Exploring the Key Issues

Graham Sansom

LGNSW Regional Collaboration and Shared Services Roundtable March 2015

Current contextImmediate need to address FFTF ‘scale and

capacity’ criterionParticular challenge for some smaller (in

population) rural-remote councilsFederal and State grants to councils likely to

decline in real terms:Federal deficit and pressure in turn on

StatesFAGs freeze means permanent 13% cut,

could be moreContinuing shortages/high cost of skilled and

experienced personnel

Councils exist in systems of governmentLocal government is government:

Not just service deliveryAdvocacy, planning, community and economic

development, environmental management etc are crucial

Complexity and changing functions are inevitableOrganisation frameworks need to adapt

Inter-government relations are fundamentalLocal leaders must understand state and federal

systems and learn how to manage relationshipsRegions offer a meeting place and platform for

collaborative relations:Amongst councilsWith State and federal governments; other

stakeholders

Many years and many models‘Core’ NSW models are County Councils and

ROCsROCs since 1970s; County Councils long before that

Variations:Alliances promoted strongly post 2004 forced

amalgamationsWellington-Blayney-Cabonne (shared services focus)Lower Macquarie Water Utilities (special purpose)

‘Overlays’:Various State regional/strategic planning committeesRegional development bodies – State and federalTourism boards/associations; regional libraries etc

Multiple models often co-exist in one regionBut overall, lack of a consistent, concerted

approach to regional collaboration (often ‘stop-start’ initiatives)

County CouncilsLong history across a range of joint activities:

Electricity, planning (Cumberland), flooding, weeds etc

Now only 145 water (one also sewerage0, 8 weeds, 1 floodplain

management‘Councils’ under LG Act (exempt from some

provisions); formed by Minister (but councils can initiate); separate proclamation for each

Member councils elect delegates, but then County operates largely independentlyLack of formal governance/decision-making links

Other relevant examplesNZ Council Controlled Organisations

Voluntary but formal company structure with separate board; annual operating agreements with shareholder councils

Victoria Regional Management Forums8 regions; State agency heads plus council CEOs,

other stakeholders; wide brief to promote collaboration; no Act or dedicated

Queensland Regional Roads and Transport GroupsState department-LGAQ agreement; network

planning; allocate State funding for regional roads

Expected benefitsRegional collaboration/shared services typically

undertaken to achieve one or more of:Economies of scale – combining requirements for

resources, products and services Economies of scope – working together achieve a

critical mass in order to provide a wide range of services

Improved service quality – through greater expertise, improved access and specialisation

Organisational development – sharing of staff skills and expertise

Increased strategic capacity – a higher level of capability to plan and act more strategically and effectively

Stronger regional advocacy – strategic plans, policy issues

Increased funding support – for major services/infrastructure or regional ‘special projects’

Reviewing the evidenceWhat works and why – or why not?Do regional collaboration and shared services

offer a viable alternative to amalgamations?What are the pre-conditions for success?What are the concerns and risks that have to be

addressed?

Gooding Davies report on ROCs (2012)

“….[ROCs] are the primary form of multi‐purpose shared services provision by local government…

Nevertheless, the delivery of shared services by ROCs remains patchy and uneven. This reflects the disparate size, number and wealth of participating councils, as well as variations in factors such as the level of commitment and institutional leadership involved. These factors apply to all forms of shared services activity…

“… the key factor was a fear that by greatly

expanding their role ROCs could become or be perceived as either a ‘fourth tier’ of government or even a replacement for their member councils.”

Shared services (Dollery et al)

“…given that scale and scope economies do exist in some specific local government services… the best way to achieve larger scale economies in these selected functional areas is for councils to enter into collaborative shared services agreements…” (2012)

[But] “… it is important not to ‘oversell’ this message by way of exaggerated claims for what shared services models can realistically achieve … shared services models have their limitations which must be recognised.” (ibid)

[And] “… there are often significant barriers to the implementation of shared service arrangements, which are difficult to overcome, including the loss of ‘local identity’, the complexity of the processes involved, conflicting objectives between participating councils and uncertainty surrounding potential benefits.” (2011)

NB: Failure of New England Strategic Alliance

Critical dimensions (Somerville and Gibbs 2012)

Organisational culture - shared services development requires strategic thinking, a careful approach to risk taking

Leadership - building trust amongst the partners, a clear vision and a commitment to communication.

Flexibility - to move away to a provider/producer split between the council and the shared service entity.

Existing relationships - building a foundation for the development of shared services

Strong change management process - to overcome any institutional obstacles.

