Agenda of Extraordinary Council Meeting - Wednesday, 18 October 2023

Extraordinary Council Meeting Agenda

18 October 2023

5 General Manager’s Report

5.1 General Manager Office

5.1.1 Demerger Status - CGRC

DOCUMENT NUMBER

400130

REPORTING OFFICER

Steve McGrath, Interim General Manager

AUTHORISING OFFICER

Steve McGrath, Interim General Manager

RELEVANCE TO COMMUNITY STRATEGIC PLAN

4. Collaborative and progressive leadership

4.4 Recognised as a premier local government Council that represents and advocates for community needs

FINANCIAL IMPLICATIONS

There are potentially Financial implications associated with this report.

LEGISLATIVE IMPLICATIONS

There are Legislative implications associated with this report.

POLICY IMPLICATIONS

There are no Policy implications associated with this report.

ATTACHMENTS

1. Office of Local Government Update on the Demerger of CGRC ⇩

2. Media Release from Minister for Local Government ⇩

3. Correspondence from Minister for Local Government 4 October 2023 ⇩

4. Proposal from Counsel House ⇩

5. Correspondence to Minister for Local Government from CGRC ⇩

6. Confidential - Legal Advice Lindsay Taylor Lawyers - Confidential (under separate cover)

Provisions for Confidentiality

(Attachment 6)

Section 10A (2) (g) - advice concerning litigation, or advice as comprises a discussion of this matter, that would otherwise be privileged from production in legal proceedings on the ground of legal professional privilege.

Public Interest

(Attachment 6)

It is considered that discussion of this matter in Open Council would, on balance, be contrary to the public interest as it may prejudice Council's ability to secure the optimum outcome for the community.

Recommendation

Council resolve to adopt a recommendation from within the four options put forward in this report.

Introduction

Since the then Minister for Local Government’s announcement in August 2022 that Cootamundra-Gundagai Regional Council’s (CGRC) proposal for demerger under 218CC of the Local Government Act 1993 (the Act), Council has been seeking direction from the NSW Government, prior to the March 2023 election and post the election with the newly elected Government, on progress of the demerger. Numerous requests for a meeting with Councillors had been made to the new Minister for Local Government since April 2023, see Attachment 5.

The Minister for Local Government, Hon Ron Hoenig MP, met with Councillors in Cootamundra on Tuesday 3 October 2023 to discuss the demerger and convey his position. According to the Minister, should CGRC wish to pursue the demerger of CGRC, effectively a fresh process will need to be initiated resulting in consideration by the NSW Local Government Boundaries Commission (LGBC) and a public inquiry for the third time.

Discussion

The proposed demerger of CGRC has been the subject of various processes in recent years:

· 2020/2021 – An elector led process initiated under section 215 of the Act was conducted resulting in a LGBC review and resultant LGBC report to the Minister for Local Government recommending the demerger proposal not be implemented (this included submission of a Business Case prepared by Professor Drew; understood there was a dissenting report issued by 2 Commissioners of the LGBC). The Minister for Local Government accepted the recommendation of the LGBC.

· 2021 – Amendments were introduced to the Act including 218CC which provided a path for a newly merged Council to seek de-amalgamation within 10 years of a merger, and provided that the State would fully fund resultant de-amalgamations.

· 2022 – CGRC lodged a demerger proposal under section 218CC of the Act. This proposal was once again referred to the LGBC, a review and public inquiry held resulting in the LGBC issuing a report recommending that the Proposal be implemented (understood that a dissenting report was issued signed by 1 Commissioner of the LGBC). The then Minister for Local Government accepted the recommendations of the LGBC and in August 2022 issued correspondence approving the demerger of CGRC, effectively to form two new Councils, Cootamundra and Gundagai.

· 2022/2023 – Since August of 2022, CGRC has been in a holding pattern waiting for the Minister and OLG to provide the direction for the demerger pathway. More specifically, since the election of a new Government in March 2023 and new Minister in April, CGRC has been seeking confirmation of the demerger progressing and the path to move forward.

