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Agenda for the Extraordinary Council Meeting

Date: 16 November 2015

Location: Bellingen Shire Council Chambers

Time: 5pm

AGENDA

EXTRAORDINARY COUNCIL 16/11/2015

AGENDA


Council’s Vision Our vision for the future must encompass all aspects of

living and working in our shire, as well as ways in which we are connected beyond our borders – regionally, nationally and globally. Our vision is about protecting the pristine natural beautify of our environment and enhancing our prosperous and safe community where inclusiveness and sustainable living are embraced, so that creativity and cultural activity can flourish.

Council’s Corporate Values Respect and understanding of our community’s needs

Fairness and equity Stewardship Responsible decision-making Co-operative partnerships Pride in our community

Council’s Guiding Principles The principles of Ecologically Sustainable

Development including

Sustainable use

Integration

Inter-generational and intra-generational equity

Conservation of our biodiversity and ecological integrity

Internalisation of environmental sustainability costs

Social justice principles including

Equity

Access

Rights

AGENDA


HOW MEMBERS OF THE COMMUNITY CAN ENGAGE WITH COUNCIL AND HAVE THEIR SAY AT COUNCIL MEETINGS

Council has a commitment to providing members of the community with an opportunity to have input into Council's decision making. The Council's Code of Meeting Practice provides the avenue for members of the public to address Council on issues of interest or concern at the Ordinary Council Meeting. The process for public address is listed below:

ADDRESSING COUNCIL ON AN AGENDA ITEM:

If the matter is listed in the Council Business Paper, you can request to address Council by:

Completing the Request to Speak on an Agenda Item at a Council Meeting”, which can be obtained from Council’s front counter at 33-39 Hyde Street, Bellingen

Or by downloading it from Council’s website.

Or by emailing Council’s General Manager’s Office directly on [email protected]

PLEASE NOTE: Your request to address Council must be received by Council no later than 12.00pm on the day prior to the Council Meeting.

COUNCIL'S CODE OF MEETING PRACTICE SETS OUT THE FOLLOWING GUIDELINES FOR ADDRESSING COUNCIL:

Addresses will be limited to 5 minutes each with the Chairperson having the option of granting an extension of time in extenuating circumstances.

Council will permit only two (2) speakers "Supporting" and two (2) speakers "Opposing" the Recommendation contained in the Business Paper.

The use of PowerPoint presentations and overhead projectors is permitted as part of the deputation, provided that the speaker has made prior arrangements with the General Managers office at the time of booking their deputation.

Council’s Code of Meeting Practice can be found on Council’s website: www.bellingen.nsw.gov.au

mailto:[email protected]

http://www.bellingen.nsw.gov.au/

AGENDA


CONFLICT OF INTEREST 1 Councillors are under an obligation to disclose any interest they may have in any

matter before the Council and to refrain from being involved in any consideration or to vote on any such matter.

2 Councillors must disclose any interest in any matter listed in the Business Paper

fully and in writing prior to or at the opening of the meeting. 3 The nature of interest shall be included in the disclosure. 4 All declarations of interests shall be recorded by the General Manager. 5 Councillors shall immediately and during the meeting disclose any interest in

respect of any matter arising during the meeting which is not referred to in the Business Paper.

6 Any Councillor having an interest shall leave the meeting room and be out of sight of

the meeting and not participate in discussions or voting on the matter. 7 Senior staff are required to declare interests in a similar manner to Council.

AGENDA


BELLINGEN SHIRE COUNCIL

DISCLOSURE OF INTEREST AT MEETINGS

Name of Meeting:

Meeting Date:

Item/Report Number:

Item/Report Title:

I declare the following interest:

(name)

Pecuniary – must leave chamber, take no part in discussion and voting.

Non Pecuniary – Significant Conflict – Recommended that Councillor/Member leaves chamber, takes no part in discussion or voting.

Non-Pecuniary – Less Significant Conflict – Councillor/Member may choose to remain in Chamber and participate in discussion and voting.

*(Definitions are provided on the next page).

For the reason that -

Signed Date

Council’s Email Address – [email protected] Council’s Facsimile Number – (02) 6655 2310

mailto:[email protected]

AGENDA


DEFINITIONS

(Local Government Act and Code of Conduct)

Pecuniary – An interest that a person has in a matter because of a reasonable likelihood or expectation of appreciable financial gain or loss to the person or another person with whom the person is associated. (Local Government Act, 1993 section 442 and 443) A Councillor or other member of a Council Committee who is present at a meeting and has a pecuniary interest in any matter which is being considered must disclose the nature of that interest to the meeting as soon as practicable. The Council or other member must not take part in the consideration or discussion on the matter and must not vote on any question relating to that matter. (Section 451). Non-pecuniary – A private or personal interest the council official has that does not amount to a pecuniary interest as defined in the Act (for example; a friendship, membership of an association, society or trade union or involvement or interest in an activity and may include an interest of a financial nature). If you have declared a non-pecuniary conflict of interest you have a broad range of options for managing the conflict. The option you choose will depend on an assessment of the circumstances of the matter, the nature of your interest and the significance of the issue being dealt with. You must deal with a non-pecuniary conflict of interest in at least one of these ways.

It may be appropriate that no action is taken where the potential for conflict is minimal. However, council officials should consider providing an explanation of why they consider a conflict does not exist.

Limit involvement if practical (for example, participate in discussion but not in decision making or vice-versa). Care needs to be taken when exercising this option.

Remove the source of the conflict (for example, relinquishing or divesting the personal interest that creates the conflict or reallocating the conflicting duties to another officer).

Have no involvement by absenting yourself from and not taking part in any debate or voting on the issue as if the provisions in section 451(2) of the Act apply (particularly if you have a significant non-pecuniary conflict of interest).

AGENDA


AGENDA

1 APOLOGIES ......................................................................................................... 9

2 DECLARATION OF PECUNIARY AND NON PECUNIARY INTEREST ................ 9

3 PUBLIC ACCESS/PRESENTATIONS ................................................................... 9

4 CIVIC LEADERSHIP ........................................................................................... 10

4.1 FIT FOR THE FUTURE UPDATE .......................................................................... 10

AGENDA


1 APOLOGIES

Nil

2 DECLARATION OF PECUNIARY AND NON PECUNIARY INTEREST

3 PUBLIC ACCESS/PRESENTATIONS

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4 CIVIC LEADERSHIP

Item: 4.1

Subject: FIT FOR THE FUTURE UPDATE

File/Index: Governance Fit for the Future

Presented by: Liz Jeremy, General Manager Michelle McFadyen, Deputy General Manager Matt Fanning, Deputy General Manager Operations

ALIGNMENT WITH DELIVERY PROGRAM (CL) CIVIC LEADERSHIP (CL.1) Council is an organisation that embraces business excellence. (CL.1.1) Financial sustainability is maintained through effective short and long term financial management. (CL.1.1.0) Financial sustainability is maintained through effective short and long term financial management - Other Activities.

RECOMMENDATION That

1. Council receive and note this report 2. Council’s position is to stand alone in keeping with the findings of the Independent

Local Government Review Panel and the analysis undertaken by the Independent Pricing and Regulatory Tribunal’s analysis which did not identify evidence for a better alternative to the council’s proposal to stand alone

3. Council provides a response to the IPART assessment by 18 November 2015, as outlined in Section 7 of this report.

EXECUTIVE SUMMARY The Fit for the Future (FFF) reform process relative to the NSW local government sector looks to achieve more efficient and effective councils that are financially sustainable, address the infrastructure backlog and achieve economies of scale. Councils were required to make a submission to Government relative to the criteria established by Government regarding the FFF process by 30 June 2015. The assessment process was carried out by the NSW Independent Regulatory and Pricing Tribunal (IPART) who were appointed by Government as the Expert Panel. IPART submitted its report to the NSW Government on 16 October 2015. On 20 October 2015 IPART’s report was released by the NSW Govenment which provided its findings with regard to Council’s across the State. The summary report card released by government is attached to this report.

