New South Wales mega-councils will be forced to pay for their own demergers, in a move likely to anger local governments that have long been advocating for the state government to stump up cash and allow forced amalgamations to be reversed.
The Minns government will on Tuesday introduce legislation to parliament to create a legal pathway to demergers for councils, including Sydney’s Inner West, that wish to split – but it has made it clear it won’t be footing the bill.
Last year the local government minister, Ron Hoenig, revealed during a budget estimates hearing that the process under which the council was attempting to demerge was “unconstitutional”, according to legal advice.
More than 60% of residents in the Inner West council voted for the council to be reverted to separate, smaller local government areas more than two years ago and the council has been making its case before the local government Boundaries Commission.
Under the proposed changes, the council would need to create a business case to be handed to the commission who would then make a report for the minister.
The minister would then need to approve the demerger before it was taken to the people for a vote.
“These amendments the government has introduced provide a clear path forward for councils wishing to de-amalgamate, providing much more clarity for current and future proposals,” Hoenig said.
“However, it’s essential that local democracy is enshrined in the decision-making process so that councils and communities are fully informed of the financial and other implications of de-amalgamation.
He said the forced amalgamation of councils had been a “failed and expensive experiment” but that he needed to be “realistic about some of the challenges” involved in untangling the large councils.
The move is expected to be met with disappointment and anger from councils that want to demerge because some had hoped the government would pay and their plans are likely to be scuppered if they can’t afford it.
The former Coalition government’s decision to merge 44 councils across the state in 2016 prompted widespread community anger, particularly in regional areas where opponents said the changes resulted in animosity and a loss of local identity.
Critics also argue the amalgamations have badly affected many councils’ finances and meant issues important to residents of former smaller council areas have been sidelined in favour of the larger councils they were forced to merge with.
The Greens MP Amanda Cohn introduced her own private member’s bill to parliament late last year that would give councils a right to hold demerger plebiscites.
“The forced amalgamations of 2016 were promised to offer huge savings and efficiency,” she told parliament in November. “Instead, they delivered rate hikes, shrinking services and a loss of local representation.”
The government’s legislation will be introduced to parliament on the first sitting day of the year, which is expected to be dominated by housing and planning reforms.
The treasurer, Daniel Mookhey, on Monday warned Sydney was at risk of a San Francisco-style homelessness issue if more was not done to curb the crisis.
“We still have an opportunity to act,” he told a summit focused on the future of the city. “We have to make sure that kids starting school this week will be able to own a home if they work hard.”
The Committee of Sydney chief executive, Eamon Waterford, told the forum the “exquisitely expensive” city was losing $10bn a year in productivity and talent and was becoming a less fair place to live.
“If we can’t keep young people here and migrants don’t feel welcome here, our economy will grind to a juddering stop,” he said.