On Tuesday 3 October 2023, the NSW Minister for Local Government, Hon Ron Hoenig MP, visited Cootamundra and met with the Councillors of CGRC. The message delivered by the Minister is contained in the October 2023 Update, attachment 1 to this report. In summary:

· The Minister advised that he is in receipt of advice from a Barrister advising the Act does not provide a legal pathway to demerge under section 218CC of the Act;

· The Minister announced a “pathway that will empower the Councils to take ownership of the demerger process.”

· The pathway will require a CGRC developed detailed implementation plan creating two sustainable councils;

· The implementation plan is to be reviewed by the LGBC, including a further public inquiry;

· If the LGBC is satisfied that the CGRC approach is sound, the Minister will proceed to dissolve CGRC (section 212 of the Act) and create two new areas (section 204 of the Act);

· No funding will be provided by the State Government to support CGRC for this process or any subsequent demerger.

CGRC is now faced with considering its options moving forward, noting that progressing in the manner advised by the Minister for Local Government on 3 October 2023 will require initial investment by CGRC, consideration by the LGBC including a further public inquiry and ultimately a final decision by the Minister for Local Government. Additionally, following the Minister’s current advice, all costs associated with a demerger will need to be factored into the detailed implementation plan and will have impact on the financial analysis (Note: the 2022 LGBC process was based on assumption that the NSW Government was required to fund the demerger costs).

Since the Minister’s meeting with the Councillors of CGRC, the Mayor and Interim General Manager have fielded numerous enquiries given the implications of the Minister’s advice to the sector generally.

The Mayor has made general enquiries of a professional public affairs, advisory organisation, Counsel House, which Council may consider engaging to undertake a lobbying/advocacy service on behalf of CGRC. A subsequent proposal has been received from Counsel House and is attached to this report as Attachment 4. The proposal indicates the nature of the service provided by Counsel House and advises that an investment of $7,000/month is required, noting that this service can be effectively turned on and off on a calendar month basis as required.

The Interim General Manager has sought some initial legal advice from a firm on Council’s legal panel and has also made general enquiries in regard to potential resources that may be available to assist with the development of the detailed implementation plan should Council progress in that direction. It is noted that discussions with representatives of the NSW OLG indicate that the detailed implementation plan would benefit from the input and direction of resources that have a strong financial qualification and background, as well as a practical hands on knowledge of the operations of councils. Council has sought further information/advice from the Minister and/or the OLG in regard to any guidelines and or further detail regarding just how detailed the implementation plan needs to be.

It has also been suggested that a dedicated media/comms campaign could be implemented by CGRC to raise awareness of the situation that CGRC now finds itself in and to mount a campaign that keeps the pressure on the NSW Government to take reasonable action in this matter. To this end, it is suggested that a potential media/comms campaign could be an item for further consideration once Council has commenced the actions identified in the adopted Option. That is, further consideration could be given to the development of this campaign at an Ordinary Council meeting in the coming months.

OPTIONS:

Option 1

Council accept the Minister for Local Government’s current position and resolve to not progress any further action. This would require communications to the community explaining the situation.

Option 2

Council seek further detailed legal advice, including the engagement senior counsel, to explore any potential legal avenues to achieve progress of the demerger of CGRC under the Act without the need for a further LGBC process and public inquiry. Additionally, Council resolve to engage Counsel House to undertake a campaign of advocacy and lobbying on behalf of CGRC.

Should Council wish to pursue this option, the recommendation would be as follows:

RECOMMENDATION:

1. Council seek further legal advice through its Solicitors, including the engagement of senior counsel, to provide advice to Council to progress the demerger of Cootamundra-Gundagai Regional Council;

2. Council engage Counsel House to undertake a campaign of advocacy and lobbying on behalf of Cootamundra-Gundagai Regional Council in pursuit of the demerger of Council to form two new Councils, Cootamundra and Gundagai; and

3. Council allocate the sum of $50,000 in its 2023/24 budget for demerger planning, such funding will reduce the projected operating surplus for the 2023/24 budget year.

Option 3

Council pursue the development of a detailed implementation plan in preparation for lodgement with the Minister and the LGBC, noting that such implementation plan will need to demonstrate two financially viable and sustainable councils will result post the demerger.

