NSW regional councils have lined up to take part in pilots for joint organisations (JOs) in a bid to avoid forced amalgamations but no Sydney Metropolitan councils have not been included in the pilot.

Five regional groups of councils that will pilot JOs are: the Hunter, Illawarra, Namoi, Riverina and Central West but Government News understands that Sydney councils were ruled out because the State government would rather they amalgamated or selected other options in their Fit for the Future applications, which are due by June 2015.

The NSW Independent Local Government Review Panel’s report Revitalising Local Government, published a few months ago, made it clear that the preferred options for Sydney’s 41 councils were to either merge or not change but the report gave each council a second option of forming strong JOs with their neighbours.

It’s a route many Sydney councils are keen to take, with some communities implacably opposed to mergers, but it is not yet known how JOs might work and what will be demanded of individual councils.

There is no guarantee either that forming JOs will hand councils a get out of jail free card to sidestep amalgamations.

The OLG’s document, Joint Organisations:  A Roadmap for Intergovernmental Collaboration in NSW, calls JOs a “forum for collaboration on regional priorities” but also underlines that they exist “alongside the other structural changes and improvements recommended by the Independent Local Government Review Panel.”

The suggested functions of JOs include: attracting education and industry, improving transport and freight links, better land use planning and cutting red tape, managing major infrastructure, supporting rural councils and pooling resources to build major works.

Each JO will receive $300,000 from the state government to get established but member councils must pay ongoing costs themselves. Once councils have joined a JO they cannot leave.

The government has said that all regional councils must be members of JOs after the September 2016 council elections but it does not appear that Sydney’s Metropolitan Councils have been mandated to join one.

The State government is understood to be in favour establishing Regional Water Alliances in each JO but the Independent Local Government Review Panel has not backed this move, noting in its report that local government water utilities are performing very well and should stay in local hands. Instead, it suggests JOs could help at a higher, strategic level and that local water utilities could be subsidiaries of JOs.

New England University academic and Australian government specialist Professor Brian Dollery said he did not oppose JOs and they could bring councils benefits from economies of scale but ‘vague and inconsistent’ guidance from the government in terms of who paid for and owned JOs and how they made decisions could hold them back.

“The whole problem with this is that it purports to be a complete plan but there are large areas of vagueness in it … is it knavery or foolishness?” Professor Dollery said.

Professor Dollery said it was critical to flesh out the detail of JOs to avoid the moribundity that had afflicted some regional organisations of councils (ROCs), which are voluntary council groupings.

For example, would bigger councils receive more votes and would they be expected to funnel more into the coffers of JOs to ensure their operation?

“All these sorts of questions remain unanswered and that sort of thing paralysed ROCs. Small councils are put off by the bigger councils. ROCs could be undermined by one council not wanting to do anything or using their power of veto,” he said.

But he praised the fact that each JO had to be established by separate proclamation under a state legislative framework, which he said made them more flexible and responsive to local communities.

Controversially, an idea has been floated that would see Finance Assistance Grants (FAGs), which councils are heavily reliant upon, go straight to JOs and bypass councils.

Professor Dollery said this could lead to JOs creaming money off the top of FAGs to cover their running costs, reducing the already scarce dollars available to local councils.

“It’s a hell of a big deal. It certainly would be controversial because it’s a zero-sum game that whatever JOs need, councils get proportionately less. If a dollar is allocated to a JO, it’s a dollar less allocated to FAG grants.”

Just how JOs will overlap with joint service delivery under regional organisations of councils (ROCs) and County Councils, which are not being abolished, is not yet known. The OLG has said it will not disband either of them but has said that some of their functions will naturally flow to JOs.

Another sticking point could be that some councils were unwilling to give up their functions as water providers, if they are pressed by the NSW government.

“They earn a damn good, secure income from water,” Prof Dollery said.

“For some councils it amounts to a quarter of their total income, which is one of the arguments for not ripping it off them or they’ll become basket cases.”

In fact, the Independent Local Government Review Panel’s report found that the performance of country water utilities had been getting better and better.

“There’s no justification in the report for taking water off individual councils and they don’t explain at all how this is supposed to happen. There’s no guidance for it:  it’s amateur hour.”

Workshops steering the pilot process began yesterday, with the aim of bringing state and local government together to paint a more detailed picture of what JOs might look like and to discuss strategic regional priorities for each community.

Minister for Local Government NSW Paul Toole’s office received 11 applications covering 14 regions from councils who wanted to take part in the pilot scheme and it is possible that more may be approved in the next few months.

Mr Toole said the new JOs would enable councils to collaborate on key community priorities that cut across traditional boundaries such as jobs, planning and infrastructure.

“Establishing these new regional structures will make it easier to manage important projects, to better deliver the jobs, education, housing, roads, bridges, sports grounds, libraries and other facilities and services that regional and rural communities need,” Mr Toole said.

“They are about providing a means of elevating key community priorities, identified by councils through strategic planning processes, into a regional vision and core strategic priorities, and bringing people together to help make them happen.”

In their Fit for the Future applications councils must show that they have the scale, good governance and financial sustainability to operate alone or indicate which of their neighbours they would merge with.