The NSW government has introduced legislation that provides a legal pathway for forcibly merged councils to part ways.

But there’s a catch for councils wanting to take up the opportunity to de-amalgamate.

The legislation requires councils that want to divorce to fund their own de-amalgamation, and to have the backing of the community.

They’ll also need approval from the minister, and majority support in a compulsory ratepayer vote.

Detailed business case

Candidates for de-amalgamation will need to present the government with a detailed business case, local government minister Ron Hoenig said as he introduced the bill into parliament on Tuesday.

“The business case must include details of the estimated financial impacts of de-amalgamation, how the amalgamated councils will finance the de-amalgamation, an estimate of the rates and charges that the councils may make or levy, and any further details such as a division of assets and liabilities,” he said.

“This will ensure the state can be assured that the business case creates two or more viable councils.

“It also ensure the community is informed about any likely increases or decreases in their rates before they go and vote.”

Councils will also be required to undertake community consultation on their business case.

View the proposed process here.

Mr Hoenig said while the government strongly supports a clear process for councils and communities to exercise their democratic right to decide on de-amalgamation, there’s a need to be realistic about the challenges involved and to have the support of the community.

The Local Government Association of NSW says the decision not to fund de-amalgamations will make it virtually impossible for councils wishing to de-amalgamate.

$150 million to de-amalgamate

Councils shouldn’t have to carry the financial burden of unravelling forced amalgamations, President Darriea Turley said.

De-amalgamating larger councils could cost as much as $150 million, she said.

It’s a cunning public relations exercise by the state government so that it looks good in the eyes of ratepayers by agreeing to allow de-amalgamations, while at the same time knowing councils cannot foot the bill to carry them out.

Darriea Turley

“This is sleight of hand by the new state government which knows that councils do not have the tens of millions of dollars required to de-amalgamate,” Cr Turley said.

“It’s a cunning public relations exercise by the state government so that it looks good in the eyes of ratepayers by agreeing to allow de-amalgamations, while at the same time knowing councils cannot foot the bill to carry them out.”

Cootamundra conundrum

Amendments to the Local Government Act contained in the government’s legislation will apply to councils with proposals already under consideration, the minister said.

One of these is Cootamundra-Gundagai Regional Council, which was also formed by proclamation of the NSW Government in 2016.

In August 2022 the then local government minister Wendy Tuckerman announced a decision to demerge the council, but since the new government came to power that decision has been in the air, Mayor Charlie Sheen told Government News.

Cr Sheen said under the original agreement, the state government was responsible for paying for the demerger, and he expected Mr Hoenig to honour that.

“The decision was made by the previous government we are to demerge and it’s to be at the cost of the state government,” he said.

He says he doesn’t believe new legislation will overturn the original agreement, but if it does “there are legal grounds that could be explored”.

“We entered into that process with a full understanding of that and I’m expecting the government to stand by that decision,” he said.

“It’s fine for this minister to say if you’re going to demerge you’ve got to pay the bill, but he’s acknowledged the mergers were failures, and that the councils that were forcibly merged are now facing financial stress,” Cr Sheehan said.

“Now he’s saying you have pay for it to get yourself in a better position, but he’s not offering any assistance or avenues of help.”

‘Significant costs’

Central Coast council was one of the entities formed as part of the state government’s program of forced amalgamation in 2016 via a merger of Gosford City and Wyong Shire.

The council is currently under administration.

In a statement to Government News, the council said no decision would be taken until an elected Council was in place.

However, “it is likely that there would be a significant one-off and ongoing cost of demerging,” the statement said.

A ‘non-starter’

Armidale Regional Council, formed by a merger of Armidale Dumaresq and Guyra Shires, says it won’t be pursuing de-amalgamation.

“The draft legislation introduces a number of threshold issues that make de-amalgamation a non-starter,” Mayor Sam Coupland told Government News. 

The draft legislation introduces a number of threshold issues that make de-amalgamation a non-starter

Mayor Sam Coupland

He said a demerger is likely to leave council $500,000 out of pocket the requirement, and the requirement that both separate councils would have to be viable was not going to work, with one council having a tenth of the population of the other yet a similar road network to maintain.

However, Cr Coupland said it was “probably fair” to expect councils to foot the bill for de-amalgamation.

“Councils should have some skin in the game to avoid spurious claims,” he said.

Insufficient funds

Snowy-Monaro Regional Council’s CEO David Hogan said a demerger could run into the “tens of millions of dollars”.

“Noting the announcement that the new legislation does not provide financial assistance for any future demerger, the likelihood of Council pursing this is highly unlikely,” Mr Hogan told Government News.

“We do not have the funds to put together a demerger business case, let alone cover the demerger costs.”

Private member’s bill

Greens local government spokeswoman and former Albury City Councillor Dr Amanda Cohn, who has a private members Bill for de-amalgamation in the Upper House, said the Greens won’t be supporting government’s  legislation in its current form.

The bill would allow binding plebiscites to be held in relation to the de-amalgamation of local councils, to be funded by the NSW Government.

It allows residents to drive a plebiscite on de-amalgamation by providing the minister with a petition of more than 10 per cent of residents from a former council area.

 If a majority of electors of a former council area vote yes, the Minister would have to enact the de-amalgamation within 12 months.

She said failed local government amalgamations were an expensive mess that the government should be responsible for cleaning up.

“This proposed legislation takes councils one step forward legally but two steps back because of the financial burden it poses for them to fund their own de-amalgamation,” she said.

“Impacted communities have already paid the cost for forced amalgamations through inefficiency, cuts to local services and weakened local democracy.

“We’ve got a fight to ensure the NSW Government accepts its financial responsibility to support councils wanting to demerge.”

The former government amalgamated 44 NSW councils in 2016.