Inner West Council: Demerger business case by Morrison Low questioned by independent councillor John Stamolis

The business case to demerge the Inner West Council has been questioned by an independent councillor, who queried the unknown terms of reference and 20-year projections.

A business case to demerge Inner West Council has been called into question by an independent councillor, who queried the methodology and costs of the report, calling the long-term projections “fantasy” and “surreal”.

Consultancy firm Morrison Low recently unveiled their first draft of a business case to demerge the Inner West Council into its three previous councils – Marrickville, Leichhardt and Ashfield – and projected a de-amalgamation could result in losses up to $230 million over 20 years.

The business case, however, has been described as “fantasy” by one independent councillor who questioned the terms of reference, methodology and 20-year projections of the report.

“The problem we now face is that this unsubstantiated report could seriously damage and undermine what our community wants for the future,” said Balmain ward councillor John Stamolis, who previously worked for the Australian Bureau of Statistics.

Cr Stamolis said he was concerned about the lack of expert review or consensus before the draft went on public exhibition.

Ashfield Civic Centre hosts council meetings of the Inner West Council.

“There’s been no expert review of the report – it’s just gone out to public exhibition” he said.

“We’re throwing information out there, which isn’t being reviewed, and where there’s large margins of error in the assumptions.”

The 20-year cost projection for a demerger by Morrison Low were also described as “fanciful” and “surreal” by Cr Stamolis, who said such far-off projections would have a huge margin of error with the data “virtually useless”.

Cr Stamolis also cited the firm’s 2015 projections for a merger, which he said proved to be well off the mark.

Councillor John Stamolis said the peer and expert reviews of the case should have taken place.

“In 2015, Morrison Low was suggesting the council would make savings of $65 million – that hasn’t happened” the councillor said.

“The operating performance ratio was over-estimated by four times, the debt service ratio was out by double.”

The draft of the business case is now available to the public with an Inner West Council spokesman telling the Inner West Courier the report was developed in line with NSW Government guidelines for business cases.

“This is what the state government uses for most strategic decisions and significant funding allocations for infrastructure, technology, structural and policy change,” he said.

“This will ensure that the business case will be suitable for the decision that the Boundary Commission and Minister will be asked to make on the demerger.”

The spokesman said the proposal outlining Morrison Low’s understanding of council’s requirements and the methodology proposed has been provided to councillors on request.

He also pointed out that the firm was chosen due to their considerable previous work on the council and knowledge of it, proving it to be the “most equipped (firm) to do so”.

“Morrison Low was across the context of not only Inner West Council but also the former Marrickville, Leichhardt and Ashfield data, positioning them as the best option to undertake further works,” the spokesman said.

The 20-year forecasts were in line with the time frames that were modelled for the amalgamation business cases, and were included to show when potentially the three demerged councils could potentially return to surplus.

“Projections and estimates are based on the knowledge and best assumptions at the time,” the spokesman said.

Leichhardt Town Hall. Picture: Craig Wilson

“However, Morrison Low in their 2021 report re-established previous financial models of the former councils undertaken in 2015 and previous modelling to 19/20.

“They then validated the models against the councils that didn’t merge (for example, Burwood, Canada Bay and Strathfield) – this gives a high standard of rigour to the data.”

The long-running demerger debate has simmered ever since the three councils were merged in 2016, with opposition from both the public and various iterations of councillors advocating for a de-amalgamation.

This came to a head in December, where a plebiscite asking whether the council should deterge resulted in 62 per cent of voters approving a de-amalgamation. Subsequently, Mayor Darcy Byrne committed to honouring that result and put forward a business case to demerge to Local Government Minister Wendy Tuckerman, before potentially then the NSW Local Government Boundaries Commission, who will make a final decision.