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Submission on NSW Blayney Cabonne and Orange Forced

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Submission on NSW Blayney Cabonne and Orange Forced CABONNE ANTY AMALGAMATION CAMPAIGN STEERING COMMITTEE Submission on NSW Government Merger Proposal: Blayney, Cabonne and Orange February 2016 Submission on NSW Government Merger Proposal: Blayney, Cabonne and Orange Amalgamation No Thank You (ANTY) represents the residents and ratepayers of Cabonne Council Local Government Area who strongly oppose the proposal put forward by the Minister for Local Government in January 2016 to force a merger between Blayney Shire Council, Cabonne Council and Orange City Council (“Forced Merger Proposal”). Executive Summary This submission addresses each of the criteria which the Delegate is required to have regard to under section 263 of the Local Government Act (1993) in considering the Forced Merger Proposal. In summary, we oppose the forced merger of Cabonne Council with Blayney and Orange City: • Cabonne is a unique rural council, catering for many small towns and villages, whilst Orange City is an urban council with entirely different needs. • There will be a detrimental economic impact on the current Cabonne LGA, through the loss/movement of council jobs, movement of council expenditure and an unfair and steep increase in rates following the four year rate freeze. • There will be a significant social impact which comes from not only the flow on economic effect, but due to the level of support that the council currently provides to the many communities and community groups diminishing with the loss of representation and direct control, and the lack of connectivity with council management and staff. • Cabonne has been found to be financially sound and sustainable into the future. There is no guarantee that the Forced Merger Proposal savings will be made1, and even if they are, there is no guarantee that any of them will find their way into the current Cabonne LGA. • Cabonne residents have overwhelmingly demonstrated that they oppose any forced amalgamation. In considering the Forced Merger Proposal all criteria must be fairly considered on the basis of credible evidence including a robust economic analysis to determine economic impacts over the long term as well as an assessment of the long term social costs. When the costs of the financial and social impacts are measured, they clearly outweigh the questionable “savings”, “efficiencies” and “reduced expenditure” promoted by the Minister. The financial and social costs to first implement the Forced Merger Proposal, and then to maintain an effective Council catering for the needs of distinctly different communities, will significantly disadvantage the region. Experience in this region has already shown that efficiencies can be achieved by cooperative measures. These types of collaborative initiatives need to be further encouraged, rather than acting against the will of the people and stripping rural communities of their fundamental right to effective representation. Principles of natural justice or procedural fairness dictate transparency and a fair and unbiased assessment of the evidence. The evidence the Minister has put forward is incomplete, incorrect, blatantly misleading and clearly biased in favour of the outcome the NSW Government bureaucrats want to achieve (refer Attachment A). Despite repeated FOI requests, further information (including the complete KPMG report) has not been forthcoming prior to the submission period closing. Those directly affected by this proposal have therefore been given no reasonable opportunity to consider and make submissions on all the information upon which the Forced Merger Proposal is put forward. 1 To the contrary, the February 2016 Morrison Low Report attached to the Cabonne Council’s submission on the Forced Merger Proposal highlights the likelihood of a realistically estimated cost of $21.3m. 28 February 2016 Submission on NSW Government Merger Proposal: Blayney, Cabonne and Orange 2 Accordingly, any decision by the Delegate to recommend supporting the Forced Merger Proposal is unsustainable. Good morning Canowindra (Photo courtesy of Chris Watson @farmpix) Commencement of the Lawnmower Race at the Cumnock Show Kerin Poll Merinos, Yeoval 28 February 2016 Submission on NSW Government Merger Proposal: Blayney, Cabonne and Orange 3 Section 263 Criteria 1 Significant financial disadvantage (s263(a)) 1.1 Each Council meets financial benchmarks for long term sustainability: Each of Orange City Council, Blayney Council and Cabonne Council has already proven, through the IPART “Fit for the Future” process, to be financially sustainable in the long term. Specifically, Cabonne Council consistently meets 5 of the 7 “Fit for the Future” financial benchmarks and will meet all 7 benchmarks from 2016/ 2017.2 1.2 The Minister’s evidence is not credible: The Parliamentary Inquiry into Local Government found that there was no evidence to support that amalgamations will save money. However, the Forced Merger Proposal is underpinned by