Reshaping Australia's Local Government: Finance, Governance and Reform

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  • R E S H A P I N G A U S T R A L I A N L O C A L G O V E R N M E N T

  • RESHAPING AUSTRALIAN

    LOCAL GOVERNMENT

    FINANCE,GOVERNANCE AND REFORM

    E d i t e d b y

    Brian Dol ler y, Nei l Marsha l l and Andrew Worthington

    UNSWPRESS

  • A UNSW Press book

    Published byUniversity of New South Wales Press LtdUniversity of New South WalesSydney NSW 2052AUSTRALIAwww.unswpress.com.au

    UNSW Press 2003First published 2003

    This book is copyright. Apart from any fair dealing for the purpose of private study, research, criticism or review, as permitted under theCopyright Act, no part may be reproduced by any process withoutwritten permission. While copyright of the work as a whole is vested in UNSW Press, copyright of individual chapters is retained by thechapter authors. Inquiries should be addressed to the publisher.

    National Library of AustraliaCataloguing-in-Publication entry:

    Reshaping Australian local government : finance, governanceand reform.

    Bibliography.Includes index.ISBN 0 86840 653 8.

    1. Local government - Australia. I. Dollery, Brian.II. Marshall, Neil, 1950- . III. Worthington, Andrew.

    352.140994

    Printer BPA

  • List of contributors ixForeword xiii

    1 INTRODUCTION Brian Dollery, Neil Marshall and Andrew Worthington 1

    Outline of the book 4

    PA RT A I N T E R N AT I O N A L C O N T E X T 1 1

    2 LOCAL GOVERNMENT: REFORM IN COMPARATIVE 13

    PERSPECTIVE Janice Caulfield

    United Kingdom 20Australia 21New Zealand 21Germany 22The Netherlands 23Switzerland 23Sweden 24North America 24Japan 25Other OECD countries 26The data 28Analysis 28Conclusion 32

    PA RT B F I N A N C E 3 5

    3 FINANCING LOCAL GOVERNMENT IN AUSTRALIA 3 7

    Andrew Johnson

    The nature of the problem 38

    C O N T E N T S

  • The genesis of the problem 41Commonwealth financial assistance grants 53Managing the problem 59Conclusion 62

    4 L O C A L G O V E R N M E N T F I N A N C I A L R E P O R T I N G 6 4

    Christine Ryan

    External reporting 64Conclusion 77

    5 A M A L G A M AT I O N A N D V I R T U A L L O C A L 7 9

    G O V E R N M E N T Paul MayCharacteristics of Australian government 80Tensions between efficiency and democratic representation 85Pursuing the economic panacea: optimum size 87Virtual governments 89Chasing the pot of gold 91Conclusion 96

    PA RT C G OV E R N A N C E A N D M A N AG E M E N T 9 9

    6 R E A S S E R T I N G L O C A L D E M O C R A C Y ? 1 0 1

    Rosemary Kiss

    What is community? 105Community and local government legitimacy 107Local government, democratic representation 111and the franchiseConclusion 115

    7 M A N A G E M E N T R E F O R M I N L O C A L 1 1 7

    G O V E R N M E N T Geoff Baker

    Top-down management reform the role of the States 118and the CommonwealthLocal government and the new public management 124Conclusion 137

    8 T H E R O L E S A N D R E S P O N S I B I L I T I E S 1 3 9

    O F C H I E F E X E C U T I V E O F F I C E R S A N D

    C O U N C I L L O R S I N A U S T R A L I A N L O C A L

    G O V E R N M E N T : A C O R P O R AT E G O V E R N A N C E

    P E R S P E C T I V E Neil Marshall

    The context of corporate governance 140The public sector 141

    V I R E S H A P I N G A U S T R A L I A N L O C A L G O V E R N M E N T

  • Corporate structure in local government 142The role of councillors 144The role of chief executive officers 147Some corporate governance perspectives 152Conclusion 155

    PA RT D P O L I C Y R E F O R M 1 5 7

    9 P O L I C Y N E T W O R K S A N D L O C A L G O V E R N M E N T 1 5 9

    Joe Wallis

    Local government involvement in multi-organisational 160partnerships (MOPs)

    Overcoming co-ordination problems through alternative 161governance mechanisms

    The capacity of councils to supply local governance 171Conclusion 175

    1 0 L O C A L G O V E R N M E N T E F F I C I E N C Y 1 7 6

    M E A S U R E M E N T Andrew Worthington

    The theory of efficiency measurement 179Efficiency measurement techniques 181Problems in measuring local government efficiency 186Studies measuring efficiency in local public services 188Determinants of local public sector efficiency 195Conclusion 198

