Q. Voluntary Amalgamation?
The New England Strategic Alliance of Councils (NESAC) was formed five years ago in response to the alternative proposed by the Varden Report of the forced amalgamation of the Armidale Dumaresq Council, Guyra and Uralla Shire Councils.
Early in the Alliance it was established that back office services (Finance and IT) were very suitable for shared services, while services that relate directly to the Community (Works, Planning and Regulatory) would be better served by co-operative arrangements.
In early 2004 there were a number of forced amalgamations throughout Regional New South Wales and it was with the assistance of the local member, the Honourable Richard Torbay, that the four New England Councils were able to avoid this very real prospect.
The Alliance (NESAC) developed very ambitious business cases for the activities of the four councils plus the New England Weeds County Council. In addition the IT platform chosen to deliver the backroom services was a “Best of Breeds” solution, which joined together the products of a number of different computer software programs.
The Alliance has had its successes and failures. The three years since the computer system went live in August 2006 has been a steep learning curve for all concerned.
One failure that has affected the ability of the member councils to make accountable the providers of services, within the Alliance, was the lack of agreed service level agreements. Service Level Agreements have only just been completed for many of the service.
The Walcha Shire Council advised, in February, that they were to leave the Alliance by 30 June 2009.
They have successfully re-established their separate identity and systems.
The management of the Armidale Dumaresq Council and Guyra Shire Council has expressed frustration with the complex shared service arrangement and lack of outcomes from the co-operative arrangements. The difficulties experienced in the management of the shared services, in the opinion of the Uralla Shire Council, are a direct result of the lack of Service Level Agreements.
There were Councillors and staff with the Alliance, who expressed a desire to “Go Forward” which can be translated into either having a super service provider separate to any of the Councils or to amalgamate.
Forsyths Chartered Accountants have been the auditors of each of the Alliance Councils for a number of years. The retiring principal of Forsyths, Mr Bob Finch, was engaged to carry out an independent review of a number of restructuring proposals.
The Forsyths Report recommended that the Councils consider voluntary amalgamation because of greater efficiencies in planning and delivery of infrastructure, improved capacity for revenue generation, simpler and more cost effective governance structure, longer term financial viability, enhanced capacity to manage risk, greater potential for the retention and redeployment of staff and meeting the goals of the water and sewerage structural reform agenda. These are dependent upon the concept of economies of scale.
The Uralla Shire Council does not believe that economies of scale are available to an amalgamated council based upon Armidale Dumaresq Council. People will still live away from the centre and will require services where they live and this negates economies of scale.
An amalgamated council will absorb the culture of the largest part and therefore an amalgamated council will be an Armidale Council.
Q. Can Uralla Stand Alone?
The Uralla Shire Council is a $14.8 million council with a fully funded 18 month works program ahead.
One of the most telling indicators of the sustainability of a local authority is the backlog of its infrastructure expenditure (or cost to bring its assets to satisfactory standard). At 30 June 2008 the infrastructure backlog was estimated at $3.959 million on assets valued at $94.723 million
(or 4.17%). Residents may recall the media reports a few months ago that 46% of the largest 100 councils were unsustainable. Using the same dashboard from Fiscal Star and Council’s 30 June 2008 figures the Uralla Shire Council was marginally into the Sustainable area – a good sign.
The Uralla Shire Council has engaged the Fiscal Star owner, Review Today, to come to Uralla later this month and carry out their review and report back to Council on their findings. The review will be undertaken by Professor Percy Allen.
The Department of Local Government is requiring that local authorities in New South Wales progressively over the next three years put in place its Integrated Planning and Reporting (IPR) guidelines. The Uralla Shire Council is on target to have these in place by 30 June 2010, the first year.
The Councillors and staff of the Uralla Shire Council believe that this council is financially viable and QBL sustainable and it will be in the best interests of its community to remain autonomous, even if it means that it must leave the Alliance.