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This report addresses advice from the NSW Government post receipt of the assessment of Councils Fit for the Future proposals carried out by the Independent Pricing and Regulatory Tribunal. Background The Fit for the Future (FFF) reform process relative to the NSW local government sector looks to achieve more efficient and effective councils that are financially sustainable, address the infrastructure backlog and achieve economies of scale.

Each NSW council was asked to submit a Council Improvement Proposal or Merger Proposal based on the Independent Local Government Review Panel’s (ILGRP) recommendations.

The ILGRP provided a package of recommendations that addressed structure and form, revenue, funding, distribution of grants and borrowings so the reform process could proceed in a planned and managed way.

The FFF process primarily addresses structure and form with the criteria being predominately financially based. In the main the other measures suggested by the ILGRP have not been put in place. An example is the review of the distribution of federal funding to local government by the state government, which has not been completed. Nor were the measures in place for Councils to formulate their submissions. This has meant that councils have had to make assumptions, as opposed to a common state wide approach.

In Bellingen’s case, along with the other Mid North Coast councils, the ILGRP recommended that Council stand alone and be a member of the North Coast Joint Organisation comprising Clarence Valley, Coffs Harbour, Bellingen and Nambucca.

Bellingen’s submission to the FFF program recognised and communicated that:

council supported the recommendations of the ILGRP i.e. a Stand Alone Council and a member of a Joint Organisation of Councils

a conservative and realistic approach was taken outlining our Shire’s unique characteristics, levels of disadvantage as well as influences and historical constraints

council will be actively engaging with our community to determine service levels and is reviewing funding arrangements including payment of rates on land that is not currently rateable (57% of Bellingen Shire is not rateable, and in the main this land is State Forest and National Parks in the ownership of the State government)

council is pursing economies of scale efficiencies through shared services and alliancing

becoming Fit for the Future is a journey

local government has been subject to rate pegging for over 35 years. As a consequence the majority of councils in NSW are suffering from an infrastructure backlog

an assessment carried out by the NSW Government estimates this backlog at $7.4 billion as at June 2012. Contextually the income generated from rates in 2011/12 was $6.8 billion

local government is significantly impacted by cost shifting. This is where responsibility for, or the costs of, providing a service is shifted from a higher level

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of government to a lower level of government without the provision of corresponding funding or adequate revenue raising capacity. Based on available data this equates to around $1.076 million for Bellingen. A specific example of this is libraries where local government pays 93% of the costs to operate public libraries which are governed by State legislation. Contribution from the State government has declined from 23% in 1980 to 7% in 2013.

In this environment of restricted revenue and additional cost impositions Council is faced with real challenges in terms of maintaining and replacing infrastructure and delivering improved and expanded services to our community. Councils submission addressed both cost containment/reduction measures as well as options for additional revenue.

Council’s plan outlined how we can maintain and improve our position over the medium term, building and improving on the significant productivity improvements and efficiencies we have already made in recent years around structure, governance, procurement, asset management, work practices, service delivery, and safety as well as shared servicing and alliancing. In addition to submissions from Council’s, IPART received submissions from members of the public. One submission was received from a member of the Bellingen community.

Council made a submission to the Parliamentary Inquiry established to review the reform process and appeared at its hearing. Many of the Inquiry’s findings and recommendations have been previously canvassed as issues in Council’s commentary.

The FFF proposals that were submitted by each council in NSW were assessed by the Independant Pricing and Regulatory Tribunal (IPART) who were appointed as the independant expert assessor. IPART’s report was released by the NSW government on 20 October 2015. This indicated that each of the 139 proposals (received from 144 councils) has been assessed as either ‘fit’ or ‘not fit’ against the FFF criteria.

52 proposals were assessed as being fit representing 37% of the proposals received.

Of the 87 proposals assessed as not fit:

1. 60 were assessed as not having sufficient scale and capacity, but did meet the financial criteria

2. 18 were assessed as having sufficient scale and capacity, but did not meet the financial criteria

3. 9 were assessed as not having sufficient scale and capacity and not meeting the financial criteria.

Bellingen Shire Council fitted into Category two. Council has until 18 November 2015 if it wishes to respond. It is important to note the following:

the IPART assessment for Bellingen indicated that ‘Our analysis has not identified evidence for a better alternative to the council’s proposal to stand alone.’

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The NSW Government requires Council to consider and provide advice regarding merger proposals if IPART has assessed a council as not having scale and capacity or where it borders a council that does not satisfy scale and capacity criteria (Bellingen Shire Council has been assessed as having scale and capacity but its neighbour to the west, Armidale Dumaresq has been assessed as not having scale and capacity)

Funding for merging councils has been announced by Government in conjunction with the release of the IPART report. This indicates that merging Councils will be eligible for a $5 million merger implementation grant. A Stronger Communities Fund for community infrastructure will provide $5 million, or $10 million where 3 or more councils are merging

Council’s categorised as fit, will have access to a streamlined IPART process for rate increases above the rate pegging limit, particularly focussed on infrastructure funding needs, access to a State borrowing facility and other State funding and grants, and eligibility for additional devolved planning powers

Advice from government (verbal) indicates that subsequent announcements post the further assessment period will indicate processes for councils to be reassessed against the criteria.

An analysis has been undertaken of the IPART findings and discussions held with IPART in this regard. Advice has been sought around the reassessment process regarding ratios, given the extensive work that council has undertaken since submissions closed regarding asset management, which is detailed further in this report. Engagement has been undertaken with the member councils of the North Coast Joint Organisation as well as Armidale Dumaresq Council. In parallel Council is continuing to work with nearby councils toward shared servicing and alliancing. Council endodrsed a Memorandum of Understanding relative to shared servicing at its October 2015 Ordinary meeting. REPORT DETAIL In the context of the background information provided above this report provides summary information regarding the Parliamentary Inquiry into local government in NSW, details correspondence provided by the NSW government relative to the IPART assessment and process moving forward, provides analysis and commentary regarding the IPART findings, outlines the reform package for merging councils, details discussions held with key stakeholders, outlines progress for shared servicing and alliancing and proposes a response to government for council’s consideration. 1 Parliamentary Inquiry The General Purpose Standing Committee Number 6 was established to inquire and report on local government in NSW. The Terms of Reference for the Committee along with findings and recommendations are set out below. The entire report may be found at www.parliament.nsw.gov.au/prod/parlment/committee. 1.1 Terms of Reference: 1 That General Purpose Standing Committee No. 6 inquire into and report on local government in New South Wales and in particular:

(a) the New South Wales Government’s ‘Fit for the Future’ reform agenda,

http://www.parliament.nsw.gov.au/prod/parlment/committee

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(b) the financial sustainability of the local government sector in New South Wales, including the measures used to benchmark local government as against the measures used to benchmark State and Federal Government in Australia,

(c) the performance criteria and associated benchmark values used to assess local authorities in New South Wales,