    1 1 . L O C A L G O V E R N M E N T F A I L U R E Brian Dollery 2 1 2

    Taxonomies of local government failure 213A new taxonomy of local government failure 215Conclusion 228

    PA RT E F U T U R E D I R E C T I O N S 2 2 9

    1 2 F U T U R E D I R E C T I O N S F O R A U S T R A L I A N 2 3 1

    L O C A L G O V E R N M E N T Brian Dollery and Neil Marshall

    The achievements of Australian local government 232Future directions 238

    References 251Index 268

    C O N T E N T S V I I

  • Geoff Baker has worked on reform of the legislative framework forlocal government in Queensland since 1989. His roles have includedbeing instructing officer for the development of Queenslands newLocal Government Act in 1993. He was appointed to the QueenslandGovernments Senior Executive Service in 1994. He has also had part-time academic roles at a number of universities in Queensland since theearly 1990s. He is currently undertaking further postgraduate studies atthe Australian Graduate School of Management.

    Janice Caulfield is Research Assistant Professor in the Department ofPolitics and Public Administration, University of Hong Kong, whereshe teaches public sector management and public policy analysis. Hercurrent research interests include performance and accountability in thepublic sector, public sector reform and development administration.She is co-editor with Helge O. Larsen of Local Government at theMillennium, which was published in 2002 by Leske and Budrich.

    Brian Dollery is Professor in the School of Economics at the Universityof New England, Armidale, and Visiting Professor in the InternationalGraduate School of the Social Sciences, Yokohama National University,Yokohama, Japan. He has previously held academic positions at theUniversity of South Africa, Rhodes University, East Carolina StateUniversity, the University of Cape Town and Creighton University. Brianhas published extensively on the economics of Australian local govern-ment and is a founding member of the University of New EnglandsCentre for Local Government. Together with Neil Marshall, Brian co-edited Australian Local Government: Reform and Renewal in 1997.

    C O N T R I B U T O R S

  • Andrew Johnson is the Director of Finance and Administration ofGuyra Shire Council in New South Wales. Andrew holds an MBAdegree from the University of New England (specialising in local gov-ernment) and is a chartered public accountant. He is presently workingon a doctorate at the University of New England dealing with the finan-cial problems confronting contemporary local government in Australia.

    Rosemary Kiss is Senior Fellow in the Department of Political Scienceat the University of Melbourne. She served as an elected councillor forsome years in Melbourne and is a past member of the Victoria GrantsCommission. She has published widely in the area of local government.Along with Peter Johnstone, she co-edited the 1996 volume, GoverningLocal Communities The future begins.

    Neil Marshall is Associate Professor in the School of Social Science atthe University of New England and teaches in the areas of Australianpolitics, public policy and public sector management. He has publisheda number of articles and edited volumes in these areas, including the1997 book Australian Local Government: Reform and Renewal, whichhe co-edited with Brian Dollery. Neil is a founding member of theCentre for Local Government at the University of New England.

    Paul May has 29 years experience in local government. He spent 23years working in planning departments at Manly, Shellharbour andEurobodalla Councils in New South Wales. For thirteen of those yearsPaul occupied senior management positions. In 1997 he establishedPlanning Initiatives, his own consultancy practice specialising in localgovernment policy, research and urban and rural planning. Paul assist-ed Professor Kevin Sproats on the Inquiry into the structure of localgovernment in eight council areas in the inner city and eastern suburbsof Sydney. He is presently completing a PhD with the University ofTechnology, Sydney, that involves examining approaches to regionalgovernance.

    Christine Ryan is Senior Lecturer in the School of Accounting at theQueensland University of Technology, Brisbane. She has published anumber of papers on accounting standards and the Australian publicsector.

    Joe Wallis is Senior Lecturer in the Department of Economics at theUniversity of Otago, Dunedin, New Zealand. Joe holds a PhD in eco-nomics from Rhodes University and has previously held academic posi-tions at Rhodes University and the University of Cape Town. He has

    X R E S H A P I N G A U S T R A L I A N L O C A L G O V E R N M E N T

  • co-authored Market Failure, Government Failure, Leadership and PublicPolicy and The Political Economy of Local Government (both with BrianDollery). Joe has also written extensively on organisational leadershipand the public sector during periods of comprehensive public sectorreform.

    Andrew Worthington is an Associate Professor in the School ofEconomics and Finance at the Queensland University of Technology,Brisbane. Andrew has a PhD in financial economics from the Universityof Queensland and has previously worked in both economics andfinance at the University of New England. He has published widely inthe area of public sector economics, and especially on the measurementof efficiency in the public sector. Andrew has