Wagstaffe to Killcare Community Association



Submission to the review of the Minister’s proposal



to merge Gosford City Council


with the Wyong Shire Council


Dr H.K. Colebatch




I am a resident of Pretty Beach in the Gosford City Council area. I am also a political scientist specializing in public management, and have been engaged on research on local government since 1969, and for some years managed the degree course in local government administration at Kuring-gai CAE which was then one of the two routes to qualification for appointment as a Town Clerk in NSW. I established the graduate program in Social Science and Policy at UNSW, and am currently a Professorial Visiting Fellow in the School of Social Science at UNSW and an Visiting Professor in the Australian Centre for Local Government Excellence at UTS.


  1. What is the problem, and what is the evidence ?


All of the documentation relating to the minister’s proposal is long on rhetoric and short on evidence. The Independent Review Panel (ILGRP) asserted that ‘local government in NSW needs a new agenda and a fresh start’, and claimed that its objective was to ‘create a revitalized system of local government’. But in the end, all it proposed was more amalgamation, which as the review admitted, has been going on for a century, evidently without having any lasting impact on the quality of government. There is no attempt in the minister’s proposal to show that merging Gosford with Wyong will produce revitalization or a new agenda and a fresh start, just continuing assertions that if the boundaries are changed, everything will be better. We have had amalgamations in the past without any dramatic change in the character of local government. We used to have a Woy Woy Council. Then it was decided that in the interests of efficiency, it should merge with Gosford. This has evidently not produced the desired result, so it is asserted that the merged council should merge again, with Wyong. But as ILGR says ‘this trend [amalgamation] will surely continue’ – in other words, it is a fashion item in Macquarie Street, and it is only a matter of time before the same claims will be made to justify a merger with Lake Macquarie or Hawkesbury or Cessnock (or all of them).



    Why did the ILGRP recommend the merger ?


The fact is that it didn’t. It said


Options for the Central Coast are a full amalgamation or a multi-purpose Joint Organisation. The Panel does not believe a separate water corporation should proceed before those options have been properly evaluated. The potential for an amalgamation warrants further investigation, but if that option is rejected or deferred indefinitely, then a Joint Organisation should be established and should assume responsibility for water along with other strategic functions.

The Panel’s conclusion is perfectly clear: either the two councils should be merged, or they should remain separate councils, with their existing cooperation over water supply being expanded to take in other services. It made similar recommendations for a number of other councils. But IPART, to which the proposal was sent for further investigation, simply refused to do it:

We have approached the assessment of the Central Coast councils on the basis that a merger should be explored first. (Final Report, p.62)

In other words, IPART took it upon itself to countermand the recommendation of the Independent Review Panel for a ‘proper valuation’ of options, and to substitute its own preference for amalgamation. The minister’s proposal simply elaborates a prior preference for amalgamation, meaning that the work that the Independent Review Panel put into exploring options, and the work that Gosford and Wyong officials put into learning to run a joint venture, has simply been trashed.

  1. The financial case

The minister’s proposal rests entirely on the financial argument: every claimed benefit is said to flow from the financial benefits, but there no argument showing how this will happen or evidence that it will.


The fact is that both Gosford and Wyong are financially well-managed, having both been ranked in the top ten best financially-managed councils in NSW, and IPART found that they satisfied the financial management criteria for continued independent existence. However it asserted that they could save money by merging and sacking senior staff. The minister claims that the KPMG analysis ‘shows’ the financial benefits of the merger, but it does nothing of the sort. KPMG assumes that all councils could save a certain percentage of their staff costs by sacking senior staff and applied this formula to Gosford and Wyong. The IRLGP at least had the honesty to admit that while you could make these projections, the savings were often not realized, or if they were, they were simply spent in other ways.