(d) the scale of local councils in New South Wales, (e) the role of the Independent Pricing and Regulatory Tribunal (IPART)in reviewing the future of local government in New South Wales, assisted by a South Australian commercial consultant, (f) the appropriateness of the deadline for ‘Fit for the Future’ proposals, (g) costs and benefits of amalgamations for local residents and businesses, (h) evidence of the impact of forced mergers on council rates drawing from the recent Queensland experience and other forced amalgamation episodes, (i) evidence of the impact of forced mergers on local infrastructure investment and maintenance, (j) evidence of the impact of forced mergers on municipal employment, including aggregate redundancy costs, (k) the known and or likely costs and benefits of amalgamations for local communities, (l) the role of co-operative models for local government including the ‘Fit for the Futures’ own Joint Organisations, Strategic Alliances, Regional Organisations of Councils, and other shared service models, such as the Common Service Model, (m) how forced amalgamation will affect the specific needs of regional and rural councils and communities, especially in terms of its impact on local economies, (n) protecting and delivering democratic structures for local government that ensure it remains close to the people it serves, (o) the impact of the ‘Fit for the Future’ benchmarks and the subsequent IPART performance criteria on councils’ current and future rate increases or levels, and (p) any other related matter. 2 That with the agreement of the committee participating members’ travel costs be covered by the committee. 3 That the committee report by Monday 17 August 2015, unless the committee resolves to table at a later date. 1.2 Findings Finding 1 While the Independent Pricing and Regulatory Tribunal has significant capacity to analyse the finances of local government it does not have the demonstrated skills or capacity to assess the overall ‘fitness’ of Councils as democratically responsible local bodies. Finding 2 That the Independent Pricing and Regulatory Tribunal’s appointment to the role of Independent Advisory Panel occurred too late in the Fit for the Future process and that the 30 June 2015 deadline for council proposals was too short. Finding 3 That the recommendations of the Independent Local Government Review Panel that were unrelated to structural reform should have been implemented before considering amalgamations. Finding 4 That the Fit for the Future reforms provided a positive impetus for local councils to review their long term financial sustainability and improve their performance, but the methodology prescribed by the government was too restrictive and rushed for councils to take full advantage of the process. Finding 5

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That the scale and capacity criterion was a flawed criterion and it should not have been included in the Fit for the Future assessment criteria and accordingly assessments of councils’ fitness based on this threshold criterion are not well founded. Finding 6 That there is significant uncertainty about the reliability of many of the Fit for the Future performance measures, which undermines the validity of the Fit for the Future assessment outcomes. Finding 7 That the Boundaries Commission process was strongly supported by many organisations including Local Government NSW, and a strengthened and more independent Commission may make up for some of the flaws in the Fit for the Future process to date. Finding 8 That the NSW Government failed to build on the consultative approach established during Destination 2036to develop a roadmap for the future of the local government sector, and appears to have neglected to adequately consult with the community, or effectively partner with the sector, to continue those reforms. Finding 9 That the projected economic benefits of council amalgamations have been consistently overstated by the proponents of forced amalgamations and the costs and extensive diseconomies of scale caused by amalgamations have not been adequately explained by those same proponents. 1.3 Recommendations Recommendation 1 That the Premier and NSW Government withdraw the statements that 71 per cent of councils in metropolitan Sydney and 56 per cent of regional councils are ‘unfit’. Recommendation 2 That the NSW Government provide all local councils in New South Wales access to the proposed Fit for the Future incentives, regardless of the Independent Pricing and Regulatory Tribunal’s assessment of whether a council is ‘fit’ or ‘unfit’. Recommendation 3 That, as part of its planned review of the rating system, the NSW Government evaluate the option of the removal of rate pegging and allow councils to determine their own rates conditional on the delivery of a local works plan outlining the expenditure associate with any proposed rate increases and demonstrated community support. Recommendation 4 That the Minister for Local Government work cooperatively with the NSW local government sector to petition the Australian Government to reverse its decision to freeze the indexation of Financial Assistance Grants. Recommendation 5 That the Minister for Local Government work cooperatively with the local government sector to petition the Australian Government to seek to redistribute Financial Assistance Grants in order to direct additional funding to councils with the greatest needs, provided councils with the capacity to raise additional local revenue are able to do so. Recommendation 6 That the NSW Government eschews future cost shifting and commits to providing adequate funding to local government for any new services, assets or regulatory functions that it devolves to local councils. Recommendation 7 That the NSW Government ensure that those water utilities that are currently operated by local councils remain under the control of those councils. Recommendation 8

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That the Office of Local Government, in consultation with the Audit Office of New South Wales and local government representatives, develop guidelines to ensure greater consistency across councils in the treatment of assets, including:

a depreciation methodology that more closely correlates with the actual condition of deterioration and considers the councils’ priorities for the condition of the infrastructure

quantifying the useful life of an asset

determining the realistic residual values of assets

the componentisation of assets. Recommendation 9 That the NSW Government implement the Independent Local Government Review Panel’s recommendations to strengthen the independence of the Boundaries Commission and ensure a robust and consultative process is in place to consider council amalgamation proposals before any further steps are taken by the government in relation to council amalgamations. Recommendation 10 That the NSW Government implement a program to assist and support senior staff affected by amalgamations, particularly those staff in regional areas who may need to relocate if their position is lost through an amalgamation. Recommendation 11 That the NSW Government commit to a policy of no forced amalgamations of local councils, except in circumstances where it can be established that a councilis severely financially unsustainable to the point of bankruptcy or unable to maintain an acceptable level of service provision. Recommendation 12 That the NSW Government consider amending the Local Government Act 1993 to allow for a period of transition between a decision to merge councils and the creation of the new council, to ensure effective planning, consultation, implementation and ongoing service delivery to communities. Recommendation 13 That the Minister for Local Government encourage local councils with council elected mayors to initiate a referendum on whether the mayor should be popularly elected or elected by councillors. Recommendation 14 That the NSW Government seek to amend the Local Government Act 1993 to increase to two years the period a mayor elected by the councillors is to hold office. Recommendation 15 That the NSW Government consider amending the electoral legislation to introduce donation and spending caps for candidates at local government elections. Recommendation 16 That the NSW Government make Joint Organisations available to all councils in New South Wales. Recommendation 17 That the NSW Government work with local government on a statutory model for Joint Organisations based on the Hunters Hill, Ryde and Lane Cove Council model as a cooperative and consensus model for local council reform in Metropolitan Sydney 1.4 Commentary The findings of the inquiry accord with views commonly held across local government, and indicate a detailed examination of the issues of importance to councils in the process. Of particular relevance are the findings and recommendations around the importance of

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implementing a package of reforms, addressing funding and providing a level playing field for all councils. An extract from the Parlimentary Enquiry’s website indicates as follows: ‘On 29/10/2015 the Committee required the Government to provide a response by 29/04/2016. No Government response has been received as yet.’ The NSW Government has indicated that it will make further announcements regarding Council Fit for the Future assessments prior to christmas. In this context it is important to note that the final sitting day for the NSW Parliament is 26 November 2015. 2 Correspondence received from the NSW Government regarding Council’s Fit

for the Future proposal

Correspondence was received from the NSW Department of Premier and Cabinet, dated 21 October 2015, inviting Council to provide feedback to the IPART report. This is attached. An extract from the correspondence is as follows:

“Councils have until 18 November 2015 to provide feedback to the Government on their IPART assessment. Councils whose submission was assessed by IPART as being not fit due to scale and capacity, or who neighbour a council who was not fit due to scale and capacity, have been asked to identify any preferences the council may have regarding mergers. Please use the fields to provide your feedback and nominate your merger preferences. If you have no preferences, please leave this field blank”.

The questions in the portal are as follows:

1. What is your council’s feedback on IPART’s assessment of your council’s Fit for the Future submission? If you have no feedback, please leave blank.

