DUNGOG SHIRE COUNCIL PRESENTATION TO DUNGOG/GLOUCESTER MERGER - - PDF document

DUNGOG SHIRE COUNCIL PRESENTATION TO DUNGOG/GLOUCESTER MERGER PROPOSAL INQUIRY 9 FEBRUARY 2016

1 | P a g e Introduction Council considered the business case prepared by MorrisonLow in relation to the Dungog/Maitland merger. Based upon the initial business case as presented, the Council resolved to stand alone as the business case did not support the proposed merger with a resulting net negative NPV of $4.1Mil1. Council re‐considered this merger proposal following the IPARTs findings at a meeting on 16 November 2015. Council again resolved to stand alone and Council further resolved that an amalgamation will only be considered if a detailed business case funded by Government, demonstrated that a merger was in the best interests of the Dungog Shire and there was community agreement to the proven proposal. The merger proposal which has now been presented by the NSW Government is poorly researched was released with factual errors and appears to be based on a generic template and was being worked on before the NSW Governments 18 November 2015 deadline and furthermore is not consistent with the Independent Review Panels recommendations and findings and is rejected by Council. The KPMG analysis and the summation of their findings gives little scope within which to critically argue on the assumptions and fails to recognise the Councils different roles. In relation to the heads of consideration, Council draws upon information from Councils merger business case with Maitland, REMPLAN & the Australian Bureau of Statistics Census data and various internal documents of Council and the Annual reports of Gloucester Shire. Heads of Consideration

Financial advantages or disadvantages From a local economy perspective the latest figures (2015) identify that the gross revenue that is generated by businesses and organisations in Dungog Shire is agriculture accounting for 16.6% or $93.266Mil2. The total estimated output of the Dungog Shires economy is estimated at $563Mil. The next industry sector is rental, hiring & real estate services at $78.6Mil or 14%. What the statistics don’t tell us is the one resource that is exported daily from the Shire and that is the value of water. The Dungog/Maitland merger highlighted that the rates of DSC residents would increase significantly in the revised business case of November 2015 2 options were looked at by MorrisonLow3, firstly to increase the rates in the Dungog LGA to Maitlands rate in the dollar which would have required a “one off” increase of 66.4%, or over three years of 29.6%,23% and 18.3%.

1 Dungog Shire Council Improvement Plan response to IPART MorrisonLow Dungog/Maitland merger business

case.

2 REMPLAN Economic Profile Dungog Shire. www.economicprofile.com.au/Dungog (output Dungog) 3 MorrisonLow revised Merger Business Case November 2015

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Councils improvement plan highlighted that general rates would have to increase by 13% p.a for 6 years (108% cumulative rate‐peg limit inclusive) to meet the Governments benchmarks. The proposed Dungog/Gloucester model will still result in rates being increased for Dungog shire residents past the four year moratorium on rating paths that is being imposed on newly established entities, if the merger proceeds. The cumulative effect of a low rates base and not passing on the maximum permissible rate‐ peg limits by Dungog Shire Council is very much reflected in the rate comparative analysis to

• Gloucester. Prior to the two special rate variations granted to Dungog Shire in

2007/08(6.42%) and 2008/09 (5.04%) the following differential between the 2 Councils existed in 2005/2006: Assuming similar Land Values, a Gloucester residential ratepayer was paying 41.7% more than a Dungog Residential ratepayer. A Gloucester business ratepayer was paying 41% more than a Dungog Business ratepayer. A Gloucester farmland ratepayer was paying 42.5% more than a Dungog Farmland ratepayer. A Gloucester rural residential ratepayer was paying 36% more than a Rural residential ratepayer in Dungog Shire.