The minister also states that both Gosford and Wyong will need to increase their rate revenue, but if they merged they would have less need of increases. But the reason that these councils will need more money in future years is that the population is growing. It is estimated that there will be another 70,000 people in the Central Coast in twenty years’ time, many of them over 65 and generating higher demand for council services, and this need will be there whether they are in one council or two. The same is true of the state government’s own expenditure. Will the minister give us an assurance that the tax take of the NSW government will be no more in 2036 than it is today ? If not, why is the increase in taxation a basis for criticizing these councils ?


This bring us to the nub of the argument: the financial problem of the councils is not size or efficiency, but vertical fiscal imbalance: they have the capacity to do things but not the money to do it, and the higher levels of government have the money but not the delivery capacity. NSW and the other states stand in exactly the same relationship to the federal government, but no one claims that the states’ need for federal funding is due to inefficiency, or (except Jeff Kennett in his roguish old age) suggests that the answer is to amalgamate the states to form larger entities. The answer to VFI in the Commonwealth of Australia was first to form an independent body to redistribute income among the states (the Commonwealth Grants Commission), and to supplement this with a new tax on economic transactions rather than land (the GST) and to distribute this among the states. The minister’s proposal shows that the state government’s response to VFI in local government is very different to what this government demands and gets at the national level.

The minister’s proposal completely ignores the structural sources of financial strain in local government, and his suggestion that these will be alleviated by boundary changes is willful self-delusion. The problem is that council’s main source of revenue is a land tax, which is inadequate in itself, and further weakened by self-interested interference by the state government. Paying for local services with a land tax was not a bad idea when it was introduced in 1601, when most wealth came from agriculture, but as this became less central, governments relied more on taxes on income (corporate and individual) and economic transactions (notably the GST). Local government was left with the land tax, which did have the advantage that it was difficult to escape it, but councils found that state government ministers always sought to ingratiate themselves with the public by refusing to let councils increase rates, and by exempting particular favoured groups (churches, pensioners) from payment. Moreover, state governments have been adept at giving councils new responsibilities but no new revenue sources.


The intention of the 1993 local government reforms was that councils should be allowed to be responsible: to decide what they were going to do, raise the money to do it, and let the voters decide whether it had their support. But ministers preferred to continue to play the fairy godmother, and to ensure that councils could only run on a short-term, year to year basis, and never take any strategic action or make any long term plans because they did not have the financial autonomy needed. The minister’s proposal does not address this problem, other than to declare that rates will be frozen for four years – i.e. the merged council will have even less autonomy and strategic capacity than the present councils. This makes his claim that the merger will ‘strengthen the role and strategic capacity of the new council’ nothing more than meaningless hot air: it will leave the new councils exactly where the existing ones are now.



    What is the purpose of local government ?


The IRLGP and other participants have made much of the councils’ ‘fitness for purpose’ without saying what this purpose is. It would appear from the minister’s proposal that the purpose of local government is to deliver services in ways approved of by the state government. While this is true up to a point, it tells only half the story. Local government is also a focus for identity, and a vehicle for asserting that identity – ‘the way we do things here’ – and managing the environment in a way consistent with this shared identity. And because it is local, it can be a channel for drawing community organizing into the process of governing. None of these aspects are addressed in the minister’s proposal, which just asserts that ‘these communities have similar lifestyles’, which is just nonsense. Gosford is a would-be regional centre; Woy Woy is increasingly a dormitory suburb for Hornsby; Terrigal is a beach resort; Wagstaffe/Killcare is a very different beach settlement (where cars stop for ducks crossing the road).. The assumption that local identity is unimportant and the state government can draw boundaries anywhere it finds convenient and define the entities thus created to be ‘local’ is one of the major weaknesses in this exercise.