‘Joint Board’ model (Dollery and Johnson 2007)

Draft paper prepared by Shires AssociationIdea that two or more councils would fully share

their administration, overseen by a Joint Board of councillors

Findings:“… constituent councils would each retain their

current political independence, thus preserving extant local democracy, while simultaneously merging their administrative staff and resources into a single enlarged bureau, in an attempt to reap any scale economies, scope economies, or other benefits that may derive from a larger aggregated administration.”

Could achieve savings of 10% or more

Amalgamation Shared ServicesRegional

Collaboration

Efficiency and Economies of Scale

Strong link Strong link Weak link

Strategic Capacity

Strong linkMedium-strong link subject to governance

Weak link

Service Improvement and Innovation

Strong linkStrong link for services that are effectively shared

Depends on nature and scope of collaboration

Potential Diminution of Local Democracy

Distinct risk, but can be managed

Risk where decision-making is ceded to joint agency

Little or no risk

ACELG ‘Consolidation: A Fresh Look’

ILGRP ToR and objectivesOptions for governance models, structural

arrangements and boundary changes:To improve the strength and effectiveness of

local governmentTo drive key strategic directions in

‘Destination 2036’ and the NSW 2021 State Plan

Goal:A more sustainable system of democratic local

government that has added capacity to address the needs of local and regional communities, and to be a valued partner of State and Federal Governments

Focus on building ‘strategic capacity’

‘Strategic Capacity’… coping with complexity, uncertainty and change

Relevance• Places and

communities• Valued

partner in government

• Role in wider agendas

• Innovation and creativity

Credibility• Improved

political governance

• Role of mayors• Comparative

benchmarking• Leadership by

larger councils

Resources• Finance/asset

management• Rates revenue• Skills (inc

strategy, policy, IGR)

• New ways of working

• Productivity

Logic of Joint OrganisationsPart of a package to enhance strategic capacity

Offer an alternative to amalgamations (provided obstacles to robust shared services can be overcome)

Offer support to small rural-remote councils Flexible model tailored to different needs

Decisive move away from ‘one-size-fits-allBuild and improve on established practice

NSW ROCs, County Councils, alliancesRelated models inter-state and overseas

A vehicle for effective collaboration with State agenciesLocal government would have ‘critical mass’ and

cloutMergers and Council of Mayors (SEQ model)

preferred for metro Sydney – sheer number of councils is a fundamental issue

Defining regionsNot a ‘deal-breaker’ provided structures are

flexible:There can be sub-regional clusters and different

‘interest groups’ with a wider region (eg WBC in the Central West)

One region can have a service agreement with another (eg water utilities)

ILGRP achieved broad agreement amongst key agencies, but momentum seems to have been lost

Key factors for ILGRP:Building on current arrangements, especially ROCsAlignment with State and federal agencies for

strategic planning, program coordination Viability of a regional alliance of water utilities (at

least 10,000 connections)A regional centre with capacity to ‘anchor’ the JO and

to assist smaller member councils where required.

Proposed Non-Metro Regions

Proposed Metro Sub- Regions

Proposed governance frameworkNew provisions in LG Act to replace County

Councils Mandatory active membership by councils in

regionSeparate negotiated proclamation for each JO to

establish governance/financial arrangements, plus agreed functions

Governing body of mayors, but proclamation could allow additional council representatives and observers/advisers (including from outside member councils)

JOs can establish subsidiaries with skills-based boards

Subsidiaries have annual operating agreement with JO governing body

AGMs open to all councillors and to the public for accountability and discussion of future activities

Proposed core functionsStrategic regional and sub-regional planning

Integration with State regional coordination system

Regional advocacy and inter-governmental relations

Collaboration on key infrastructure (water utilities, road network planning, major projects)

Regional economic development a nd environmental management

Library services‘High level’ corporate services (including

procurement)Other shared services as agreed (but expected to

be substantial)

Suggested Structure for Joint Organisation

SA Local Excellence Panel proposal

ConclusionLocal government faces an uncertain future in

difficult timesIt needs greater capacity and credibility as

government Reform must be multi-dimensional:

A mix of mergers, shared services and other forms of regional collaboration – there is no single ‘right’ approach

Objectives vary and any approach may ‘succeed’ or ‘fail’ depending on the circumstances

Regional collaboration is tricky – especially building trust

Purely voluntary (opt-in/opt-out) regional collaboration doesn’t deliver solid, long-term gains

Mandatory or durable, far-reaching shared services is in many ways little different from mergers

We need to review past experience, look at a range of current arrangements, and develop new models if necessary