Inner West Council de-amalgamation: Business case reveals huge cost of demerger, process questioned

A draft business case has revealed demerger of the Inner West Council could cost over $200 million, but councillors have clashed over the process and intentions behind this process.

Update — Council clashes over demerger report

The Inner West Council clashed over the draft business case for the demerger which highlighted over $200 million in potential costs.

Consultancy firm Morrison Low’s draft demerger business case states the cost of demerging could be between $200.7 million and $232.8 million over a 20-year period.

At last night’s council meeting, Labor councillor Philippa Scott described the independent audit and risk committee meeting on the Morrison Low draft demerger business case as “sobering” because of the financial costs and non-financial risks associated with a demerger.

“Those risks are principally of a period of anti-democratic administration … and also the loss of corporate knowledge and service interruption,” Cr Scott said.

“At this point it would appear the only benefits to be found in demerging the council are the intangible perceived benefits that exist in the minds of the community.”

Labor councillor Philippa Scott.

The Labor councillor also said a genuine process of community engagement would help Inner West residents vocalise and debate the benefits of a demerger.

But independent councillor John Stamolis described Morrison Low’s draft demerger business case as a “cherry picked” and “incomplete” document.

“We’re not putting the whole case out, we’re simply putting the Morrison Low demerger report out,” Cr Stamolis said.

This concern was echoed by other Greens and independent councillors, with Greens councillor Kobi Shetty stating the draft business case struggled to move beyond a mere financial analysis.

“The Morrison Low report is not a holistic report into the benefits of a demerger,” Cr Shetty said.

“(It characterises) the community perception of improvements as merely an unquantifiable feeling that holds no real value.”

Cr Scott’s recommended council take on the concerns raised in the draft business case and note improvements to the process.

This recommendation was passed along party lines, receiving the votes of all Labor councillors and no support from either Greens or independent councillors.

Earlier — Huge cost of inner west demerger revealed

The potential demerger of the Inner West Council could cost as much as over $200 million – across 20 years – if projections from a draft business case are correct, although there are reservations about how the process has been conducted and a perceived lack of weight given to the qualitative benefits of demerging.

A draft demerger business case, prepared by consultancy firm Morrison Low, indicates the cost of demerging – represented in net present value (NPV) terms – would be between $150.8 million and $162.9 million over 10 years, and between $200.7 million and $232.8 million over a 20-year period.

The Inner West Council was formed in 2016 with the merger of the Ashfield Municipality, Leichhardt Council and Marrickville Council.

The Inner West Council will debate the draft business case at a meeting tonight. Picture: Christian Gilles

There has been persistent resistance to its formation and in December the public voted to demerge the council in a plebiscite, with 62 per cent of the vote. The council committed to put forward a demerger business case to Wendy Tuckerman, state local government minister, and the NSW Local Government Boundaries Commission – who will make a decision.

The draft business case, however, sets out in no uncertain terms the financial cost of splitting the council back into three.

“The business case finds that while there is a net financial cost to a de-amalgamation and the benefits of de-amalgamation are largely unquantifiable and subjective, the affected community had access to the information about the potential costs and financial impact ahead of the poll (in December),” Morrison Low said.

The costs for each council, Morison Low indicated, were significant: about $3.8 million per annum for Ashfield, $2.8 million per annum for Leichhardt, and $3.2 million per annum for Marrickville.

These figures were based on one option of the cost-benefit analysis Morrison Low undertook. Option A (which the figures above are based off) assumes the three councils would revert to pre-merger services levels while option B is based on the current council services level.

The cost on the taxpayer, Morrison Low believes, would also spike. On the lowest end of estimates, in Marrickville, a rate increase for locals would be $87 per annum, while the highest estimate would be $471 per annum, in Ashfield.

The consultancy firm noted voters knew the cost of demerging when they voted in the plebiscite, stating that “improved local representation”, “a right to self-determination” and “better alignment of communities of interest” were assessed by residents as outweighing the costs.

“The key benefits are not easily quantifiable,” Morrison Low said.

“The comparison of quantitative benefits and qualitative benefits is a subjective one, and it is the community’s view of how they are balanced that matters.”

There has been resistance from independent and Greens councillors on the council – Labor have a majority of one in the 15-seat chamber – who believe the process has lacked transparency and community ownership.

The current Inner West LGA, made up of the three previous councils. Picture: Morrison Low

Liz Atkins (pictured) said the process has failed to engage the community. Picture: Supplied

“It would have been better to draw up the plans to demerge the council, and then cost that process and project that outcome over the next few years,” Liz Atkins, Greens councillor for Stanmore, said.

“The draft case doesn’t read like a case for demerger, it doesn’t propose how it could be done.

“What we’ve ended up with looks like an attempted justification for keeping the Inner West Council as it is.”

Greens and the two independents on the council have long advocated for community engagement on the demerger, something which they said has been lacking.

Councillor Justine Langford (centre) with volunteers during the demerger vote. Picture: Residents for De-amalgamation

“We had an inner west art summit recently where – before any work took place – we got people in the room and asked what are the issues, what solutions could work,” Cr Atkins said.

“We’re going to see great results in terms of policy making – so why couldn’t we have done something similar with the demerger?”

The qualitative benefits of demerger, Cr Atkins said, were also not properly explored in the draft case.

“The case itself said it hasn’t been able to look properly at the qualitative benefits, so more work needs to be done on that front” Cr Atkins said.

The draft business case will appear before a council meeting tonight as a mayoral minute from Mayor Darcy Byrne.