Our stakeholder discussions regarding shared services revealed a wide range of perspectives and insights. For the most part, discussion focussed on the risks associated with ‘ad hoc’ or informal arrangements.

On the topic of shared services, we heard:

• Where a new centralised service corporation, regional entity, or joint authority is to be established, it must have transparent and carefully designed governance structures. Ideally, it should be subject to market competition, and accessibility and accountability to communities must be maintained.
• Some council activities, particularly tourism and local promotion or economic development functions, make more sense when organised at a regional or state-wide level than locally.
• Removing responsibility for some core services risks leaving councils without a critical mass of staff or resources threatening sustainability.
• Creating more service provision authorities or corporations could create additional bureaucracy.
• The benefits of service sharing are not necessarily enjoyed equally by all members of an arrangement. Even where the net impact is positive, some benefit more than others.
• Voluntary involvement can be problematic because individual councils may ‘freeride’ by entering and exiting arrangements opportunistically

Increasing the size and reducing the number of councils in Tasmania has been a hotly debated topic, and throughout our engagement we have heard a wide range of strongly held views. Key insights and recurring themes in these conversations included:

• Economies of scope and council capability and capacity need to be considered, not just economies of scale and cost savings.
• There is no simple binary of large councils being effective and small ones dysfunctional – some small councils work well, and some mid-size or larger councils struggle.
• Consolidation of councils can risk losing local knowledge and diminishing local employment – rural local governments are often the largest employers in their areas – any such reform must carefully address these issues.
• A one-size-fits-all model driven by a desire to achieve a minimum population size for all councils will not work. Different areas have different needs and priorities, which means that Tasmania will inevitably have councils of some size variation.
• Amalgamations can raise costs and service levels to that of the highest cost council.
• Larger councils tend to have more success attracting grants-based funding.
• Success is critically dependant on transition arrangements: some individuals and councils continue to “bear the scars” of poorly executed amalgamations in the past.
• Boundary changes should be informed by the needs and social and economic features of a region, rather than the pursuit of an arbitrary, pre-determined minimum size.
• Distance makes consolidation more complicated: local government is most highly valued in regional and remote communities, particularly for its accessibility and democratic function. Remote councils need a specific and tailored approach.

• This option is preferred by some stakeholders who believe it offers the greatest potential to improve capability and capacity within councils while maintaining or enhancing local representation, addressing local needs and priorities, and continuing to utilise valuable local knowledge.
• Many local government stakeholders and community members have emphasised the different needs and capabilities of urban and rural councils, stressing reform needs to be ‘place-based’ and tailored to local contexts.
• Innovative models should be considered with this approach. One suggestion was some councils, where they lacked the capacity or capability, share services with Service Tasmania.
• Another proposal is decentralised ‘service hubs’ – whether for operational or customer service functions – could be used to address issues of distance, ensure accessibility and connectivity, and maintain local jobs.

The Board’s detailed analysis of different service consolidation arrangements found the successful sharing of services at scale depends on a wide range of factors. The evidence suggests, while such arrangements can deliver considerable benefits, these do not accrue equally to all council services or all council areas.

Positive outcomes are most likely to be achieved where the services in question are capital-intensive and delivered in a relatively uniform or undifferentiated way across council areas. One example of this is how the creation of TasWater facilitated increased investment and subsequent improvements in the delivery of water and sewerage services.

Further, our research suggests that service consolidation will be most effective where equitable distributions of cost and risk are maintained, and councils are equipped with streamlined and compatible ICT, back office, and HR systems to enable a smooth transition to sharing. Finally, evidence from existing shared or consolidated service initiatives highlights risks to be managed and potential pitfalls to be avoided, more often related to three key issues:

1. The first is councils’ rationale for participating. In some instances, sharing arrangements have failed due to the lack of a compelling rationale or genuine desire for collaboration among the councils involved. In some cases, the development of shared services agreements has been promoted by councils as an alternative to forced amalgamations. Having overcome the threat of mergers, however the absence of a compelling reason and commitment to resource sharing can see arrangements dissolve.
2. The second risk relates to monitoring, reporting, and evaluation. The 2018 NSW Shared Services in Local Government audit, for example, found that “councils do not always have the capacity to identify which services to share, negotiate with partner councils, or plan and evaluate shared service arrangements”. This evidence reinforces the Board’s view that any service consolidation in Tasmanian local government would need to be mandatory and led by the State Government.
3. Finally, research has highlighted the perceived loss of autonomy service consolidation can present for councils and their communities. Resident or councillor fears of losing control over local services can undermine service consolidation initiatives even in cases where the relevant authorities already have a long history of successful service sharing.

The Australian and international evidence concerning council consolidation has focussed on three distinct but related issues:

• Evidence of efficiency and cost savings;
• Evidence of improving economies of scope; and
• Evidence of enhancing council capacity and capability.

Most research on amalgamation focuses on the first issue – efficiency and cost savings – and has produced a complex and diverse range of findings. This analysis suggests that while efficiencies and economies of scale can sometimes follow municipal consolidation, the evidence does not support pursuing boundary reform to achieve cost savings alone.

The second and third rationales – increasing economies of scope, and capacity and capability - are the primary objective of this Review. An emerging body of evidence suggests council consolidation can be an effective way to capture economies of scope, attract and retain skilled workers, and improve councils’ strategic capacity and capability.

Finally, available evidence highlights how minimum population size is not the right metric to use when deciding the size councils ought to be. Rather, boundary design should carefully consider how and at what scale councils provide services and whether their activities correspond clearly to factors such as established communities of interest or functional economic areas