    Pros and cons


Any intelligent business case examines the expected costs as well as the expected benefits of a proposal, and this is required by s.263 (3) of the Act, but it seems to be absent from the minister’s proposal, which expatiates endlessly (although vaguely) on the beneficial effects of merging the two councils, but appears to be unaware of any disadvantages. For instance, the minister’s proposal speaks warmly of the prospect of the different regulatory regime in the two council areas being ‘harmonised’. Now the NSW parliament has in its wisdom given each council the right to make, within broad limits, its own regulations about land use and building, and this is probably the point at which ordinary citizens are most likely to becomes aware of the council as a decision-making body. These ‘local rules’ are part of the working knowledge of council staff, architects, planners, builders, building suppliers, etc., and changing them makes all this working knowledge obsolete, and everybody has to learn the new rules. This is a cost of change: people have to take time off from their job to learn their way around the new regulatory structure. And the new rules may now be in conflict with the rules in place in Hawkesbury or Cessnock or Lake Macquarie – in other words, one set of inconsistencies may be replaced with another. It may well be that the benefits of standardizing the rules in Gosford and Wyong outweighs the costs of change and any new inconsistencies, but the minister’s proposal does not even recognize the need to assess the balance between costs and benefits as part of the decision process. Once the minister has decided on the outcome, it can only be good.



7. ‘Everyone else does it !’



The minister claims that ‘independent experts have found that NSW cannot sustain 152 councils’, which is twice as many as Victoria, though the Report of the Independent Review does not discuss this belief in any detail, and no one has ever said why Victoria should be the model: NSW is more than three times the size of Victoria and has one-third more population. Why not compare NSW with Switzerland, which is much closer to NSW in population terms, and has more than 500 councils ? Or France, which has 3000 councils for its 40m people ? Or the US ? New York State (19m) has 1400 distinct local government units. It is not that the Swiss (or the French or the Americans) don’t care about efficiency: it’s that they also care about local democracy, and think that communities should be able to run their own affairs. The minister’s proposal shows that he does not: democracy stops when a state election puts a minister into office, and local communities should be compulsorily corralled into whatever organizational form is currently in favour with Sydney politicians and bureaucrats



8. Who decides what’s good for you ?



This brings us to the central question. The whole argument in the minister’s proposal is that a merged council will benefit the residents: it will cost less and deliver better government. The first claim rests entirely on formula-based projections and the second is simply impossible to assess. But supposing it were true that a merged council would be cheaper, would this be a sufficient reason for a merger ? If we always wanted the cheapest option we would eat all our meals at McDonalds, do all our shopping at Aldi, and drive Chinese-built cars - but of course we don’t: we make our own judgments about quality, convenience and cost, based on our own experience and preferences. We are all experienced consumers of the performance of our local council; why are we not allowed to make a choice about whether to have a smaller, perhaps more expensive, council or a larger, perhaps cheaper one ? We do this all the time with restaurants, but the government goes to great lengths to prevent residents from exercising any choice over the form of their local council.



In this connection, it is worth recalling what the Independent Review of Local Government Panel said about the views of citizens about their councils:


The findings of the Panel’s new polling closely aligned with those of previous surveys. Some key points are as follows:

_On the whole, people appear more satisfied with the performance of local government than with State and federal governments. Local councils are seen to play a very important role in providing community infrastructure and services.

_Council rates are seen as ‘fairly good value’ and most respondents would rather see rates rise than have cuts to local services. Similarly, most would be willing to pay more in rates if it meant the quality of local services improved.


_A majority of respondents did not support amalgamation of councils due to concerns about local government areas becoming too large and loss of local representation and identity. …



Such findings again confirm the value people place on local government services (IRLG Report, p.23)



So the alleged beneficiaries of the merger have been given no choice, and effectively, nor have their elected representatives. Moving the motion to accept the merger with Wyong, the Gosford Deputy Mayor said


“In 17 years [in local government] I have never been backed into a corner like this by any state government no matter what their political creed.”

He said Local Government Minister Paul Toole made it clear in a meeting last week that a stand-alone option was not on the table.

