3 December 2014

Amalgamation costs more than promised: study

On the eve of a Local Government Commission proposal to amalgamate the Wellington region, a study shows that the cost of amalgamation is always many times the projections, and often outweighs the expected savings.

The report from the Local Democracy Coalition investigates the promised and actual costs and savings from local government amalgamation in Canada, Australia and England.

Spokesperson for the Local Democracy Coalition, Ray Wallace, says the findings show that ratepayers should be sceptical of the promises made by amalgamation advocates.

“No one should believe amalgamation advocates – their promises never come true.

“Every overseas amalgamation was accompanied by promises that the costs of merging would be small, and the cost savings would be big. It never happened.

“Every merger budget was blown. Every saving was outweighed by new costs.

“Auckland is learning that amalgamation is not a solution. If people want to save money by sharing services and assets, there’s much better ways that cost very little,” Mr Wallace said.

Over 75% of voters rejected the 1998 amalgamation of local councils in Metropolitan Toronto. The proposal had projected $100 million in cost savings. However, according to this research the process came at a cost of between $275 and $400 million. The savings are yet to materialise - with staff numbers rising by 4000 people over nine years following the amalgamation.

The same occurred in South Australia between 1996 and 1998 where council numbers reduced from 118 to 68. The restructure was proposed to ensure financial sustainability for all councils. A 2005 review concluded that the amalgamations bought significant costs with exaggerated benefits. In hindsight they suggested that there were many intermediate forms of cooperation between councils that should have been considered before turning to the extremity of amalgamation.

Costs came from one off costs of merging IT systems, wage creep, adding new services and work, and diseconomies of scale as staff effectiveness slowed down.

The report was prepared by Wellington based TDB Advisory who have been reviewing the economic efficiencies of amalgamation proposals for the wider Wellington region. It can be viewed here.

About the Local Democracy Coalition
The Coalition was formed in March this year to give voice to concerns over amalgamation proposals from the Local Government Commission, and the Commission’s approach to its task. It believes in people self-organising their local governance. www.localdemocracy.org.nz

ENDS

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