Should Council wish to pursue this option, the recommendation would be as follows:

RECOMMENDATION:

1. Council resolve to prepare a detailed implementation plan which creates two sustainable councils in preparation for lodgement with the Minister for Local Government and the Local Government Boundaries Commission to pursue the demerger of Cootamundra-Gundagai Regional Council; and

2. Council allocate the sum of $180,000 in its 2023/24 budget for demerger planning, such funding will reduce the projected operating surplus for the 2023/24 budget year.

Option 4

Council effectively pursue a combination of Options 2 and 3. This would mean running processes concurrently, noting that should either of items 1 and 2 in Option 2 achieve a positive result, Council may be in a position to cease the progress of item 1 in Option 3.

Should Council wish to pursue this option, the recommendation would be as follows:

RECOMMENDATION:

3. Council resolve to prepare a detailed implementation plan which creates two sustainable councils in preparation for lodgement with the Minister for Local Government and the Local Government Boundaries Commission to pursue the demerger of Cootamundra-Gundagai Regional Council; and

4. Council allocate the sum of $230,000 in its 2023/24 budget for demerger planning, such funding will reduce the projected operating surplus for the 2023/24 budget year.

Financial

There will be financial implications for CGRC to consider moving forward dependent on the option that Council resolves to pursue. Should Council decide not to progress with the demerger at all, there would obviously be no demerger costs and therefore no financial implications.

Should Council progress with seeking detailed legal advice and actively pursuing the assistance/support of a professional lobbying/advocacy group, it is anticipated that the financial investment required would be in the order of $50,000.

Pursuing the development of the detailed implementation plan advised by the Minister on 3 October 2023 would require financial investment in the order of $180,000.

Council could resolve to undertake some of the above processes concurrently, which would require financial investment reflecting the combination of the processes resolved to be undertaken.

It should also be noted that consistent with the Minister’s suggestion that the OLG could offer support, some discussions have occurred with representatives of the OLG and the nature and level of support that the OLG may be able to offer is currently being explored. The support provided by the OLG may have the effect of reducing the expenditure incurred by Council, and therefore reduce the budget allocation necessary.

The other financial implication to be considered relates to the actual one-off demerger costs that would be incurred if ultimately Council’s detailed implementation plan is approved by the LGBC and the Minister for Local Government. Previously, as mentioned elsewhere in this report, Council and the community were progressing for a demerger on the basis that it was expected that the NSW Government would be funding the one-off demerger costs. The Minister for Local Government has been clear that from his perspective there is no funding available from the State Government for the demerger and CGRC will need provide the funding.

It is noted that there has been some conjecture by various parties regarding what is the investment required to fund one-off demerger costs. Professor Drew’s business case, prepared in 2020, suggested a figure of $1.75m. This was peer reviewed by Deloitte’s on behalf of the LGBC in November 2020 resulting in a range of $1.8m to $4.2m being suggested and a mid-point of $3m being utilised for further financial analysis. In more recent times, much higher figures have been suggested apparently as a result of further analysis conducted by the Office of Local Government.

For the purpose of Council’s consideration of likely demerger costs should the detailed implementation plan or some other outcome result in a decision to demerge by the Minister for Local Government, it is perhaps appropriate to estimate these costs as being between $4.5m and $6.5m, given the time that has elapsed since the initial analysis and the significant increase in costs since 2020.

OLG 23a Guideline consideration

At face value, there will be implications for Council as a result of the 23A Guidelines issued by the Office of Local Government. Should Council resolve to pursue an option from this report to move forward on the demerger, it is quite likely that Council will incur additional expenditure that is not currently provided for in the 2023/24 Operational Plan and Budget.

This may require public advertisement and comment sought, and potentially communication with the Office of Local Government.

It should be noted that this potential additional expenditure results directly from the position taken by the current Minister for Local Government on this matter. It is suggested that the 23A Guideline constraints may be unreasonable under the current circumstances.

DOCUMENT NUMBER	400305
REPORTING OFFICER	Logan Collins, Councillor
AUTHORISING OFFICER	Charlie Sheahan, Mayor