Did amalgamation make local government more fit for the future?

Drew, Joseph; McQuestin, Dana; Dollery, Brian

doi:10.1111/1467-8500.12530

Cited by 8 publications

(8 citation statements)

References 20 publications

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“…For instance, the aged percentage now became negative which is to be expected given the mandated pensioner discount on local government taxes. In addition, the amalgamation dummy variable became positive in line with observations regarding large grant flows for amalgamated local governments (Drew et al., 2022). Economic variables were also significant, as were our demographic controls.…”

Section: Resultssupporting

confidence: 77%

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The other side of the local government ledger—The association between revenue growth and population growth

2023

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Population growth exerts an impact on both sides of the local government accounting ledger—expenditure and revenue. Despite this fact, the vast scholarly literature on local government finance has been myopically focussed on expenditure functions. This apparent neglect to also consider the revenue side of the ledger is problematic because many regulators across the globe have exhorted local governments to pursue growth according to the assumption that it will promote fiscal health. In this article, we first set out a number of propositions that combine to cast some doubt on the common wisdom dispensed by local government policy‐makers. Following this, we empirically explore the effects of population growth on revenue by making recourse to a comprehensive 10‐year panel of revenue and population data. We conclude our work with some important public policy recommendations arising from the need to mitigate the prima facie surprising results that we obtain.Points for practitioners Public policy architects have exhorted local governments to pursue population growth as a way to mitigate financial sustainability problems. However, this advice has been based on assumptions only and not subjected to empirical investigation. Econometric estimations demonstrate a negative association between unit revenue and population growth which means that the policy advice is likely to exacerbate financial distress. A number of changes could be made to local government taxation, pricing, and grants that would mitigate the deleterious effects of population growth on financial sustainability.

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Section: Resultssupporting

confidence: 77%

“…22The unit here is population because (i) it has been the focus of the public policy rhetoric (see, e.g., ILGRP, 2013), (ii) it is the unit by which policy‐making is generally dictated (Drew et al., 2021 (iii) it is consistent with the growth factor under consideration.…”

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confidence: 99%

The other side of the local government ledger—The association between revenue growth and population growth

2023

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“…This should not have been surprising to NSW Government policymakers since Drew (2016) predicted that the CGRC merger would shift the two former Cootamundra and Gundagai councils from facing potential scale economies to a post-amalgamation municipal configuration that would result in diseconomies of scale slightly in excess of 8 percent. Indeed, robust scholarly empirical work also predicted significant diseconomies of scale at the Statewide level prior to amalgamation , and recent post-merger econometric analysis has revealed an amalgamation treatment effect in the order of 11 percent reduction to efficiency on average, ceteris paribus (Drew et al, 2021). Moreover, the analyses by Drew (2016) and were provided to the Boundaries Commission Delegate in 2016 because s263(3)(a) of the Act (1993) specifically required the Delegate to give consideration to 'economies or diseconomies of scale'.…”

Section: Paq Vol 47 Issuementioning

confidence: 99%

New South Wales State Government Failure? An Empirical Analysis of the Cootamundra Gundagai Regional Council Forced Merger

Dollery¹,

Drew²

2023

Public Administration Quarterly

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Under the NSW Government's forced amalgamation program, the Cootamundra and Gundagai councils were merged in 2016. This paper examines the outcomes of the amalgamation by comparing the estimated outcomes prepared by NSW Government agencies and KPMG with the actual outcomes after four years post-merger. It demonstrates that the merger has failed on almost all counts. Abstract: As part of the controversial local government structural reform program in NSW, the Cootamundra and Gundagai shire councils were forcibly amalgamated into the Cootamundra Gundagai Regional Council (CGRC) in 2016. Various documents and commissioned reports prepared by NSW government agencies, commercial consultants KPMG and the NSW Boundaries Commission Delegate all claimed that significant cost savings and other financial benefits would flow from the consolidated CGRC. Using data from the four post-merger financial years, in this paper we examine these claims against observed financial and operational efficiency outcomes at the CGRC. Three different analyses are conducted: aggregate accounting measures are examined, financial ratio analysis is used for performance comparison, and operational efficiency is estimated through Data Envelopment Analysis. All three analyses decisively demonstrate that the CGRC has not only failed to reap the claimed cost savings and other financial benefits, but its fiscal performance has deteriorated sharply. In sum, the CGRC represents a clear case of NSW state government policy failure.

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“…Some people believe that population growth-through both internal and external migration as well as organic growth-is the way to realise this 'size yields sustainability' dictum (see for an evidence-based test of this assumption). However, far more people seem to believe that local government amalgamation is the best way of increasing size and therefore improving financial sustainability (Andrews, 2013Baird, 2016Drew et al, 2021;Tasmanian Government, 2022). Indeed, this 'merger mania' (Sancton, 2000) has a global character and is increasingly proposed 'as the remedy to every problem.…”

Section: Introductionmentioning

confidence: 99%

“…[2023] for an evidence‐based test of this assumption). However, far more people seem to believe that local government amalgamation is the best way of increasing size and therefore improving financial sustainability (Andrews, 2013 Baird, 2016; Drew et al., 2021; Tasmanian Government, 2022). Indeed, this ‘merger mania’ (Sancton, 2000) has a global character and is increasingly proposed ‘as the remedy to every problem…[whereby] we could all be living in Nirvana’ (Drew, 2020, p. 53).…”

Section: Introductionmentioning

confidence: 99%

Is ‘more’ better? Testing the assumption that larger local governments are more sustainable

Drew,

Miyazaki,

McQuestin

2024

Aust J Public Adm

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It is commonly assumed that bigger local governments will be more financially sustainable. Indeed, public policymakers are often prompted to make boundary change decisions according to idealised structures that they assume will lead to stronger local governments. In addition, many local government regulators urge councillors to work for growth in order to become sustainable. However, the assumption that size is associated with financial sustainability has seldom been put to robust empirical test. In this work, we first explore the theoretical considerations relevant to the supposed association between size and sustainability. Following this, we employ a comprehensive 5‐year panel of data to test the association. The evidence we derive stands in stark contrast to the assumptions of many policy architects. We conclude our work with an enumeration of the surprising implications that our results point to with respect to future public policy prescriptions.Points for practitioners Theoretical considerations are ambiguous with respect to the assumption that larger local governments might be more financially sustainable. A regression of a 5‐year panel of data demonstrates that larger local governments are indeed less financially sustainable. Our results suggest the need for a radical re‐appraisal of policies surrounding amalgamation, de‐amalgamation, and which local governments are most at risk of financial failure.

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Did amalgamation make local government more fit for the future?

Cited by 8 publications

References 20 publications

The other side of the local government ledger—The association between revenue growth and population growth

The other side of the local government ledger—The association between revenue growth and population growth

New South Wales State Government Failure? An Empirical Analysis of the Cootamundra Gundagai Regional Council Forced Merger

Is ‘more’ better? Testing the assumption that larger local governments are more sustainable

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