$486.00 $346.00 $620.80 $1,195.00 $582.00 $834.00 $562.00 $976.00 $2,010.00 $988.00 $0 $500 $1,000 $1,500 $2,000 $2,500 Residential Dungog Village Res Rural Res Farmland Business Dungog

Dungog/Gloucester 2005/06 Rate Comparison

Gloucester Dungog

LV $40,000 LV $250,000 LV $100,000 LV $40,000 LV $40,000

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Back then to harmonise rate increases to match Gloucester Shires rates, Dungog Shire rates would have increased between 57 to 71%. 10 years on to the start of the 2015/2016 financial year with Gloucester for the first time increasing their rates above the permissible limit with a 13% increase which was 10.6% above the rate‐pegging limit. Comparing Dungog Shire to Gloucester Shire now Assuming land value parity between LGA’s: Dungog Residential rate is 29.8% lower than Gloucester Shire Village is 35.9% lower than Gloucester Village Rural Residential is 32.2% lower than Gloucester Rural Res Farmland is 27.1% lower than Gloucester Farmland Dungog Business is 28.8% lower than Gloucester Gloucester Shire has a further 2 years of 13% increases to pass on to their community, Dungog Shire residents in 2016/2017 will have the rate‐peg limit of 1.8%.

$551.71 $429.50 $832.90 $1,444.15 $750.66 $786.00 $670.00 $1,228.80 $1,982.00 $1,054.00 $0 $500 $1,000 $1,500 $2,000 $2,500 Residential Dungog Village Res Rural Res Farmland Business Dungog

2015/2016 Dungog/Gloucester Rate Comparative

Gloucester Dungog

LV $80,000 LV $400,000 LV $200,000 LV $70,000 LV $80,000

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If you looked at harmonising the rates between the two LGA’s which a new Council would have to do, based on the 2015/20164 figures alone you would need to raise the rates in Dungog Shire overall by an additional $2.2Mil or approx. 42% increase on its current rating yield. Assuming a new entity is to comply with the State Governments’ moratorium, by 2019/2020 it would be in the order of approx. $4.3Mil or 74%. Both Councils have large road networks with many local rural unsealed roads not inter‐ connected due to the geographical constraints thereby negating some efficiencies in maintenance cycles that can be achieved in western rural areas. The combined infrastructure backlog @June 2015 was $40.4Mil of which roads accounted for $34.3Mil. The regional road network is the highest road classification in both LGA’s a total of 230km’s the only assured State funding is the Regional Roads Block & Supplementary Grant. However there is a gap of 37 Kms between both LGA’s in driving on the highest order road available for residents of both LGA’s. The distance between the principal centres would pose a series of challenges from a management perspective let alone a cost efficiency perspective. Whilst KPMG has stated that there would be certain savings in procurement they have not recognised the level of joint purchasing that already exists throughout the Hunter Councils who participate in bulk tenders, Regional Procurement has confirmed that Council in the past year (2015) expended

4 Dungog & Gloucester Shire Councils Operational Plans 2015/2016

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$3.2Mil on Hunter Council contracts, we are party to some 20 agreements. This is aside from bulk purchase agreements with Local Government Procurement, NSW Gov’t Contracts and Procurement Australia. Councils other major outlay annually relates to plant hire as the Councils heavy fleet

• peration is minimal, with annual tenders called for plant hire both wet & dry hourly rates

are provided from a pool of some 30 odd companies. Whilst there may be a synthesising of a number of roles over time there will need to be adjustments as regards services provided and that could threaten some external NGO’s that work within the different LGA’s now, one example is youth services that service is provided by Gloucester Council whereas in Dungog the funding is provided to an NGO. In relation to the Financial Assistance Grant5, there already is a disparity of $110 per resident between Gloucester & Dungog Shire. Obviously factors such as land values and distance to a major regional centre account for a component that influences the disability

• factors. However the equation that is applied is still in the realm of the unknown when the