“We have been bullied into a corner of which there is no recovery,” he said. Daily Telegraph 16 November 2015)


The councilors were left with the clear understanding that if they failed to vote for amalgamation, the council would be dissolved and an appointed administrator would exercise their powers, leaving them unable to represent their constituents’ interests. This was coercion, not informed consent. The case for amalgamation is so unpersuasive that neither the alleged beneficiaries or their representatives were allowed any choice in the matter.



9. Compliance with statutory requirements (s.263(3)



    the financial advantages or disadvantages (including the economies or diseconomies of scale) of any relevant proposal to the residents and ratepayers of the areas concerned,


The document makes numerous assertions about the financial advantages of a merger, but these rest on assumptions rather than evidence. The ILGRP worked on a general assumption that councils needed more resources, and that the only way to get more resources was to have a larger population and benefit from economies of scale, but it admitted that sometimes, mergers produced these economies and sometimes they did not. The matter was referred to IPART, which did no research, either into Gosford/Wyong or anywhere else, past or present, but made an estimate of the proportion of the wage bill which could be saved by sacking staff, and applied it to the present council budgets. In other words, the claim that a merger will save $112m is simply a guess by IPART, which has no particular knowledge of local government and does not appear to have done any research into the actual experience of mergers.



The document makes no reference to any financial disadvantages of the merger and makes no attempt to weigh them against the advantages.



The document does not satisfy this requirement.



    the community of interest and geographic cohesion in the existing areas and in any proposed new area,


The document makes a passing assertion that ‘the communities of Gosford and Wyong share common characteristics’ but makes no attempt to assess the extent to which there is a community of interest and geographic cohesion, simply listing activities it regards as ‘community’, but not relating these in any way to the proposal for merger of the two councils.



    the existing historical and traditional values in the existing areas and the impact of change on them,


Not addressed; document does not satisfy this requirement.



    the attitude of the residents and ratepayers of the areas concerned,


The document makes no reference to the attitude of the residents and ratepayers, and the minister made it clear to Gosford City Council that he was determined to force a merger irrespective of the attitude of the ratepayers and residents or their elected representatives.



The document does not satisfy this requirement.



    the requirements of the area concerned in relation to elected representation for residents and ratepayers at the local level, the desirable and appropriate relationship between elected representatives and ratepayers and residents and such other matters as it considers relevant in relation to the past and future patterns of elected representation for that area,


The document assumes that elected representation will be reduced from 20 in the present councils to 15 in the merged council, meaning that representation (residents per councillor) will be reduced by 28% in Gosford and 39% in Wyong. It states that this is appropriate because Blacktown City Council will have roughly the same representation ratio, ignoring that fact that Blacktown is an urban area and Gosford/Wyong an area of widely dispersed settlements. The area of the Gosford/Wyong council would be seven times the area of Blacktown Council, and its residents are likely to find their elected representatives to le much less accessible than those in Blacktown.



The issue of representation is not adequately addressed in the document.



(e1) the impact of any relevant proposal on the ability of the councils of the areas concerned to provide adequate, equitable and appropriate services and facilities,



The document asserts endlessly the minister’s belief that a merged council will provides services that are better in every respect than the services now provided, but gives no reason for anyone else to share that belief.



(e2) the impact of any relevant proposal on the employment of the staff by the councils of the areas concerned,



The central claim of the document is that a merged council could save $10m a year by sacking staff, and it sees this as entirely laudable. It assumes that it will be senior staff who will be dismissed, and their departure would make no difference to the operational capacity of the council. This assertion does not appear to rest on any specific evidence from the two councils, but seems to be another projection of an IPART belief.



The document states that this $10m saving will finance vastly improved service, reduce the need for rate increases, and enable the councils to catch up the infrastructure backlog. But since the combined budgets of the two councils at present are $345m a year, a $10m saving represent 2.8% of the budget – worth having, but hardly the basis for a dramatic turnaround.



This factor is not adequately addressed in the document.



