DUNGOG SHIRE COUNCIL PRESENTATION TO DUNGOG/GLOUCESTER MERGER PROPOSAL INQUIRY 9 FEBRUARY 2016
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 $4.1Mil 1 . 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 $93.266Mil 2 . 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 MorrisonLow 3 , 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 1 | P a g e
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: Dungog/Gloucester 2005/06 Rate Comparison LV $40,000 $988.00 Business Dungog $582.00 $2,010.00 Farmland LV $250,000 $1,195.00 $976.00 Gloucester Rural Res LV $100,000 $620.80 Dungog $562.00 LV $40,000 Village Res $346.00 $834.00 Residential Dungog LV $40,000 $486.00 $0 $500 $1,000 $1,500 $2,000 $2,500 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. 2 | P a g e
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 2015/2016 Dungog/Gloucester Rate Comparative $1,054.00 LV $80,000 Business Dungog $750.66 $1,982.00 Farmland LV $400,000 $1,444.15 $1,228.80 Rural Res Gloucester LV $200,000 $832.90 Dungog $670.00 Village Res LV $70,000 $429.50 $786.00 Residential Dungog LV $80,000 $551.71 $0 $500 $1,000 $1,500 $2,000 $2,500 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%. 3 | P a g e
If you looked at harmonising the rates between the two LGA’s which a new Council would have to do, based on the 2015/2016 4 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 4 | P a g e
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