NSW Grants Commission meet with Councils as regards how the figures are derived. Whilst the State Government has committed to looking at how the FAG is distributed, the underlying principles of the Federal Government need to be maintained as regards horizontal equalisation and effort neutrality as the National Principles are a disallowable instrument. At the end of 2019/2020 if the new entity does not meet the “Fit for the Future” benchmarks then what happens to the “Fit” status that the NSW Government proposes at day 1. Do the opportunities to partner with the Government continue? will the entity have a more streamlined special rate variation process with IPART? The end result is that the only financial advantage is the $10Mil promised for community

• infrastructure. The cost of the merger will supposedly be accommodated by the $5Mil grant,

but there will be ongoing legacy costs as a consequence of the merger as the LG Act stipulates that in rural areas where the principal township has a population of less than 5,000 that a merged entity is to retain staff numbers, which applies to both towns. b.) The community of interest and geographic cohesion in the existing areas and in any proposed new area: Arguments for: There is the potential for the merged entity to be able to harness the potential of the Barringtons from a tourism perspective, however there is no direct road access into the Barrington Tops from the Dungog LGA.

5 NSW Grants Commission whttp://www.olg.nsw.gov.au/commissions‐and‐tribunals/grants‐

commission/grants‐resources Table of Financial Assistance Grants to NSW Local Governing Bodies 1991/92 – 2015/2016

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Against: There is no geographic cohesion between the two LGA’s now. From a community’s of interest perspective the majority of the ties for Dungog Shire residents are to the South, if you look at sporting affiliations and linkages they predominate within the lower Hunter & Newcastle regions. The differences relate to the structure of the LGA’s in terms of urban hierarchy Gloucester is the principal centre and because of distance it is the commercial hub as regards provision of retail, rural & consumer services the town can generally service the needs of most. This is reflected in the number of local jobs compared to their usual place of residence which for Gloucester is 78% of Gloucester Shires employed residents work locally. Whereas Dungog township may be the principal centre in terms of infrastructure such as the hospital, aged care facility, high school, there are several other distinct communities in the Shire, Gresford, Clarence Town & Paterson with different services available in each

• community. From an urban hierarchy perspective the urban centres of the Dungog LGA

would be defined as lower order urban centres. Meaning that they provide a limited range

• f goods and services to local residents and surrounding rural areas.

The proximity of the Dungog LGA to the lower Hunter labour markets and retail centres was highlighted in the 2004 report6 on the economic leakage from the Shire prepared by the University of Newcastle. With studies showing that between 55% and 60% of spending by Dungog Shire households leaks from the Dungog Shire. As previously alerted to you the merger proposal report as published incorrectly reports the number of local jobs on page 13, the real perspective is that Dungog Shire is a net exporter

• f jobs, i.e the data provided by REMPLAN7 extracted from 2011 census statistics identifies

that there are 2064 local jobs of which 1635 are filled by local residents. The census identifies that 3721 residents are employed accordingly 56% of these people leave the Shire for work everyday, the majority (67%)of whom work in the lower Hunter LGA’s of Maitland, Newcastle, Lake Macquarie, Cessnock & Port Stephens. The 2004 report highlighted that at that time there were 2084 jobs with over 75% held by locals and just over 50% of Dungog Shires workers were employed in the Dungog LGA, this dynamic has obviously changed as Council witnesses development growth in the southern areas of the Shire. At a local government operational level Gloucester Shire initially did not want to participate in the trial Joint Organisation for Hunter Councils, at the time they were aligning themselves to the Mid North Coast proposed JO and initially were included in the new NSW Planning

6 Strategic Connections: Economic Flows and Industrial Development in Dungog Shire. Produced by Centre for

Urban and Regional Studies, University of Newcastle 28 January 2005.