(e3) the impact of any relevant proposal on rural communities in the areas concerned,



This is not addressed in the document, which does not appear to have even entertained the possibility that councils may reduce staff by closing small outstations (e.g. roads depots) rather than sacking senior staff in the head office. Given that the former is one of the most common ways of effecting economies of staff (e.g. closing the RTA office in Woy Woy and transferring it to Gosford), this is a remarkable omission.



(e4) in the case of a proposal for the amalgamation of two or more areas, the desirability (or otherwise) of dividing the resulting area or areas into wards,



The document recognises this as a question to be addressed, but has nothing to say on it other that suggestions may be made in the consultation process.



(e5) in the case of a proposal for the amalgamation of two or more areas, the need to ensure that the opinions of each of the diverse communities of the resulting area or areas are effectively represented,



The document makes no reference to the opinions of the diverse communities, and it is not evident that the consultation process has brought these into consideration. Only one public meeting was held in Woy Woy, and it was not advertised widely (e.g. in the community newspaper mentioned in this document).



(f) such other factors as it considers relevant to the provision of efficient and effective local government in the existing and proposed new areas.



10. In conclusion



This proposal originated in an ambitious exercise which purported to be creating a ‘new agenda’ and a ‘fresh start’ for local government, but it shied away from all the difficult questions abut the governing of place and the coordination of the different elements of government in relation to place, and ended up, like all its predecessors, calling for amalgamations and redrawing maps to producer councils which had more population and were therefore, in some unexplained way, ‘better’. And it does not even claim that this will be a sustainable result, but expects that by the middle of the century, there will be another round of enquiries and more claims that amalgamation is needed. If it didn’t work last time, we should do it again, and when we find that this one hasn’t worked – well, we can do it again.



The ILGRP did at least diverge from this well-worn track by admitting that in some cases (of which Gosford/Wyong was one) a joint organization to operate shared services might deliver the same benefits as a merged council, but this was just ignored by IPART and did not appear in the minister’s proposal.


So we end up with a damp squib: not Brave New World, but Groundhog Day, yet another amalgamation, and just a very timid one, to merge two adjoining medium-sized councils to create one larger one, in the hope that this will result in savings equal to 2.8% of the aggregate budget of the present councils (and 1.9% of the projected budget of the merged council). But we are asked to believe that this modest saving will


improve road networks;

upgrade local water and wastewater infrastructure

ensure clean waterways and beaches;

promote tourism and business

better manage open spaces, cultural and recreational facilities.

provide effective representation


make the council a more effective advocate for the area’



One would have to feel pity for the hapless public servants who were directed to dream up a justification for this merger; much of it is simply downloaded from a standard template, of course, but this too makes for obvious errors. For instance, the minister’s proposal claims (p.4) that the putative savings will enable reducing the existing $228 million infrastructure backlog across the Gosford and Wyong areas , but on p.7 it states that the infrastructure backlog at present is 5% in Gosford and 3% in Wyong but in the merged council it would be 4%: Gosford a little better off, Wyong a little worse off, net change: Nil. Similarly, the proposal claims that that the merger will ‘provide the new council with a larger rate base on which to set ratings policies and improve the sustainability of council revenue’ (p.11), but Table 1 shows that the number of ratepayers and the profile of types will be exactly the same in the merged council as in the present councils: the suggestion that the merged council could squeeze the ratepayers harder is not consistent with the claims that merger will ease the pressure on the rates..



So the review of this document must find that the case is Not Proven. The two councils are well-run, and have a good track record of collaborating in joint service ventures, and for this reason the independent Review Panel recommended that the option of their continuing as stand-alone councils with a joint service organization be properly evaluated. But this has not been done, and the minister’s proposal simply articulates a belief that councils with greater population are always better than councils with smaller population. This is evidence-free reorganization, without any attempts to calculate and compare costs and benefits, and cannot be endorsed by the review.



Dr H.K. Colebatch



25 High View Road



Pretty Beach 2257



4360 2747





Copyright 2009 Wagstaffe to Killcare Community Association Incorporated