Gundagai and Cootumundra residents will be slugged with a 53.5 per cent rate hike over the next four years, costing ratepayers an additional $27 million.
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Cootamundra-Gundagai Shire Council mayor Abb McAlister said the merger between the two councils had proved too expensive to bear, and that they would go insolvent in 12 months without a rate hike.
Even with the rate hike, Councillor McAlister said their long term financial plans suggested they would lose another $17.5 million in ten years, having already lost $28 million since the merger in 2016.
Councillor McAlister said the NSW Office of Local Government had assured him the merger would save them money, but that the reverse had proven to be the case.
"They were saying the larger the organisation the better the economies of scale would be, but it's not. We're still providing us the same services but it's costing a lot more," Cr McAlister said.
"One of our biggest costs is the tyranny of distance. It's three quarters of an hour from Gundagai to Coota, and staff have to travel between those towns. That's $6-700,000 a year extra just there."
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Cr McAlister said they also had to increase their middle management and hire another three directors at considerable extra cost.
University of Technology, Sydney academic Joseph Drew said he foresaw this outcome years ago, but that his findings had been repeatedly ignored by the state government.
"I'd published about 12 peer-reviewed papers in A-ranked journals, the best journals in the world, showing that these amalgamations wouldn't work prior to the amalgamation," Professor Drew said.
"Cootamundra-Gundagai have to suffer a 53.5% rate increase because the state government got it wrong. They were warned in 2015 and 2016, I warned them it wouldn't work, that it would cost a considerable amount of money and sadly it's all turned out to be true."
Professor Drew said he believed the state government and Paul Toole, who was the Local Government minister at the time, had ignored the evidence for political reasons.
At the time the state government said they were basing their decision on a 2015 KPMG report as well as advice from an Independent Local Government Review Panel, however Professor Drew said neither process was handled in a rigorous, academic, peer-reviewed way.
"The whole panel didn't have a single person on there who could do the empirical work that was required if you're going to do the amalgamation sensibly, and as a result it was a disaster," Professor Drew said.
"Why the state government wouldn't look at peer reviewed work is beyond me. The only reasonable conclusion is that it was always a political stitch up and didn't have anything to do with efficiency and sustainability at all."
Subsequent peer-reviewed work published by Professor Drew in 2020 found the costs for amalgamated councils were about 10 per cent higher than non-amalgamated ones, even though they were supposed to be cheaper.
He said these results were consistent with the fact that the amalgamated Central Coast Council was placed into administration in late 2020 after effectively becoming insolvent.
Fourth generation farmer Michael Kingwill, who lives in Adjungbilly about 60 kilometres out of Gundagai, said the rate hike would cost them another $12,000 per year at least.
Mr Kingwill lives on the family farm with his two brothers, each of whom lives in a separate household while paying "exorbitant" rates.
He said thought the rate hikes were especially unfair on rural ratepayers who had to pay far more than city residents while getting less service.
"If you're in a private enterprise and you're going broke what do you do? You cut staff and you cut services, but as far as being a rural ratepayer in the Gundagai shire, you can't cut the services much more," Mr Kingwill said.
"They used to grade the dirt and gravel roads twice a year and they've cut that back to one year, and they've got no garbage service and we're still paying through the nose for everything."
An Office of Local Government spokesman said the rate increases had been decided by the Independent Pricing and Regulatory Tribunal, and not the NSW government.
When making their decision the tribunal agreed with Cootamundra-Gundagai council that the rate increase was necessary to mitigate the extra costs arising from the 2016 amalgamations.
The Office of Local Government spokesman said the government was helping the Cootamundra-Gundagai council through a range of grants and other programs.
"The NSW Government provided record funding to support new councils created in 2016 including $20.8 million to Cootamundra-Gundagai Regional Council towards the upfront costs of amalgamation and to kick-start delivery of community infrastructure projects," the spokesman said.
"In providing this unprecedented level of financial assistance, it was recognised that councils would need to carefully identify and prioritise activities for funding and invest savings directly into community benefits at the earliest opportunity."
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