The Government’s Fit for the Future (FFTF) reform policy has gathered significant momentum in recent months. Whilst many councils have expressed a preference to “stand alone”, some amalgamations and boundary adjustments are expected.  It is highly unlikely that things will remain unchanged.

Because some change is foreseeable, it is important for councils to understand the legal process, not only to be prepared, but more importantly to ensure your council’s voice is heard and understood.

What is the prescribed statutory scheme for an amalgamation?

The statutory scheme for an amalgamation can be summarised as follows:

  1. Two or more local government areas may be amalgamated into one or more new areas by proclamation of the Governor in relation to section 218A(1) of the Local Government Act 1993.
  2. Such a proclamation may not be recommended to the Governor unless and until the following requirements have been satisfied:
    1. An amalgamation proposal can be initiated by:
  • the Minister for Local Government
  • a Council who is affected by a proposal
  • 250 electors for each affected area or 10 percent of them, which-ever is the greatest.
  1. On making or receiving a proposal, the Minister must refer the proposal to the Boundaries Commission or to the Director-General for examination and report.
  2. The Boundaries Commission (or the Director-General) must hold an inquiry.1 The Boundaries Commission (or Director-General) must give reasonable notice of the inquiry to members of the public, and allow members of the public to attend the inquiry. Apart from public notice, the act does not prescribe how an inquiry ought to be conducted or who is entitled to address the inquiry.
  3. If the proposal is a joint proposal for amalgamation of two or more councils, then the Boundaries Commission (or Director General) must seek views of electors over a period of 40 days:
  • by means of advertised public meetings, inviting public submissions, conducting postal surveys
  • by means of formal poll.
  1. If the proposal is referred to the Director-General and the proposal is not supported by one or more of the councils affected by it, the Director-General must furnish the Director-General’s report to the Boundaries Commission for review and comment. The Boundaries Commission must make its comments on the Director-General’s report to the Minster. In reviewing and making comments on the Director-General’s report, the Boundaries Commission is not able to conduct a public inquiry unless the Minister directs or approves that it undertake an inquiry.
  2. The Minister may recommend to the Governor that the proposal be implemented:
  • with such modifications as arise out of the Boundaries Commission’s report or the Director-General’s report (and the Boundaries Commission’s comments on that report)
  • with such other modifications as the Minister determines.

However, if the modifications (in the Minister’s opinion) constitute a new proposal, the process must be followed again for the new proposal.

  1. Once the Governor makes a proclamation, the pre-amalgamation areas are dissolved; the post amalgamation areas are constituted; and the Councillors of the pre-amalgamation areas cease to hold office and an administrator is appointed, unless the proclamation itself states that the Councillors remain in office.

Boundary adjustment vs. amalgamation – what’s the difference?

Although both boundary adjustments and amalgamations are made by proclamation, there are four key differences in the statutory scheme for a boundary adjustment:

  1. boundaries may be altered without the dissolution, or partial dissolution, of an area
  2. because there is no dissolution or partial dissolution of a donor council area, neither the Boundaries Commission nor the Director-General can undertake an inquiry in considering a boundary adjustment unless the Minister directs or otherwise authorises an inquiry
  3. there is no statutory prescribed public participation (neither the Boundaries Commission nor the Director-General are required to undertake a poll or otherwise seek or consider submissions from the public with respect to the proposal)
  4. upon the proclamation of a boundary adjustment, Councillors do not automatically cease to hold office, unless the proclamation specifically states that a particular Councillor or Councillors cease to hold office.

This is a significant shift from the original scheme in the Local Government Act 1993 (before it was amended in 1999 shortly before South Sydney amalgamated with Sydney City Council).  Before the 1999 amendments to theLocal Government Act 1993, a boundary adjustment was made in accordance with section 212 which provides (emphasis added):

  1. The Governor may, by proclamation, dissolve the whole or part of an area.
  2. The Minister may not recommend the making of a proclamation to dissolve the whole or part of an area until after a public inquiry has been held and the Minister has considered the report made as a consequence of the inquiry.

Section 212 still exists in the Local Government Act 1993 in its original form.  However, the effect of the 1999 amendments to the Local Government Act 1993 is that areas can be altered without the alteration being considered a partial dissolution of the donor area.  The consequence is that a public inquiry is no longer a mandatory pre-condition to a boundary adjustment.  This issue was the subject of a decision of the Supreme Court in Leichhardt Municipal Council v Minister for Local Government & anor [2001] NSWSC 1200 where the current Chief Justice of the Land & Environment Court was acting for the Council seeking a public inquiry prior to a boundary adjustment – the Council was not successful.

The effect of IPART’s recommendation on the FFTF proposals

What is notable about the process is that the recommendations of IPART, expected in October 2015, are not part of the statutory scheme and therefore not a statutory pre-condition to the proclamation of the Governor. This means the Minister can adopt IPART’s recommendation, or reject IPART’s recommendations and make his own amalgamation or boundary adjustment proposal. Accepting or rejecting IPART’s recommendations (or even an error by IPART in making recommendations) will not necessarily invalidate or otherwise infect a proclamation by the Governor (provided the statutory scheme in the Local Government Act 1993 is followed).

On 1 June 2015, IPART released its methodology for considering the FFTF proposals. There is a question over whether IPART is conducting its review in a manner consistent with the Independent Pricing and Regulatory Tribunal Act 1992 (IPART Act). Even if IPART undertake a comprehensive analysis of the FFTF proposals against the matters in its methodology, those matters are different to the matters that the Boundaries Commission (or Director-General) must consider under section 263(3) of the Local Government Act 1993. The table below lists matters in section 263(3) of the Local Government Act 1993 and compares them to the IPART methodology.

Click here to view table.

While the matters overlap to a certain degree, they are not identical.  The result is that in preparing FFTF proposals councils have not been required to address the matters the Boundaries Commission (or the Director-General) must consider in section 263(3) of the Local Government Act 1993.

The difficulty this creates is that if not addressed in the FFTF proposals the first opportunity a Council will have to consider and address the matters in section 263(3) of the Local Government Act 1993 is as part of the public consultation process or inquiry under the prescribed statutory scheme. However, if the Minister’s proposal is for a boundary adjustment there is no mandatory inquiry or public consultation and a council may not be given another opportunity to make representations on the matters in section 263(3) of the Local Government Act 1993. This would be a curious result, but is possible.

Where to next?

We haven’t addressed in this article the matters that will be included in the Governor’s proclamation. A proclamation is a legal instrument which needs to be drafted carefully to ensure not only the orderly transfer of assets and contracts, but also to protect council employees. Proclamations can include:

  • transfer or apportionment of assets, rights and liabilities
  • the delivery or retention of records
  • the termination, cessation, dissolution or abolition of anything existing before the proclamation takes effect (for example, those employed by the Council), and
  • the preservation or continuance of anything existing before the proclamation takes effect.

It might be obvious, but we suggest Councils start preparing for multiple outcomes. This is largely because once the Minister makes a proposal for an amalgamation or a boundary adjustment, the Council may only be given a very limited opportunity to make further comments as part of any public consultation and inquiry process. For example:

  • How will the council respond if IPART or the Minister recommend an amalgamation?
  • How will the council respond if the IPART or the Minister recommend a boundary adjustment?
  • Has the Council started preparing its analysis of the section 263(3) matters?
  • If a particular result is more likely, what matters must be included in a proclamation in order to protect assets, contracts and staff?