2. If your council’s submission was assessed not fit due to scale and

capacity, or your council neighbours a council who was assessed as not fit due to scale and capacity, please identify your council’s merger preferences using the fields. Please note you can enter up to three preferred mergers, which can include one or more merging partners. You are not required to use all the preferences. If you have no preference, please leave blank.

In relation to question number 1, the IPART assessment is detailed below and subsequently the suggested feedback comments to download into the portal. In relation to question 2, Council does neighbour a Council that was deemed not fit due to scale and capacity, namely Armidale Dumaresq Shire Council. Council can determine if it wishes to consider making a preference merger with this Council. This matter is further addressed below. Additional correspondence was received from the Minister for Local Government and the Premier dated 11 November 2015. This correspondence which is attached indicates that it is seeking to clarify matters that have been raised. An extract from the correspondence is as follows:

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As you will be aware, the Government is providing significant funding for mergers. Up to $15 million is available to newly merged councils to invest in community infrastructure projects or better services. Funding of up to $10million is also available to meet the upfront cost of merging. To access funding, mergers must be agreed to by councils, supported by the government and submitted by the deadline of 18 November. Councillors that have demonstrated an ability to work together in reaching agreement to merge will have the opportunity shape the future of the new council and serve their community until the end of their current term. This will include input to decisions on service levels, branding, jobs, location of key administrate centres and/or local representation. We ask you to consider carefully the interests of your community and the benefits of a larger council. We ask you to also consider the job protections in place (in particular for areas with fewer than 5000 people) and the guarantee the Government has given on services, infrastructure rates and local representation. Councils that see the benefits of merging, but are unable to reach agreement with neighbouring councils, should submit their merger preferences even if agreement has not been reached. These councils will have the best opportunity to shape the future of the new council. We look forward to receiving your response to the IPART findings and merger preferences by the November 18 deadline. Following your Council’s response, the Government will take the next step in local government reform. The Government is strongly committed to ensuring ratepayers get value for money and the services and infrastructure they deserve, and benefit from the close to $2 billion in savings identified by IPART. 3 Analysis and commentary regarding IPART findings

The IPART report is at

www.ipart.nsw.gov.au/Home/Industries/Local_Govt/Fit_for_the_Future.

3.1 IPART Assessment The following is an extract from the IPART report pages 133-134 that is entitled “Bellingen Shire Council”.

Assessment summary Scale and capacity Satisfies Financial criteria: Does not satisfy overall

Sustainability - Does not satisfy

Infrastructure and service management – Satisfies

Efficiency - Satisfies Fit for the Future – NOT FIT

http://www.ipart.nsw.gov.au/Home/Industries/Local_Govt/Fit_for_the_Future

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The council satisfies the scale and capacity criterion.

The council does not satisfy the financial criteria overall. Although it satisfies the infrastructure and service management and efficiency criteria, it does not satisfy the sustainability criterion.

The council does not satisfy the sustainability criterion based on its forecast for a negative operating performance ratio.

We consider a council’s operating performance ratio is a key measure of financial sustainability that all Fit for the Future (FTFF) councils must meet, therefore the council is not fit.

Scale and capacity - satisfies

The council’s proposal is consistent with the ILGRP’s option to stand alone.

Given the ILGRP’s preferred option, the council was not required to demonstrate how it met each of the elements of scale and capacity.

However, the council meets some of the elements. In particular, it demonstrates good regional collaboration.

Our analysis has not identified evidence for a better alternative to the council’s proposal to stand alone.

Based on an initial analysis of total expenditure, the KPMG ‘Optimising Service Delivery report for MIDROC identified potential recurrent savings of $2m p.a. in service delivery for the council.

Sustainability – does not satisfy

The council does not meet the criterion for sustainability based on its continuing operating deficits and relatively low building and infrastructure asset renewal ratio.

Its operating performance ratio is forecast to be -7.2% in 2024-25.

Its building and infrastructure asset renewal ratio was 40% in 2014-15 and is forecast to improve to 56.9% by 2019-20 which is remains below the benchmark.

Its own source revenue ratio including and excluding FAGs is forecast to meet the benchmark.

The council has limited options to improve its financial position and relies on the successful application for and adoption of a special variation from 2016-17 of 69% cumulative over 9 years (44% above the rate peg). This is included in the council’s ratios.

Infrastructure and service management - satisfies

The council satisfies the criterion for infrastructure and service management based on meeting the benchmarks for the infrastructure backlog, asset maintenance and debt service ratios by 2019-20.

The council states it has revised the methodology for calculating the backlog ratio from the 2014-15 year onwards, which we consider to be reasonable.

Efficiency - satisfies

The council meets the criterion for efficiency based on the Real Operating Expenditure per Capita showing a declining trend.

Other relevant factors Social and community context Bellingen Shire Council has a small population base and a very large road and bridge network, large areas of non-rateable land (State Forests comprise 33%, National Parks 21%), below average SEIFA index ranking (ranked in the 50 most disadvantaged local government areas in the State.) It has an ageing population with 44.4% being over 50 and 62% of those employed earning less than $600/week. The area is prone to natural disasters that have major adverse cost impacts for Council (e.g. 13 declared flood events since 2001 with $31m of damages). It has an abundance of natural assets (ocean, river

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and mountains) which has created a thriving tourism industry with more than 300,000 visitors each year. Community consultation The council has not provided any information on consultation with the community on Fit for the Future. It has however included some information on a community satisfaction survey, which showed that 26% were satisfied and 27% dissatisfied with council services. Water/sewer The council’s water and sewer businesses operates on a better than break-even basis. The council states it currently achieves the requirements of the NSW Government Best Practice Management of Water Supply and Sewerage Framework and has no infrastructure backlog. Submissions We received one submission in relation to Bellingen’s proposal, opposing any merger for Bellingen. 3.2 Commentary and analysis Council officers have sought advice and commentary from IPART in relation to its assessment of Council’s proposal. This indicated that the key issue for IPART was the Operating Performance Ratio wherein the benchmark is breakeven or surplus based on a three year rolling average. The advice from IPART also indicated that, as previously stated IPART’s role in the assessment of council proposals had been completed but that if council had revised figures it should provide this advice to government as part of any further submission it wishes to make. Within this context the following advice has been provided by Council’s Chief Financial Officer and endorsed by the Deputy General Manager Operations and Deputy General Manager Corporate and Community.

Under the NSW Code of Accounting Practice full revaluations of Councils infrastructure, property, plant and equipment are to be carried out on a five year rolling cycle. Accordingly Councils roads, bridges, footpaths and drainage assets were revalued at 30 June 2015.

The revaluation resulted in a significant decrease in Council’s carrying value of the above asset classes, which will significantly decrease future annual depreciation expense.

The decrease in asset values is as a result of Council using a revised methodology to determine asset values following its participation in a regional asset management benchmarking project known as “Apples with Apples”. The mid-north coast councils working in consultation with Jeff Roorda & Associates (JRA) have agreed to a regional approach to asset reporting. This new approach has led to a significant decrease in unit rates and longer asset lives, resulting in lower asset values and lower future depreciation.

Council’s external auditor has also carried out significant benchmarking across its local government audit clients and as a result has used this data to assess trends in useful lives and unit costs in order to compare each council across the region. After discussions with the auditors it was expected that Bellingen align itself with these regional trends.

The table below summarises the impact on Council’s overall asset values and estimated annual depreciation as a result of the above reviews:

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Specifically, the above changes to annual depreciation have had a significant impact on Councils forecast ‘Fit for the Future’ ratios. The above changes will have a positive impact on both the ‘operating performance ratio and the ‘infrastructure renewals ratio’.