7 www.economicprofile.com.au/Dungog Employment

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areas for the Mid North Coast. However as Great Lakes Council wanted to be aligned to the Hunter they(Great Lakes) are a member of the Pilot Hunter Councils Joint Organisation. That Council actively lobbied NSW Planning to be included within the Hunter as they argued that they were a two hour drive from Newcastle and Coffs harbour was 4 hours away. However Gloucesters early decision resulted in them only being established as an associate member

• f the Pilot JO for Hunter Councils.

c.) Existing historical & traditional values in the existing areas: Prior to white occupation the lands around Dungog Shire were occupied by indigenous sub‐ groups of the Wonnarua and Worimi peoples in the Dungog area it was the Gringai tribe8. Today there are four local aboriginal land councils within the Dungog LGA, the Worimi, Karuah, Wonnarua & Mindaribba. The ATSI population at the 2011 census9 was 4.5%. There are families within the Dungog LGA today that can link with the first European settlements of the Williams, Paterson and Allyn river valleys. European exploration into the area began around 1801 when Colonel William Paterson first surveyed the area along the Paterson & Williams Rivers, first settlers in the Paterson area were cedar getters who established a settlement around 1812 .Paterson was the third town site to be surveyed in the Hunter Region (after Newcastle & Maitland) it was not proclaimed until 1823. The first land grant in Dungog was to a Mr Mackay in 1824, this was followed by land grants to the Hookes, Chapmans, Windeyers, Dowlings and Verges. Present day Dungog streets are named after these families. If you follow the historical links of Maitland you would find that the areas in the Dungog LGA were settled by many people that had their origins in Maitland. Traditional industries were associated with the land, timber gathering, stock raising beef, pigs & horses, wine production, vegetables & fruit production, tobacco growing all were early activities of the pioneers. The ports of Paterson & Clarence Town were utilised to transport product to the more populous centres with highly prized timber being sent across the world. The Clarence Town ship building industry grew and the first ocean going steam ship to be built in Australia was built at Clarence Town As Australia developed with extensions of road & rail networks that improved the connectivity of rural areas to major regional centres. These changes resulted in the decline

• f the shipping ports as rail transport opened more markets for local producers. The

depression era resulted in many of the roads within the Shire being built under employment schemes. Government policy was also directed towards improvements in education and health which contributed to the growing population of the Shire.

8 Dungog Shire Community Profile 1994 9

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

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From a historical perspective Dungog Shires population in 1966 was 595010, by 1976 it had reduced to 5718, with the Department of Planning projections for 2001 being 5,400, by 1996 Census the population was 7,658, 2011 census 8,318 people. The estimated residential population is now 9,10811. The average age of the population in 1966 was 33, the median age is now 44. NSW Planning 2013 population projections predicted that the population by 2031 would increase to 9800 which from 2011 to 2031 represented a 15.3% change, somehow when the 2014 projections were released in May 201512 the forecast projection for 2031 is now 8800 representing only a 2.8% change. Since the 2011 census there has been 254 new dwellings approved in Dungog Shire. In 2012 when the Council worked with the community on the development of the community strategic plan, the values of the people in terms of protection of the rural lands, protection of the heritage features of the Shire, protection of the scenic qualities and protection of the waterways were strongly emphasised throughout along with the protection of our rural character i.e. no over‐development. There are still a number of Dungog residents that can talk about their education and travelling on train to attend Maitland Boys High school on a daily basis. Which highlights another linkage to the South. There was an affinity between Dungog & Gloucester many years ago when the timber & dairy industries were prevalent in both areas. At one time there was the Hawley shield which was a sporting competition between the towns of Dungog & Gloucester, I am not certain as to when the Shield was last competed for, however I do know that the shield is held by Gloucester Shire Council. The dairy & timber industries were significant in terms of local employment in Dungog, with a local milk factory in operation until the late 1980’s, the timber mill at Maxwells Creek survived until September 2008 when it was closed by Boral with the loss of 46 local jobs. Gloucester has also lost its milk factory, whilst a timber mill is still in operation. It is still a traditional rural community that is being challenged in terms of natural resources development in relation to mining and coal seam gas at the present time. However, historically Dungog Shire is part of the lower Hunter urban hierarchy, but it too still comprises traditional rural communities. Attitudes of residents and ratepayers

