parker submission number 17 18. Geoff Horton submission number 18 19. Kath Fergusson submission number 19 20. Alain from DRSA submission number 20 21. Bill Costin, General Manager Sorell Council submission number 21 22. Mr & Mrs Davoren submission number 22 23. Mr A & Mrs M Morgan submission number 23 24. Beris Hansberry submission number 24 25. Dorset Council submission number 25 26. Jim & Karyl Whelan submission number 26 27. Cr Alex Green Southern Midlands Council submission number 27 28. Tony Walker, General Manager Break O’Day Council confidential submission 29. Elizabeth & Kyrle Hodson submission number 29 30. Allan Garcia CEO LGAT submission number 30 31. Daniel Hanna, Tourism Industry Council Tasmania submission number 31 32. Lynette Taylor submission number 32 33. John Heck submission number 33 34. Beverley & Peter Rubenach submission number 34 35. Kate Springer submission number 35 36. Neil Denney submission number 36 37. State Grants Commission submission number 37 38. Workplace Standards Tasmania submission number 38 39. Ron Sanderson, General Manager, Brighton Council submission number 39 40. David Metcalf, General Manager, Glamorgan-Spring Bay confidential submission Council 41. Dr Roscoe Taylor, DHHS Population Health submission number 41 42. Kate Walker, Relevancy Pty Ltd submission number 42 43. Mathinna Community Landcare Group submission number 43 85

Appendix 3: Verbal Submissions The Board met with the Break O’Day and Glamorgan-Spring Bay Councils. The Board also met with the staff of both councils in a private session. Name Spoke to written submission 1. Cr David Clement N/A 2. Cr Reon Johns N/A 3. Cr John Le Fevre N/A 4. Cr Robert Legge, Mayor N/A 5. Cr John Charles McGiveron N/A 6. Cr Margaret Osborne N/A 7. Cr Henry Holder N/A 8. Cr Vic Cato N/A 9. Cr Jan Bacon N/A 10. Cr Bertrand Cadart ,Mayor N/A 11. Cr Jenifer Crawford N/A 12. Cr Michael Fama N/A 13. Cr Larry Gibson submission number 12 14. Cr Craig Johnston N/A 15. Cr Richard Parker submission number 17 16. Cr Geoff Witton N/A 17. Ms Kim Kean N/A 18. Mr Bernard Raspin N/A 19. Mr Fred Williams N/A 20. Mr Winston Henry N/A 21. Mr Richard Parker N/A 22. Ms Kath Fergusson submission number 19 23. Mr Graeme Hodgson N/A 24. Mr Derek Madson N/A 25. Ms Helen Madson N/A 26. Mr John Heck submission number 33 27. Mr Todd Dudley N/A 28. Mr John Martin General Manager Dorset Council submission number 25 29. Mr Guy Jetson Corporate Services Manager Dorset N/A Council 30. Ms Jennifer Crawford N/A 31. Ms Sue Bull N/A 32. Ms Deidre Monk N/A 33. Ms Molly Ferguson N/A 34. Ms Dana Douglas N/A 35. Mr Tony Pollard N/A 36. Mr Geoff Horton submission number 18 37. Mr Martin Crawford submission number 11 38. Mr Robert Woolley N/A 39. Mr Sean Kelly – State Secretary Australian Services submission number 16 Union

40. Mr Craig Jensen No 41. Mr Sharon Jensen No 42. Ms Margaret Fletcher submission number 8 43. Ms Christine Scott No 44. Mr Frank Giles No 45. Mr Geoff Weston No 46. Mr Peter Rubenach submission number 34 47. Mr Jim Hayes No Total: 43 written submissions and 47 verbal submissions

LOCAL GOVERNMENT BOARD GPO Box 123, Hobart 7001 Ph: 1300 404 607 Email: [email protected] Visit: www.dpac.tas.gov.au/lgboard