Learning from Experience inNSW?

Abstract

While the bulk of the empirical evidence shows that municipal mergers do not improve the performance of local authorities, Australian policy‐makers nonetheless continue to impose council amalgamation, as illustrated by the current New South Wales Fit for the Future local government reform process. This paper first critically examines the empirical evidence employed by the Independent Local Government Review Panel on the impact of the 2004 council mergers. We argue that this evidence is flawed. We then provide an empirical assessment of the municipal mergers, which occurred over 2000–2004 with our sample drawn from Group 4 councils in the New South Wales variant of the Australian Local Government Classification System. Group 4 councils represent a group of significant regional cities and town councils with similar operational activities. We demonstrate that merged councils have not performed any better than their unmerged peers over the period 2004 to 2014. The paper concludes with some brief policy implications for local government reform in New South Wales and elsewhere.

Amalgamation in action: Participant perspectives on the Armidale regional council merger process

“…NSW government intervention in the amalgamation process was regarded by respondent ARC employees as unhelpful in its efforts to ensure the merger process went smoothly. This result falls in line with system-wide econometric analysis on the NSW mergers, like Bell, Dollery and Drew (2016) and Fahey, Drew and Dollery (2016). These results are broadly reflective of the findings of the empirical literature on municipal merger processes such as Andrews and Boyne (2012), Condrey (1994), Durning (1995), Durning and Nobbie (2000) and Pocock et al (2001).…”

“…The scepticism of ARC staff intimately involved in the consolidation process echoes the findings of empirical analysts involved in studying the NSW mergers at the wider system level, such as Bell, Dollery and Drew (2016) and Drew, Kortt and Dollery (2015), who could find no empirical evidence to suggest that merged councils perform better than their unmerged counterparts, or that significant economies of scale could be reaped. It is also more than a little ironical that IPART's (2015b) own evaluations serve to demonstrate that amalgamation does not improve council financial performance: three of the five councils employed in Tate's (2013) case study of the outcomes of the 2004 consolidations were found to be "unfit", notwithstanding Tate's (2013) claims that the merger process had worked smoothly!…”

“…For example, in relation to the claims on financial sustainability made by Fit for the Future proponents, Dollery (2014, 2015) and Abelson and Joyeux (2015) found these claims unsubstantiated. Similarly, Bell, Dollery and Drew (2016) compared the financial performance of merged and unmerged councils in the 2004 forced amalgamation programme and found no difference in performance. Similarly, Fahey, Drew and Dollery (2016) and Drew, Kortt and Dollery (2015) examined claims of significant economies of scale attendant upon the proposed mergers.…”

The Optimal Size of Local Government, with Special Reference to New South Wales

“…As noted by Bell et al (2016), the ILGRP (2013a, 2013b) did not cite any empirical evidence of cost savings from amalgamation.…”

“…And Bell et al (2016) showed that, in 2014, NSW councils amalgamated between 2000 and 2004 were no more financially sustainable than councils that had not been amalgamated.…”