10 Dungog‐ A Social Profile Hunter Regional Community Information Service April 1981 11 ABS Estimated Resident Population 2014 12 Planning NSW Website Research & Demography Population Projections

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The decision of Government to put forward this merger proposal near Christmas and provide Councils very little opportunity to inform our communities and gather their opinions is a poor reflection on the term consultation. The attitudes of people differ, the merger proposal is misleading and is not quantifiable. Some believe that Dungog Shire should stand alone, some see Gloucester as a rural Council alternative instead of Dungog Shire being swallowed up by Maitland. Others want to split the Shire up which would be a disastrous economic outcome for the Dungog township. However without a proper business case that can inform the community of all the information and facts the true attitude of residents is unknown. Gloucester Council has made it clear they do not want Dungog Shire as a merger partner Requirements as to local representation for residents and ratepayers Both LGA’s are currently within the State seat of Upper Hunter the members office is situated at Muswellbrook. The Dungog LGA will move to the Federal seat of Lyne as a consequence of the Federal redistribution. This will pose problems for the residents of Dungog LGA as regards advocacy and attendance at offices etc., with the communities of the Dungog LGA travelling some 2 ½ hrs to Taree making representation more difficult. Previously in the Federal seat of Paterson the local members office was at Raymond Terrace some 35 minutes away for the residents of Dungog. At a local level Dungog Shire has 9 Councillors and Gloucester 7. Both Councils elect their mayor on an annual cycle, the community of Dungog Shire has enjoyed the access to their Councillors with representation at 1 Councillor to 1000 residents, Gloucester is 1 Councillor to 723 residents. Clearly local representation for the communities of both Shires is a better outcome than the

• ptions of the two LGA’s with much larger populations i.e Maitland & Great Lakes.

Any impacts that the merger proposal could have on the ability of the Council to provide adequate, equitable and appropriate services: There will be impacts as a consequence if the proposed merger proceeds, firstly financial in terms of the Financial Assistance Grant, whilst the FAG is separately assigned by the two Councils for 4 years past the merger, there is the risk that the level of funding will fall in the future which will impact on services. As previously commented in relation to the inequity in rating structures until the rating structure is harmonised the levels of service will differ between the areas. Staffing as will be reported in the next section there is the risk of loss of appropriately skilled staff particularly if their work location changes in the future or that they have to undertake regular travel between the two main centres.

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From a planning perspective the combining of the SILEP’s and the synthesising of the planning policies of both Councils will take time neither Council has spare capacity to undertake the role in conjunction with their day to day roles. Even if outsourced to contractors Council staff would still need to oversee the project and ultimately take

• wnership in conjunction with the elected Council.

There are complexities as regards the different boundaries that each LGA works in as regards service delivery, Dungog Shire is already part of two local area commands for policing being Port Stephens & Central Hunter, Gloucester is part of the Manning/Great Lakes Command. From an emergency services perspective Dungog Shire is part of the lower Hunter Rural Fire Zone with Port Stephens, Maitland & Cessnock, the same applies for SES and the Lower Hunter Emergency Plan. There are differing levies applicable to the two Water/Sewer authorities, with Gloucester LGA part of Mid Coast water and Dungog LGA in the Hunter Water Corporation catchment. Mid Coast Water levies water/sewer headworks charges, Hunter Water does not as a consequence of Government legislation. Dungog Shire has been pursuing Hunter Water as regards the provision of sewerage to the villages of Gresford, Vacy & Paterson. Which were projects Council had listed under the Country Towns Water & Sewerage Program when we were the authority. Employment Dungog Shire budgets for a Full Time Equivalent(FTE) workforce of 66 plus 1 term contract associated with the natural disaster recovery project management. In total the FTE comprises: Administration Centre, Library & VIC 19 Full time & 8 Part Time Engineering, Depot, Operations Staff & landfill 39 Full time & 2 part time. Note vacancy p/t position 0.6, recent f/t recruitment 0.2 gap, parenting employee f/t reduced by 0.4 The average age of the Councils workforce is 47 the median age is 50. By Gender : Female full time 14 Female part time 8 Male full time 44 Male part time 1 Recruitment of technical/professional staff by Council has been difficult for many years, it was evident when I arrived in September 1999, with no qualified planner, no health & building surveyor despite the positions existing within the Councils organisation structure contractors, were being utilised.

