EARLIER this week, Newcastle councillor Therese Doyle presented an ideological fairytale (“The bottom line: the books aren’t that bad”, Newcastle Herald, 30/1).
It’s the same fairytale that has been used by council managers and a majority of councillors for most of the past decade. The view that everything is OK, that there is no financial crisis in the council, displays the head-in-the-clouds delusion that has brought us the present situation.
Here’s a quick recap of the council’s recent history:
• In 2007, the council got state government approval for a special rate levy above the standard rate cap increase, which we were told would fix the council’s infrastructure backlog and would be a one-off.
• In 2012, the council again achieved an over-the-rate cap increase, as the problems were getting worse.
• Late last year, after an external audit report stated that the council’s financial future was unsustainable without major change, the option of a further rate increase above the cap was again raised.
Yet still Cr Doyle says the current financial position “offers little justification for alarm”.
From a ratepayer’s perspective, any council that lurches from one rate hike to the next in this fashion offers quite the opposite.
The council has repeatedly shown that it’s only response to a worsening financial position is to crank up the revenue side of the budget by increasing rates.
There has never, in my view, been a really serious attempt to rein in the expenditure side.
In fact, the opposite has been happening.
For example, staff numbers have steadily grown from a stable 1000 or so in the 1990s, to apparently over 1400, despite a hugely expensive redundancy campaign in 2011.
Numbers employed in indirect overhead areas like human resources and IT have apparently ballooned, although these numbers are no longer published in budget documents. Perhaps they are too embarrassing.
In 2006, when the first “gold coin” rate rise was mooted, I wrote an article in the Herald opposing the proposed rate rise on the basis that much could be done to improve the council’s performance before resorting to slugging ratepayers.
Among other things, I suggested:
• Whole of life costing before any new asset is approved for building
• Exposing in-house services to competition by calling tenders
• Better emphasis on maintaining assets we already have
• Improving efficiency
• Reducing services and redirecting funds
In 2007, I wrote in the Herald that the additional rate rise was unjustified because virtually no improvements had been made to the way the council operated, despite grandiose claims by senior management about “productivity improvements”.
These same claims, however creative or spurious, formed the basis of wage and salary increases under enterprise agreements, resulting in the type of disconnect with market rates (and with reality) recently disclosed in the Herald.
Throughout this period, every submission calling for significant action to bring about improved performance has been stonewalled by a succession of senior managers, aided and abetted by elected representatives who, with only a few exceptions, showed no bottle for taking on the administration, or were too naive to accept reality.
Cr Doyle thinks a net deficit of $12.3million, a widening gap between income and expenditure and no real plan to fix it, is acceptable.
Many would disagree. Her plan “to make efficiencies in work practices that should be negotiated with our workforce” is exactly what we’ve been told by management every year, and nothing appears to have improved. They are just words.
Cr Doyle said the budget process “involves making predictions about income and expenditure that are inexact”.
I think it starts out assuming all existing services and overheads have to remain, factoring in inflationary increases including desired wage and salary gains, and then seeing what rate increase will be needed to pay for it.
Cr Doyle jumps to the defence of in-house services saying they shouldn’t be put to tender.
Sure, contractors need to make a profit. But they have to be competitive.
The frequency with which five or six people can be seen standing around at council workplaces, where a contractor would have three, all of whom would be working, suggests that significant savings would be made.
Cr Doyle said the council “is not a business and should not operate as a business”.
Why? The council is a very big business, with senior managers paid very big business-level salaries, and elected councillors as a “board of directors”.
In every respect except that it doesn’t aim to return a profit, exactly the same principles of sound financial management should apply.
Unfortunately a recital of every glib local government platitude, as in Cr Doyle’s article, cannot mask the reality that major change is needed.
The council’s auditors recognise it. I fear that lord mayor Jeff McCloy is correct – drastic action is necessary.
People will lose jobs, there will be redundancy costs and services will have to be reduced.
The only real decisions, and they are hard ones, are what services to cut and who is to stay.
Phil McLeod is an anti-rate rise advocate and a civil engineer with 40 years’ experience in local government and the private sector.