In Councils original FFF submission, Councils operating performance ratio (forecast of -7.2% 2024/25) did not meet the FFF benchmark of break even or surplus by 2024/25. With the impact of the depreciation changes above it is estimated that Council will report a surplus operating result of $367K by 2024/25. The impact on the ratio calculated on a three year rolling average will be within 1% of the benchmark by 2024/25.

In addition to the above ratio, Council also failed to meet the building an infrastructure renewals ratio in the FFF submission with a forecast average of 48.1% in the 10 years covering 2015/16 to 2024/25, which was below the benchmark of 100% expected by the Office of Local Government. The estimated changes to the 2016/17 depreciation will increase this average to 68.6% across the future 10 year period. Although this is still below the benchmark, IPART consider this ratio to be a long term ratio covering a much greater period than the next 10 years and considered our original submission reasonable, having no impact on our classification of being considered ‘fit’ or ‘unfit’.

Below is a forecast of the effect to both of these ratios:

Category (Depreciable Component)

2014

Fair Value

$’000,s

2014

Deprec.

$’000,s

2015

Fair Value

$’000,s

2016

Deprec.

$’000,s

Roads 193,809 4,118 109,651 2,307

Bridges 31,735 525 33,691 218

Footpaths 3,760 38 2,166 26

Drainage 25,432 249 22,525 203

Total 254,736 4,930 179,627 2,754

1. Operating Performance Ratio

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

FFF Submission Result -37.97% -28.12% -22.82% -20.59% -17.92% -15.74% -13.70% -11.56% -9.39% -7.22%

Post Revaluation Result -35.39% -22.82% -14.88% -12.68% -10.34% -8.50% -6.75% -4.78% -2.79% -0.79%

OLG

Benchmark

>= break

even over 3

years

BSC Results

(2024/25)-7%

KPI Met?

Trend+ve trend

continuing-40.00%

-35.00%

-30.00%

-25.00%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

TARGET (>)

LTFP 2015/16 -2024/25 (GF)

LTFP Post Revaluation

Operating Performance Ratio

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Specifically, the above changes to annual depreciation have had a significant impact on Councils forecast ‘Fit for the Future’ ratios. The above changes will have a positive impact on both the ‘operating performance ratio and the ‘infrastructure renewals ratio’.


In addition to the above ratio, Council also failed to meet the building an infrastructure renewals ratio in the FFF submission with a forecast average of 48.1% in the 10 years covering 2015/16 to 2024/25, well below the benchmark of 100% expected by the Office of Local Government. The estimated changes to the 2016/17 depreciation will increase this average to 68.6% across the future 10 year period. Although this is still below the benchmark, IPART consider this ratio to be a long term ratio covering a much greater period than the next 10 years and considered our original submission reasonable, having no impact on our classification of being considered ‘fit’ or ‘unfit’.

3.3 Engagement Council’s engagement approach was framed in a Councillor workshop held in May 2015. The following is an extract from Council’s Improvement Plan which was submitted to IPART by 30 June 2015. The following was undertaken in the development of the Action Plan and overall FFF engagement:

A Fit for the Future Information Centre has been established on Councils website

A Fit for the Future working group has been established to develop the submission that includes the General Manager, Deputy General Managers, Executive Manager Organisational Development, Chief Financial Officer and Manager Asset Management and Design

A Fit For the Future Project Officer was appointed, and Council has allocated initial funding to the process

3. Building and Infrastructure Asset Renewal Ratio

2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25

FFF Submission Result 45.2% 52.5% 64.4% 58.0% 56.9% 49.4% 39.4% 35.9% 36.4% 42.5%

Post Revaluation Result 54.8% 68.8% 85.2% 90.3% 81.4% 79.8% 69.3% 55.2% 50.4% 51.0%

OLG

Benchmark100%

BSC Results

(2024/25)42%

KPI Met?

Trend Nuetral0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

LTFP 2015/16 -2024/25 (GF)

TARGET (>)

LTFP Post Revaluation

Building and Infrastructure Asset Renewal Ratio

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Staff briefings regarding the recommendations of the Independent NSW Local Government Reform Panel (ILGRP) and the Fit for the Future Reform package

Briefings with key opinion leaders and Chambers of Commerce

Councillors have been briefed by way of a number of reports to Council meetings throughout 2013 and 2014 regarding the work of the ILGRP and in September 2014, February and June 2015 regarding Fit For the Future

Workshops with Councillors in December 2014, February and April 2015 to inform the progression of the FFF submission

The General Manager and Deputy General Manager Corporate and Community have attended a number of information sessions provided by the Office of Local Government

Key staff have attended forums facilitated by external organisations such as the Office of Local Government, Local Government NSW, and IPWEA

Council participated in the MIDROC ‘Talking Apples and Apples Infrastructure’ review program which will provide key input to the asset management framework and future long term financial plans

Regular liaison with the Office of Local Government’s Relationship Manager for the Mid North Coast

Regular liaison with IPART including attendance at the assessment methodology public forum in Coffs Harbour

FFF project team members participated in the Joint Organisation Pilot webinar

FFF workshops with Councillors in May and June 2015 obtaining input into the draft submission and Improvement Action

The format of the merger suggestions is included below as it helps form a picture of the nature of the feedback requested by the State. 4 Key Stakeholders and the Stronger communities fund As previously outlined as part of its Fit for the Future local government reforms, the NSW Government has announced an incentive program to encourage councils to voluntarily merge. In rural areas an offer has been made of $5 million for infrastructure if two councils merge, or $10 million if three or more councils merge. Additionally, there is $5 million towards merger implementation costs. The funding is contingent on Council voluntarily agreeing to a merger by 18 November 2015, and the partner(s) council also agreeing to the merger. As incentive funds have again been tabled, it is appropriate that council should review the options and consider what is seen to be in the best interests of our community within the context of the information provided by government. To contextualise, at an academic level, the data and investigations that have been undertaken into amalgamations by researchers provides a guide as to what is likely to happen, but each situation is unique and therefore could have different outcomes. There have been a plethora of academic papers written on the merging of local councils. The Parliamentary Inquiry referred to earlier in this report addressed this issue at chapters 6 – Amalgamations, 7 – Evidence of Outcomes and 8 – Protecting and Delivering Democratic Structures for Local Government, see www.parliament.nsw.gov.au/prod/parlment/committee, pages 93 – 146. A number of extracts from the Parliamentary Inquiry are provided hereunder: 1 Transitional costs

http://www.parliament.nsw.gov.au/prod/parlment/committee

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“In its submission, LGNSW noted that many costs of amalgamations are ‘realised in the short term, while the benefits may only emerge in the medium to long term’. LGNSW identified a number of the transitional costs association with amalgamations. It suggested that there would be costs related to the following aspect of amalgamations:

integration of information technology

harmonising rates, fees, charges, planning instruments, service and regulatory functions

staff and premises relocation and displacement

integration of employees and managements

redundancy costs for senior management

community consultation and information

branding and identity of the new council” Source: General Purpose Standing Committee No. 6, Local Government in New South Wales, page 136 2 Summary Committee comment ‘Although some questions were raised about the level of robust and rigorous empirical research on the impacts of amalgamations, much of the available evidence appears not to support claims of cost savings and efficiency. The committee heard that numerous studies have shown mergers often fail to achieve expected cost savings and other intended objectives. Further, some stakeholders argued that certain functions of local government require local attention and are better done at a smaller scale. The committee heard that there are a multitude of factors that can affect the success of amalgamations. Such factors include the level of community support for amalgamation, with community endorsement leading to better outcomes. The availability of resources and support to assist councils through the amalgamation process is also a key factor in success, as is a genuine partnership approach between the NSW Government and local government sector. Robust planning, regular communication and the availability of incentives are other important factors leading to improved outcomes.’ Source: General Purpose Standing Committee No. 6, Local Government in New South Wales, page 109 3 Responses to online questionnaire: Views on amalgamations ‘A number of the responses to the committee’s online questionnaire, related to the issue of council amalgamations, are set out below.