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In January 2015 was the first time in my 10 years as GM of Council that all engineering positions within the organisation were filled. Whilst positions are now filled it does not mean that they all have the necessary skills to properly fulfil their roles. However it will provide a buffer and enable the other staff the opportunity to divest themselves of some of the workload and hopefully focus on future priorities and monitoring of performance of this

• function. Development engineering is still undertaken on a contract basis of 10 hours per

week. What needs to be understood from the staffing level is that of all technical/professional staff down to & including the rates clerks position in Council there are 14 of 17 positions that are occupied by people (11 full time & 3 part time) that travel into the Shire to attend Dungog Shire Council for work, all within a 1 hours drive of Dungog. They travel from Singleton, Tanilba Bay, Wallalong, Hinton, Farley, Raworth, Medowie & Newcastle. The announcement of Gloucester in the context of the merger proposal has disrupted the work organisation, it has pulled down morale and I have been asked since Christmas to be a referee for several staff as a consequence of this announcement as they fear the inevitable and limited opportunity for a career path. The last thing that Council can afford at this moment is to lose staff. As General Manager it has taken me a long time to embrace the commuting staff notion because of the risk factors, whilst evident in some cases in the early 2000’s the numbers continued to grow as we endeavoured to fill roles. Both parents working and not able to find employment for the partner, housing affordability, lack of rental accommodation, uplifting of children from schools were all factors that influenced some of the quality candidates to reject Councils offer of

• employment. It was evident that the lower Hunter had a large commuter population and

Local Government was no different, we had to compete in the same market for candidates. Ensuring the opinions of diverse communities are effectively represented 2011 Census data 13reveals 5.4% of the population was born overseas, predominantly from Anglo/European backgrounds, with English being the first language in the households. The ATSI population of the Dungog Shire comprises 4.5% of the population. They do not predominate in any locality within the Shire. Council engages with the 4 Land Councils on matters as they arise dependent upon locality. The Karuah ALC is representative on the Pilchers Reserve Management Committee.

13

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

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Other Factors relevant to the provision of efficient and effective local government in existing and proposed areas. As mentioned earlier the areas of connectivity and boundaries will result in inefficiencies in relation to Councils obligations to represent their communities should the merger proceed. We are looking at: 3 Local Police Area Commands, each will require attendance at their community liaison/community safety meetings. The conduct of local traffic & road safety meetings will result in coordination difficulties as regards inspections, attendance etc. 2 Separate water/sewer authorities Gloucester Council having representation on the Midcoast board, whereas the other board Hunter Water Corporation is appointed by

• Government. Council representatives attend community reference group with Hunter
• Water. With the Dungog LGA predominantly falling within a drinking water catchment, this

will create different rules and complexity in relation to processing DA’s. 2 Separate bushfire districts, the structure of the lower Hunter Zone, Bushfire Risk Management Committee, Zone Liaison Committee aside from what Gloucester is involved in. Both administrative centres already provide extended services to the communities through the motor registries the viability of which is questionable, will the new entity maintain such into the future particularly when it has no negotiating power with Service NSW? Conclusion: Councils position has previously been stated and the Council stands firm behind their decision of 16 November 2015. The merger proposal as submitted by the Government is flawed and has been prepared by someone that has no appreciation for the communities of Dungog & Gloucester Shires and Council rejects the NSW Governments merger proposal. Thank you.