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Inquiry slams ‘unreliable’ council merger review

COUNCILS banding together in legal bids against forced amalgamation have received a major boost.

A parliamentary inquiry has found significant flaws in the process used to find almost two-thirds of NSW local governments unfit to retain their independence.

Christian Democrat Paul Green, who headed the inquiry, called for the State Government to "withdraw its statements that 71% of Sydney councils and 56% of regional councils are 'unfit' for the future".

Local Government NSW president Keith Rhoades said councils were already planning legal bids to remain separate entities.

Hunters Hill and North Sydney councils were investigating their options.

Last week Narrandera's mayor urged fellow Riverina councils to pool their resources for possible court action.

"Councils that have been deemed unfit on 'scale and capacity' feel they have a very strong case to challenge that finding," Cr Rhoades said.

"This report just backs up that position.

"It found 92% of metro councils and 76% of non-metro councils, met the financial criteria overall despite the systemic funding challenges they faced.

"There are councils looking at the possibility of an injunction once the government's submission is made.

"Of course, it hasn't been made yet."

The inquiry found the Independent Pricing and Regulatory Tribunal was not qualified to assess the overall fitness of councils and the "scale and capacity" criteria should never have been included in the review.

It also recommended an end to rate pegging to allow local governments to set their own rates, conditional on the proven delivery of local works plans.

"Given the numerous concerns raised by stakeholders about the costs of amalgamations, the committee is of the view that the case for amalgamations, and in particular, forced amalgamations, has not been made," Mr Green wrote.

Cr Rhoades said LGNSW had campaigned for more than a year for the government to fix its funding models before seeking mergers.

"LGNSW argued vociferously that this (scale and capacity) criterion was a Catch 22 for councils," he said.

"They could only win the right to stand alone by showing scale and capacity, and they could only show scale and capacity if they agreed to amalgamate in line with the government's preferences.

"That criterion, now discredited, is the only reason IPART could declare the majority of NSW councils unfit, and claim NSW's system of local government is broken."