73 per cent of respondents did not support the forced amalgamation of local councils, if IPART found that they do not have sufficient scale and capacity.

73 per cent of respondents thought the services provided by their local council would be compromised if their council was amalgamated into a larger council.

75 per cent of respondents considered that the size and scale of their own local council was appropriate.

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74 per cent did not think that the amalgamation of their local council would improve its financial sustainability.

71 per cent of respondents did not support the amalgamation of their local council.’ Source: General Purpose Standing Committee No. 6, Local Government in New South Wales, page 101 Costs of amalgamations When considering the potential disadvantages of their local council merging with one or more neighbouring councils 73 per cent of respondents to the committee’s online questionnaire selected ‘local issues will be overlooked/loss of local identity’. The next most popular responses were ‘loss of representation/loss of voice’ (65 per cent), ‘doubt about cost savings/waste of time and/or money (61 per cent), ‘a bigger council will be less efficient/too bureaucratic’ (58 per cent). Questionnaire respondents also submitted a number of open ended responses on the costs of amalgamations:

‘Higher rates, large administration costs in changeover. Little savings in service delivery outcomes. Loss of jobs and intellectual property. Loss of social capital in job losses’

‘Loss of autonomy, cost of local jobs, waste of currently owned machinery which will become redundant’

‘Instability of programs and departments that are already working well, danger of “one size fits all” approach for unique issues’

‘Higher costs. Reduced services. Slower response times

‘Merged Councils will take years to work through the changes with no guarantee of improved services, financial efficiency or improved civic leadership. The costs are a certainty and the benefits a promise

‘From what I have read, interstate experience of amalgamation has not saved money for councils. Amalgamation has also resulted in the need to set up ‘parish’ councils in some amalgamated councils in order to deal with local affairs. The reduced number of councillors per head of population diminishes representation and is undemocratic

‘There is no evidence to suggest that amalgamations have resulted in improved services or cost savings to rate payers’

Source: General Purpose Standing Committee No. 6, Local Government in New South Wales, page 136 Loss of local identity and community uniqueness ‘There were also some responses to the committee’s online questionnaire which made comments about the loss of local identity and community uniqueness in response to the question ‘What are the costs, impacts and/or benefits of local council amalgamations for the community and businesses?’ A selection of such responses is set out below:

‘Each council governs their area according to the needs and wants of their citizens, creating unique communities across Sydney and NSW. Amalgamating these councils dilutes the individuality of some of these areas and could altogether dissolve what makes them appealing in the first place’

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‘Reduced local representation, increased middle management costs, poorer understanding of local issues within a super council’. ‘Instability of programs and departments that are already working well, danger of “one size fits all’

Following the release of the IPART assessment a meeting was initiated with the councils slated for membership of the North Coast Joint Organisation i.e. Clarence Valley, Coffs Harbour, Nambucca and Bellingen. The meeting reaffirmed the collaborative nature of the partnership and the willingness to work together in the Joint Organisation. The Councils noted the Minister’s indication that two more pilot Joint Organisations may be established and agreed to resubmit an application in the event that this occurred. In terms of Bellingen’s immediate neighbours to the north and south, Coffs Harbour and Nambucca Councils have previously stated their positions as stand alone with membership to the Joint Organisation in accordance with the recommendations of the ILGRP. This is also the case for the other MIDROC Councils with the exception of Gloucester Shire Council. In addition in the case of our immediate neighbouring councils, IPART has indicated that their analysis has not identified evidence for a better alternative to the council’s proposal to stand alone. This is also the case for Bellingen. It is understood that the following recommendation will be considered by Nambucca Shire Council at its meeting on 12 November 2015: That Council make a submission to the Department of Premier and Cabinet acknowledging that Council accepts IPART’s findings in relation to Nambucca Shire’s Fit for the Future Proposal and confirming Council’s commitment to continuing to deliver the reforms aimed at meeting the Fit for the Future benchmarks by 2020. It is further understood that Coffs Harbour City Council does not plan to make a submission. There is no requirement for any council to make a submission. In terms of Councils’ neighbour to the west, Armidale Dumaresq Council, it should be noted that their submission resulted in a categorisation of not fit on scale and capacity grounds as well as financial capacity. Armidale Dumaresq is a previously merged council. Accordingly, in keeping with the Governments directive outlined in its correspondence of 21 November 2015 i.e. Councils whose submission was assessed by IPART as being not fit due to scale and capacity, or who neighbour a council who was not fit due to scale and capacity, have been asked to identify any preferences the council may have regarding mergers, discussions were initiated by Bellingen Shire Council and undertaken between the Mayor and General Managers of both councils. These discussions

Indicated that Armidale’s preference was a merger with Uralla and Guyra.

contemplated that the two council areas were geographically separate in that the Great Dividing Range and associated national parks which effectively separate our areas make operating areas as one community highly problematic

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that the two councils shared only a very small border, did not have communities of interest and that any merger was not seen as feasible.

In addition it is important to note that Armidale is not slated for membership of the North Coast Joint Organiation, state planning boundaries for Armidale and Bellingen do not align, and key services for each council area including police, health and education are provided from different regional centres. As Bellingen (and for that matter Nambucca and Coffs Harbour councils) have not been previously required to assess a merger, a proper business case has not been undertaken and even if the councils were of a mind to do this, 30 days is not an adequate time frame for this to occur within. In addition, consideration of any merger should also have due regard to issues around representation and localism. This is canvassed in the Parliamentary Inquiry Report. It is reasonable to contend that any decison regarding merging should be based on a business case assessment that addresses the foregoing issues. Previous work undertaken by Council has shown there is great potential for improved services to be delivered to the community after reviewing what services should be provided and how best to provide them. The issue of shared servicing is addressed further in Section 5 of this report. A key challenge in making these changes is funding the upfront investigations and the cost of implementing the changes. If Council had available the $5 million on offer, it would allow Council to speed up the process of providing a better service value. It would be advantageous to the community for the NSW Government to fund significant changes that would deliver services more efficiently even if Councils do not merge. Mergers are also not a way to address the underlying financial issue that horizontal fiscal equalisation - the process of removing inherent disadvantage - that local councils cannot change -creates across the State. Without the disadvantage costs, such as long road networks and multiple small villages being properly addressed, local government in many areas will only be financially sustainable by having relatively higher rates. If you have twice the road length per resident it will cost twice as much to maintain it, even if the council is operating in the most effective way. To remain competitive and attract residents who will invest in business and grow regional communities, a new way of funding basic services needs to be put in place. This has been recognised and documented by both the Independent Local Government Review Panel and the Parliamentary Inquiry. Both of these processes indicated that the issue of local government financing needed to be part of a package of reforms. Whilst it is understood that a review of the distribution of the Financial Assistance Grants is underway, there is no information about process outcomes or timeframes and the reform process and assessment of ratios by IPART has been undertaken without regard to this matter. A state-wide levy to supplement the existing Financial Assistance Grant is required to allow for a fair and equitable transfer of funds from where the wealth resides to where it is needed to support communities. Council should take the opportunity to raise this issue again within its submission.

