The Huon Valley Council has put the Huon D’Entrecasteau Boundary Adjustment out for public comment via an online survey. The survey is accompanied by the Felmingham Report 2015 which the Council commissioned to provide an economic analysis of the proposal. The Huon D’Entrecasteau Boundary Adjustment involves merging that part of Kingborough south of and including Margate (MS in the report) with the Huon Valley Council and is termed M1. It was compared against Huon Valley remaining as it is and against M2, a merger of Huon Valley with all of Kingborough except for Taroona.
The report concluded that M1 was by far the the most viable option. The M1 option produced an annual operating surplus of $3.5 million compared with the current Council’s surplus of $636,000, resulting, in a positive economic outcome for the area’s residents. When I first read the recommendation I was intrigued as to how the merger could produce a six-fold increase in Council’s operating surplus and so I decided to have a closer look at the Felmingham Report.
I discovered that the Felmingham Report contains a number of inconsistencies and questionable assumptions that in my opinion, invalidate its conclusion on the economic benefits of the M1 option. Chief among these is the assumption that a 65% increase in the Huon Valley Council’s population would only cause its expenses to increase by 17%. It is this assumption that is largely responsible for the impressive surplus calculated for the enlarged Council area.
To calculate the likely financial surplus for M1, the Report starts with the Huon Valley Council financials for 2010/11 and creates a new income and expenditure statement for M1. To the Huon Valley actuals it adds estimates to accommodate the additional MS area and population as follows:
The end result of this is summarised in Table 1 (Columns 2 and 3 numbers are taken directly from the Felmingham report):
The Report explains that the factor of 1.17 was chosen because it was the average weighted increase in the population of the M1 area between 2006 and 2011. What that has to do with the anticipated costs of servicing an additional 10,000 residents is never addressed. The seemingly obvious answer is that the 17% figure has no relevance to this calculation.
Elsewhere in the report a completely different method is used to calculate the decrease in expenses if Kingborough Council divested itself of the Taroona area. Here the Report suggests that because Kingborough, with a population of 34,000 is losing 3100 people, its expenses will reduce by 9.12% (3100/34,000). No explanation is given as to why this method isn’t applied to M1.
Table 2 shows the results If we do apply this same method to the M1 calculation.
Now the $3.5 million surplus has become a much more believable deficit of $1.4 million. This means M1 is the worst of the three options rather than the best. The best option is clearly M2 both on the total surplus and a per capita basis.
Other matters in the report that caused me concern included:
• The comparison table of financial statements uses the Surplus before “non cash assets identified” for the Huon Council but Surplus after “non cash assets identified” for the Kingborough Council. This gives a skewed view of the relative surplus of each Council.
• The 2010/11 financials are used for both Huon Valley and Kingborough when 2014/15 were available.
• Correctly, no increase factor is applied to the revenue of the three Huon Valley medical and child centres in the M1 calculation (as they won’t be affected by the merger) but the 1.17 factor is applied to the expenses of the centres.
• When comparing the 3 options in the summary of findings, a surplus for M2 of $1,242,000 is used instead of the report’s calculated figure of $2,965,000, understating the M2 surplus and per capita benefit by a factor of 2.4.
• The 10 year projections for the 3 options are calculated using the 1.17 factor. In this way M1 achieves a surplus of around $4.65 million in year 10 and an accumulated surplus over the 10 years of over $40 million. However if we use the starting point calculated in table 2 we end up instead with an accumulated deficit of $17 million. Straight line projections over such a long time period need to be treated with great care, especially if you have the wrong starting point.
After accepting the Felmingham report’s conclusion on the viability of the Huon D’Entrecasteau Boundary Adjustment, the Huon Valley Council developed a Community Engagement Plan. A report tabled at the June 22 Council Meeting reveals that “Through much deliberation” it was decided that an online survey would be “the most efficient and effective in ensuring broad engagement”.
The survey would “request a post code from respondents to clarify their location and understand where their interests lie”. The engagement will also “provide the means to inform the community about the current resource sharing arrangements between the Council and others so they can make an informed judgement “ .
The Plan was adopted by the Council, with only the Mayor and Cr Smith voting against it.
