ORION was commissioned by the LGAQ to examine any linkages between Council population and economies of scale, and any linkages between financial strength and population.This was used for a submission to the Local Government Reform Commission.
Economies of Scale:
The analysis showed that there appears to be some relationship between Council indoor staff
levels for populations up to 50,000, with greater economies of scale and predictability in the
first 5,000 to 10,000 population ranges. However, these trends only explain 50 to 60 percent
of the variations in staff levels across the State. Above 50,000 population there is no
statistical connection between indoor staff levels and population size. There also appears to
be linkage between staff size and population growth and density.The Commission appeared to ignore this research and concluded that there were potential economies of scale in all degrees of amalgamation, based on the above research on Northern Downs (also by ORION using the same methodology) and Southern Downs (performed by AEC Group, but applying the same methodology).
Financial Sustainability:
The analysis shows that there appears to be a positive but small relationship between
population size and financial sustainability. However, the relationship is only about 20
percent statistically accurate.
Increasing size possibly creates the opportunity to improve financial sustainability, but the
evidence above indicates that there is only a one in five likelihood that this occurs in
practice. This may be due to the continuing pressure on Local Government’s to do more
with less which offsets any benefits of scale.
Improved financial sustainability is more likely to occur if there are
economies of scale which can lead to reduced cost structures.there appears to be some relationship between population growth
and the FSR score, with financial sustainability increasing gradually with increasing
population growth. However, the regression of the individual scores only shows a 10
percent relationship between these factors. There also appears to be a
small relationship between financial sustainability and population density, however it only
explains 6 percent of the variations. |