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Neither the Independent Review Panel nor IPART identified Council as achieving advantages from merging. It is therefore not considered reasonable that the NSW Government only support communities where mergers are considered a good outcome. The residents of the Bellingen Shire are equally deserving of support to have efficient and effective local services. Unfortunately it appears that the bulk of the funding available will target communities substantially better able to fund improvements to their local government organisations than our community. For these reasons the NSW Government should be asked to make the funding available to communities that are willing to make changes but have difficulty in funding the works required. Local government in the future will be different to what it is today, but we need a State Government that will assist in making those changes happen sooner, particularly in areas such as the Mid North Coast where financial pressures are impacting a number of councils. This will deliver substantial benefits to the community several years before it would otherwise happen. 5 Progress regarding shared servicing and alliancing For many years Bellingen Shire Council has actively sought regional partnerships and alliances which have delivered economic benefit, service improvement and efficiency gains. Partnerships are currently in place for:

Waste management

Library services

Internal Audit

Asset management In addition, Bellingen Shire Council has been an active member and participant in the Mid North Coast Region of Councils (MIDROC) whose focus for a number of years has been both collaboration and advocacy. By way of example, Council participates in a range of MIDROC subgroups where best practice is shared. Collaborative effort has realised significant cost and efficiency savings in areas such as waste, work health and safety, human resource management, planning, procurement and asset management. More specifically, Bellingen Shire Council, through the MIDROC HR subgroup, initiated and led the regional procurement of a shared learning management system for six of the seven MIDROC councils achieving cost savings of approximately $372,000 in total (on average $62k per council) over the four (4) year subscription period, as opposed to each council individually procuring this service. For Bellingen Shire Council this resulted in savings of $11,220 per annum and $44,880 over the four (4) year subscription. In addition, cost and efficiency savings will also be realised through:

Reduced use of external trainers/consultants (and associated costs) as a significant proportion of training can be delivered online at the workplace

Savings in both training related travel time and costs

Reduced costs associated with using external training facilities

Reduced training development costs as online training programs developed in – house may be shared across the member councils via the learning management system

Reduced training administration time In addition significant work has been undertaken and continues in terms of a shared approach to asset management through the ‘apples with apples’ regional asset

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management project. This matter has been subject to a number of briefings to council and has been incorporated into the development of Councils Fit for the Future submission. In 2014 MIDROC engaged consulting firm KPMG to undertake an investigation to identify optimal service delivery models for the MIDROC councils. With a limited data set, KPMG identified the potential for a 10% saving in councils’ operating costs by councils working collaboratively across their boundaries through “shared service” endeavours. Following the KPMG report, the General Managers of Bellingen, Nambucca, Kempsey and Gloucester councils have met on several occasions to continue a dialogue in relation to the potential opportunities which shared services might provide their respective councils. It is fair to say that the meetings have evidenced some differences between the councils in relation to their values, processes, capabilities and relative strengths and weaknesses. However more importantly there is solid agreement to the principal that the councils will improve their efficiency by sharing a range of services. In this forthcoming “Fit for the Future” period it will be important for councils, and particularly smaller councils, to demonstrate the efficiency improvements which could be achieved through using the same economies of scale which underpin much of the justification for Council amalgamations. At a meeting of the councils’ General Managers in Kempsey on 10 August, there was discussion concerning a draft Memorandum of Understanding (MoU) for further engagement in shared services. In Principle agreement was reached on the attached draft MoU as an overarching statement of intent and direction. Since that time each Council including Bellingen has resolved to endorse the MoU. Reaching agreement on an MoU is an important milestone as all of the councils are undertaking or are proposing to undertake reviews of their service delivery. It is possible for some of those service reviews to be undertaken collaboratively and not only examine possibilities for efficiency/effectiveness gains within the Council but also across Councils. Other associations of councils are also undertaking similar work. A recent paper prepared by Percy Allan & Associates corroborates the findings of KPMG and provides similar direction to that proposed in the MoU. As a consequence of the need to undertake process reviews across Council boundaries and obtain agreement and approval to a governance structure, the implementation of shared services will be more akin to a “journey” than a single key performance indicator which will be completed within two years. As with any journey there will be sectors which don’t go as well as others but a road map is required to ensure that everybody is aware of both the starting point and destination. The “roadmap” or steps towards the achievement of shared services between the councils is envisaged as follows:

1. Development of draft Memorandum of Understanding (MoU) 2. Adoption of Memorandum of Understanding by each Council 3. Development of a draft constitution for the governance structure 4. Adoption of the constitution by each Council

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5. Obtain approval of Minister for Local Government (under Section 358 of the Act) to the formation of a corporation or other entity which will be responsible for delivering the shared services to the respective councils

6. Undertake cross boundary service reviews to identify those services which would benefit from a shared services approach.

The General Managers from the participating Councils have principally agreed on five (5) service areas which they believe will provide benefits in the first instance, being:

1. Information Technology 2. Procurement 3. Fleet 4. Human Resources (including Work, Health and Safety) 5. Finance

These are seen as key services which will be required to underpin any provision of other shared services, so are seen as being necessary to review first to ensure that the organisations have the capacity to provide any other shared services where this is seen as advantageous. Council has previously considered a report regarding Shared Servicing at its meeting of 23 September 2015 entitled Development of a Regional Shared Services Model – Draft Memorandum of Understanding where it was resolved as follows: 032/15 RESOLVED (Cr Manning/Cr Harrison) That : 1. The information concerning the draft Memorandum of Understanding for Shared Services be received. 2. That Councillors provide the General Manager with any comments in relation to the draft Memorandum of Understanding for Shared Services so that they may be considered in finalising the document for adoption by the respective councils. 3. A further report be presented to Council on a Memorandum of Understanding for the provision of shared services. UNANIMOUS In addition Council considered a subsequent report at its meeting of 28 October 2015 and resolved as follows 053/15 RESOLVED (Cr Scott/Cr Harrison) That Council 1. Council receive this report. 2. Endorse the Memorandum of Understanding for Shared Services as outlined in this report. 3. Receive a further report prior the deadline date established by Government for further submission relative to the ‘Fit for the Future’ reform process. UNANIMOUS in the absence of Cr Klipin

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Whilst final advice is expected from the NSW Government regarding final consideration of Bellingen Council’s Fit for the Future proposal before Christmas it is considered pragmatic to continue the process relative to shared servicing at this time. The next step in the process is to establish the governance structure and this is being progressed now. Shared servicing and alliancing will be the subject of further reports to council. 6 Analysis The Fit for the Future reform process currently underway across the local government sector has been the subject of many plans and reports and trangresses two terms of council. The pathway forward post release of the Fit for the Future Reform program has not been clearly mapped out for local government in a step by step manner so that the options, implications and anticipated outcomes were known and understood from the outset. The communication from government has varied and at times has been contradictory. Notwishstanding that, Bellingen Shire Council has responded to each and every step in the reform process and followed the advice and direction provided by Government. In framing its further response to government regarding FFF, Council should continue to take a holistic balanced and pragmatic view about what is best for council and its community that considers the impacts of the proposed reforms on our towns business and residents. Localism and the people within our community are important. Decisions such as these are once in a generation and cannot be based on a set of numerical measures alone. They require an integrated package of measures that are implemented in a planned and managed way. 7 Proposed response Submissions are to be made using an online form which restricts the format and content of the submission. The form is divided into two sections; the first is a chance to respond to IPART’s report and its assessment of council proposals under the Fit for the Future reforms. On the basis of the information contained within this report the following response is recommended For part (a) of the form.