So what did the Community end up receiving to enable it to make an informed judgement?
Unfortunately not very much. Survey participants are invited to read the Felmingham Report but no other information concerning the proposal is provided. The promised information on resource sharing is not mentioned. The Felmingham Report is all you have to base your opinion on when you start the survey.
The greatest attribute of the survey is its brevity. There are only 2 questions. The first one is whether you would like the Council to continue investigating the proposal. You have a choice of Yes or No. The second question is your post code. There is then a box where you can make a comment.
No questions to find out whether you would like a full merger with Kingborough or no merger at all. No questions that would provide useful information such as whether the participants were ratepayers, whether they were long term residents or recent arrivals, whether they were business owners, or were satisfied with the service level they currently received etc? Definitely not a survey designed to learn very much. Also no illumination on how, by knowing your post code, the Council will “understand where your interests lie”.
So the Huon Valley Community is provided with a survey of questionable value about a project of questionable viability. Many of us wouldn’t need the help of an expensive academic report to tell us that adding Margate south including Bruny Island to Huon Valley Council would not create a financial utopia. Common sense would suffice for most Huon Valley residents.
It is disappointing that no one at the Council appears to have queried the figures in the report. Perhaps because the report told them what they wanted to hear they didn’t look too closely. I suspect that if the report had recommended the full merger with Kingborough as the most viable option (which it appears to be) the report would have been quietly buried.
From my analysis the Felmingham report should never have been used as the basis for pursuing the Huon D’Entrecasteau Boundary Adjustment. That it has, is an embarrassing and costly action by those Councillors and staff pushing this merger option.
*David de Burgh is a retired accountant and company director who has lived in the Huon Valley for 14 years. He served as a Councillor at the City of Melville in Western Australia from 1997 to 2001.
• Bob Hawkins in Comments: Thanks David for your expertise in penetrating and exposing some of the smoke-and-mirrors crap that we have to live with in the Huon. That useless M1 “boundary adjustment” report — flimsy in the extreme and costing us taxpayers thousands — is another example of HVC bleeding funds by chasing shadows and fantasies. Council management told us recently that the better part of $60,000 had been spent on legal advice to counter the findings of the Gutwein inquiry that decided council was, indeed, dysfunctional. Yet no one in the general public is allowed to see what kind of tricky arguments council made that persuaded LG Minister Gutwein to reject his own BoI report (compiled over more than half a year of careful sifting of evidence and interviews) and place greater credence on scores of pages of legal argument that, as if by magic, were produced within a couple of days of being commissioned by HVC. It appears council (or, rather, Heart of the Huon councillors) had not at that stage formally approved the commissioning. (Must have been something to do with the enormous authority “delegated” to management to handle matters for which our elected representatives have abdicated responsibility.) What it adds up to is that HVC, having spent scores of thousands of dollars of our money, won’t show us what it was we paid for. Why aren’t tax/ratepayers demanding to see it? …
• Dr Bruce Felmingham is invited to respond to these observations ...
• David de Burgh in Comments: For those who have been seeking feedback from Dr Felmingham, I can confirm that the Huon Valley Council contacted Dr Felmingham prior to publication of this article and asked for his comment on my criticism. He replied that he saw no reason to change his position and that he did not understand my claim. Apparently his wife is quite ill and he said he would give it more thought when she was better. Thanks to those who have uncovered earlier criticism of other reports he has been involved in. It makes interesting reading. Please don’t forget to take the 30 seconds necessary to complete the Council’s online survey. You owe it to Margate residents to vote NO but please yourself.
• Geoffrey Swan in Comments: Sent Monday August 1st 2016. Dear Ms Watson (Simone), As a ratepayer living in the Huon Valley I am requesting your immediate intervention into the closing down of the current Boundary Adjustment Survey and that Council then publish this decision on the HVC website and in our local media. My principle reason is the way the survey has been created and that it is falsely suggesting this is a community consultation on an important matter that is affecting not only the residents of the Huon Valley but also the residents of Kingborough. In my view this is yet another abysmal example of a dysfunctional Council and it saddens me as a Ratepayer that our Council just cannot seem to rise above such simple everyday management issues …