Q. What are Uralla Shire Council's Options?
The Uralla Shire Council has taken the next step following the statements of the Councillors and Senior Staff of the other General Purpose Councils in the Alliance disclosing preferences towards either voluntary amalgamation or a separate business service entity. This step is to seek, by open tender, tenders for the supply, installation, training, management and annual maintenance of a fully managed local government information technology (IT) solution for a five year period. This will outsource a significant “back office” service, currently provided by NESAC shared services.
The calling of tenders will not preclude; an amalgamated council, a separate business entity or individual council from the Alliance; submitting a tender. However the tenders will be in the real world and will be for the benefit of the Uralla Shire Council.
Its membership and participation in the Alliance has prepared the Uralla Shire Council well in identifying those services that can be outsourced more economically than provided internally. Information Technology is one such service and a fundamental service that can be more economically provided by one service provider to a number of clients.
The Uralla Shire Council has also benefited from the shared services of asset management, plant and fleet management and pre-construction. These are fundamentally a cooperative arrangement and Council has provided $100,000 in work across the Councils and will be open to continuing these cooperative arrangements. It has been in the cooperative arrangements that Council has observed the greatest benefits. The lessons learned by middle and front line workers in cooperation across boundaries will continue. The Uralla Shire Council and Walcha Shire Council continue to work cooperatively even after Walcha was no longer in the Alliance. In fact, the cooperation not only with Walcha, but also Liverpool Plains, Councils has not depended upon a formal agreement but is based in mutual respect and win/win agreements.
While the Uralla Shire Council will not be involved in the ownership and operation of a separate business entity or in a voluntary amalgamation it strongly supports the shared services and cooperative model providing management issues can be resolved.
As a promoter and champion of the New England Strategic Alliance of Councils, the Uralla Shire Council will be reluctant to leave the Alliance, however it will do so in a stronger position than when the Alliance was first formed. We particularly thank the local member, the Honourable Richard Torbay, for his support and those Councillors and Staff who worked hard for the Alliance to prosper.
Q. Uralla Shire Council's Dilema
The Uralla Shire Council have been faced with the following problems:
- Lack of accountability of shared services because of the lack of Service Level Agreements.
- Skills shortage which has meant that Armidale Dumaresq has not been able to fully release their staff to shared service positions in the works directorate.
- Failure of the shared services teams to meet Uralla Shire Council’s rate recovery targets and to maintain Council’s historical recovery percentages.
- Increased shared services finance and IT costs that are a major part of an annualised Corporate Services administration costs increase of 12.5% per year from 2005/2006 to 2009/2010. This can be compared to the annualised increase in the local controlled Engineering administration cost of 4.75% per year for the same period.
The Uralla Shire Council can not continue to accept these shortcomings and has stated that it would, if the other two council either amalgamate or set up a separate business entity, purchase services and continue to co-operate with the new entities.
Q. Economies of Scale?
The proponents for amalgamation usually quote Economy of Scale as a reason for eliminating smaller local authorities. They claim economy of scale provides greater efficiencies in planning of and delivery of infrastructure, improved capacity for revenue generation, simpler and more cost effective governance structure, longer term financial viability, enhanced capacity to manage risk, greater potential for the retention and redeployment of staff and meeting the goals of the water and sewerage structural reform agenda.
Big is not necessarily better. An amalgamated council will not automatically have greater efficiencies in fact the bigger the bureaucracy the less efficient. How many of you have examples of dealing with big organisations. Small organisations are usually more innovative and have committed employees. The Uralla Shire Council has had no difficulty in discovering new revenue sources and of the three Councils left in the Alliance has the best financially viable future prospect.
The idea that an amalgamated council could have a simpler and more cost effective governance structure flies in the face of reality. Amalgamated Councils find that they are required to establish area committees to do what small councils automatically are able to do. Uralla Shire Councillors and General Manager are visible and approachable.
There is attraction in living and working in small towns and Uralla Shire Council has been able to attract and retain highly skilled professionals with lifestyle choices.
Why lose all the advantages of our small local authority for the unproven promises of economies of scale?