One of the constant questions that Councils across the land are asked is for money to contribute to some event or cause that will be for the greater good. I constantly see businesses ask for free land or free development applications or a reduction in fees because their business will generate a significant number of jobs for the City; I see event organisers ask for free facilities or significant financial contributions because their event will attract so many people to the City; and I see not for profit organisations asking for support because of the excellent work their organisation will do for the community.
Unlike a normal business a Council, as a business, has a tricky role to play. For a start, the Council needs to be financially viable. Although many of these arguments are quite sound from the proponents and there may be significant benefits for the community, the first rule in business and in Council is that you can’t do any good at all if you go broke. No one wants to be involved in a Council that is so financially strained that the State Government steps in and appoints an administrator. So as much as various concessions might be wonderful for the community, it may eventually send a Council broke.
The bigger issue here is what the tangible benefits are and who the real beneficiaries are.
There are a couple of interesting examples I have seen recently. On 10 July I read with interest in the Wellington Times that the Gelato Ingredients Manufacturers of Australia (based in Molong) was closing its doors and moving to Taren Point in southern Sydney. They have been located in Molong for less than six years and it was seen as a great coup for Molong when the factory first opened. Cabonne Council bought the land for the factory in 2007 and the Australian Government gave the company $163,000 in funding. The Wellington Times estimated the company received a combined total from all three levels of government of around $200,000. If this organisation operated from Molong for 30 years and grew the operation and employed hundreds of people, it would be seen as a great success story. Unfortunately, as so often happens, when an organisation is given lump sums of money to help them start, they often are unsustainable. More to the point, there are some organisations that shop Council areas off against each other to see who will offer them the best deal – this week. The issue here is that there is limited loyalty, limited long-term benefits and some companies are happy to move to the next area that offers them a deal. More than 10 years ago I was Chairman of the Dubbo City Development Corporation (DCDC) and the focus at the time was to help grow Dubbo’s businesses. In other words, focus the efforts on businesses that already exist within Dubbo and if they can grow, they will employ more people and be more likely to stay in Dubbo as they weren’t enticed here by money. It certainly makes for a better headline when an organisation is successful in moving a company that employs 200 people to your Council area, but a much more sustainable model is for an organisation to help 200 existing businesses all employ one additional person. I have rarely seen enticement programs like the situation in Molong be successful and, if governments were serious about business decentralisation, ongoing long-term benefits would have more of an impact. For example, if a State Government gave permanent Payroll Tax exemption to ALL businesses in a regional area, but only for the employees employed in that regional area, there would be an ongoing incentive to keep employees in regional areas. Under this scheme, if the Gelato Factory moved from Molong to Sydney, they would lose their Payroll Tax exemptions and it would be a strong disincentive to make the move. As it turns out – who knows – maybe they were offered incentives by Taren Point to move down there?
The other example that creates an interesting situation is in event attraction. I read in the Sunday Telegraph last weekend that “It’s understood Mudgee Council [sic] put up $150,000 to entice Parramatta to town earlier this season to take on Gold Coast at their Glen Willow complex”. If that number is correct, it is a significant amount for a regional Council. That is a number straight from the bottom line of Council in the hope that it will boost spending in the cafes, restaurants and accommodation providers in the town. The Mudgee Guardian reported 9,132 people attended the game. If you estimated that only one-quarter of those in attendance travelled to Mudgee and stayed overnight, that would be an injection of some $300,000 to the local economy. At face value, that would seem like a reasonable outcome. The tricky part of this situation is that the businesses in Mudgee may well have benefited to the tune of $300,000 but that doesn’t inject money into the Council coffers to cover the $150,000 outlay. I would suggest that this was a successful venture for the Council but not necessarily a sustainable model because the Council would not be able to keep paying out $150,000 for every game without other services suffering.
The entire concept of concessions and reductions is a tricky one and an area that Councils are always grappling with. Let me know your thoughts on the concept at firstname.lastname@example.org.
Clr Mathew Dickerson
Mayor of the City of Dubbo