KPMG’s modelling which suggests ”potential” to generate net savings to council operations of $29 million over 20 years. The KPMG modelling is superficial and uninformed. No attempt was made to obtain accurate data from the affected Councils. Its assumptions are broad and unreliable. Despite repeated requests, the KPMG report has not been released in full to allow the community or the affected Councils to scrutinise and provide critical information allowing a fair and proper assessment by the Delegate under section 263. However, based on the information available, in Attachment A, we detail our specific concerns in relation to the contents of the document put forward by Minister Toole to support the Forced Merger Proposal. It is also noted that on 3 July 2015 Orange City Council made a submission to the Inquiry into Local Government in NSW. It highlighted the “helicopter view undertaken by the Independent Local Government Review Panel, the Fit for the Future process and IPART”. Orange City Council stated that it “has a fiduciary duty to act in the best interests of its constituents. Council cannot fulfil that duty on the evidence detailed in the data revealed by the Fit for the Future process. By comparison the process does not meet the due diligence requirements of private or corporate sectors.” The KPMG modelling is simply more of the same – uninformed desktop modelling. 1.3 Council submissions based on informed data: Cabonne Council and Orange City Council last year appointed Morrison Low jointly to independently assess the merger case for those two Councils, based on independent public data, as well as data provided directly by the Councils. The result was that there was no business case to support a merger of those two Councils and each Council resolved to “stand alone” as the superior option. Cabonne Council has engaged Morrison Low to undertake further analysis for the purposes of this Forced Merger Proposal and it forms part of Cabonne Council’s submission. For the reasons outlined in Cabonne’s submission, it is far more credible than the KPMG report. 1.4 Merger expenses: The KPMG modelling of merger expenses is deficient in a number of areas. Key issues are: (a) IT costs: KPMG factors in $2.8m (for a “Medium Regional Cluster”) + 30% contingency, so a total of just $3.64m, to cover the costs of stop-gap “IT enhancements….. for example, access to key financial accounts and a single web address and email domain”. The Minister argues that the Forced Merger Proposal will achieve long term savings and yet only factors in a band aid short term fix for the fundamental operational platform of the new entity ie a fully integrated IT programme. This not only distorts the financial analysis but sets the Forced Merger Proposal up for failure. These projects are expensive and notoriously run over budget (eg Auckland’s failed technology integration programme will cost between NZ$140m and NZ$172m, on a budget of NZ$71m3). Morrison Low estimates (as contained in Cabonne’s submission) that the IT integration project would cost $15m. (b) losses on plant and buildings: The KPMG modelling fails to take into account potential losses on unsaleable infrastructure such as Council buildings in Cabonne and Blayney and fails to consider the cost of building new infrastructure to accommodate the workforce in a centralised structure. 2 Cabonne Council proposal to IPART June 2015. 3 NZ Herald, 20 November 2014, Jared Savage, Bernard Orsman. 28 February 2016 Submission on NSW Government Merger Proposal: Blayney, Cabonne and Orange 4 1.5 Merger cost savings: Two key areas of deficiency in the KPMG modelling of cost savings are: (a) staff cost savings: KPMG has several errors in relation to staff cost savings. Basic errors such as these means that any KPMG figures in relation to staff costs and savings can’t be relied upon in any definitive way: (i) The KPMG modelling applies the wrong award in relation to redundancy payments. Staff are covered by the Local Government (State) Award, 2014 and not by a federal award as assumed by KPMG. (ii) The KPMG assumptions state that there will be 1 GM and 2 Directors in the merged council. In its savings on senior staff KPMG states a figure of $10m over 20 years. It has assumed that there is currently 1 GM and 2 Directors in each of the existing councils (i.e. 3 GMs and 6 Directors in total) and that there will be 1 GM and 2 Directors in the merged council. A simple phone call to either Blayney or Cabonne councils would have alerted them to the fact that there is only a GM in place at each of these councils, and no Tier 3 (Directors) employed. The savings claimed on senior staff is therefore substantially overstated. (iii) What they also neglect to take into account are the increased salaries of not just these senior staff but of the next level of management due to managing a larger employee and expenditure base. This is illustrated in an article by Stephen Albin, with the following excerpt “… asked me to communicate with a professor from the London School of Economics called Patrick Dunleavy.
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