1 Bellingen Shire Council has been rated as satisfying the scale and capacity criteria but not satisfying the financial benchmarks and in particular the Operating Performance Ratio.

2 Bellingen Shire Council notes and accepts the direction provided to it by the Independent Local Government Review Panel to stand alone and be a member of a Joint Organisation

3 Bellingen Shire Council notes and accepts the direction provided by the Independent Pricing and Regulatory Tribunal that its analysis has not identified evidence for a better alternative to the council’s proposal to stand alone.

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4 Bellingen Shire Council has undertaken significant additional work on its asset framework and based on audited figures has revised its forecasts against the Operating Performance Ratio and the Building and Infrastructure Asset Renewal Ratio. This has been communicated to IPART, who have indicated that this information should be communicated by Council in its submission:

Under the NSW Code of Accounting Practice full revaluations of Councils infrastructure, property, plant and equipment are to be carried out on a five year rolling cycle. Accordingly Councils roads, bridges, footpaths and drainage assets were revalued at 30 June 2015. The revaluation resulted in a significant decrease in Council’s carrying value of the above asset classes, which will significantly decrease future annual depreciation expense. The large decrease in asset values is as a result of Council using a revised methodology to determine asset values following its participation in a regional asset management benchmarking project known as “Apples with Apples”. The mid-north coast councils working in consultation with Jeff Roorda & Associates (JRA) have agreed to a regional approach to asset reporting. This new approach has led to a significant decrease in unit rates and the componentisation of assets, resulting in lower asset values and lower future depreciation. Council’s external auditor has also carried out significant benchmarking across its local government audit clients and as a result has used this data to assess trends in useful lives and unit costs in order to compare each council across the region. After discussions with the auditors it was expected that Bellingen align itself with these regional trends Specifically, the above changes to annual depreciation have had a significant impact on Councils forecast ‘Fit for the Future’ ratios. The above changes will have a positive impact on both the ‘operating performance ratio and the ‘infrastructure renewals ratio’.


In addition to the above ratio, Council also failed to meet the building an infrastructure renewals ratio in the FFF submission with a forecast average of 48.1% in the 10 years covering 2015/16 to 2024/25, well below the benchmark of 100% expected by the Office of Local Government. The estimated changes to the 2016/17 depreciation will increase this average to 68.6% across the future 10 year period. Although this is still below the benchmark, IPART consider this ratio to be a long term ratio covering a much greater period than the next 10 years and considered our original submission reasonable, having no impact on our classification of being considered ‘fit’ or ‘unfit’.

5 Bellingen Shire Council has undertaken significant reforms over recent years which have been detailed in its Improvement Proposal. This proposal proposes the

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continuation of the reform process and sets out a detailed plan which is in the process of being implemented. This includes actively pursuing shared servicing and alliancing with nearby councils. This process is also underway

6 Bellingen Shire Council is currently in a group of councils with scale and capacity and varying capacity around financial sustainability based on the ratio assessment at a particular point in time. Consideration should be given to sustainable funding models to assist this group of councils provide sustainable infrastructure to their communities. A guaranteed level of suitable, efficient transport infrastructure services across NSW is critical to the future sustainability of the whole state. The Mid North Coast Group of Council’s has done significant work in this regard. Bellingen Shire Council would be pleased to be part of the process for developing such models.

For part (b) of the form: The second section of the form is for merger proposals for Councils that did not meet the Scale and Capacity criteria or neighbour a local government area(s) that did not meet the criteria. Both Coffs Harbour and Nambucca meet scale and capacity, therefore Council is not required to submit a merger proposal. Bellingen Shire Council does have a very small border with Armidale Dumaresq Shire that did not meet scale and capacity. This report outlines the engagement process undertaken with Armidale Dumaresq Council and outlines the reasons why a merger would not be considered feasible. Therefore it is recommended that the seond half of the form is left blank. BUDGET IMPLICATIONS The Fit for the Future (FFF) reform process relative to the NSW local government sector looks to achieve more efficient and effective councils that are financially sustainable, address the infrastructure backlog and achieve economies of scale. Funding for merging councils has been announced by Government in conjunction with the release of the IPART report. This indicates that merging Councils will be eligible for a $5 million merger implementation grant. In addition, a Stronger Communities Fund of up to $15 million is available, ‘providing new councils a head start on community infrastructure projects like sporting fields, libraries, or parks’. In regional areas this will provide $5 million, or $10 million where three or more councils are merging. It is understood that council’s who are categorised as fit, will have access to a streamlined IPART process for rate increases above the rate pegging limit, particularly focussed on infrastructure funding needs, access to a State borrowing facility, priority access to other State funding and grants and eligibility for additional devolved planning powers in relation to the making of local environmental plans and development decisions, and opportunities for devolving further planning powers In relation to shared services and alliancing, the four participating Councils in the proposed shared servicing arrangement have each considered reports relative to the proposed process, items for review and the endorsement of an MoU. Each of the four councils have agreed. Work will now focus on progressing service reviews and establishment of a governance structure.

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SUSTAINABILITY ASSESSMENT In framing its further response to government regarding the Fit for the Future assessment, Council will continue to take a holistic balanced and pragmatic view about what is best for council and its community that considers the impacts of the proposed reforms on our towns business and residents. Decisions such as these are once in a generation and cannot be based solely on a set of numerical measures. Identity, sense of community, economic prosperity employment and amenity are all important considerations. The issues that have plagued local government in NSW for over 35 years as a consequence of rate pegging and cost shifting cannot be fixed over night. They require an integrated package of measures that are implemented in a planned and managed way. ENGAGEMENT The Bellingen Shire Council Community Engagement Strategy was adopted by Council at its meeting of 22 February 2012. This strategy is designed to outline the approach Bellingen Shire takes towards engaging with our community. Having regard to the Community engagement strategy it is considered that the actions/initiatives contained within this report are appropriately categorised as having a LEVEL 3 impact. To address the requirements of Councils Community Engagement Strategy and the NSW Local Government Act 1993, the following is of relevance:

1. Reports have been progressively provided to Council regarding the Fit for the Future Local Government Reform Program being undertaken by the NSW Government.

2. Detailed information has been provided on Council’s website regarding the Fit for the Future program along with engagement with key stakeholders such as local Chambers of Commerce.

3. Council has regularly issued media releases and included information in its newsletter.

4. Bellingen Shire Council staff have been regularly briefed regarding the Fit for the Future process and in particular recent briefings have specifically addressed the recent announcements by government, along with the need to participate in shared servicing arrangements

5. Detailed engagement has been undertaken between the General Managers of Bellingen, Nambucca, Kempsey and Gloucester Councils. Moving forward consultation should also be undertaken with other Mid North Coast Councils to ascertain their interest in being a party to the MoU.

6. There will also be a need to consult with the Office of Local Government in relation to the creation of a governance entity, such as a corporation

7. Council has participated in briefings from the NSW government post the Government’s announcements relative to the IPART assessment.

8. Councillors participated in a workshop on 25 October 2015. Feedback from Councillors at this workshop has framed the direction articulated in this report.

ATTACHMENTS 4.1.A PERIOD OF CONSULTATION 4.1.B REPORT CARD 4.1.C STRONGER COUNCIL STRONGER COMMUNITY 4.1.D LETTER FROM THE HON PAUL TOOLE MP

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Attachment 4.1.B

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Attachment 4.1.D

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agenda for the extraordinary council meeting€¦ · "opposing" the recommendation...

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