The potential threat of amalgamation has returned for the four Illawarra councils, after Shellharbour and Kiama were judged to be “not fit” by the state’s government regulator.

On Tuesday, NSW Local Government Minister Paul Toole released a report from the Independent Pricing and Regulatory Tribunal (IPART), which showed just 52 of 139 councils were financially fit.

Councils were assessed on their ability to be fit in the future, with Shellharbour and Kiama failing to meet the government’s financial target.

This led IPART to suggest a “merger between Wollongong and Shellharbour could be explored”.

Also, a merged Kiama and Shoalhaven council could be considered in the future, as it “would likely perform better in terms of long-term financial sustainability, in particular for Kiama given the potential efficiencies available from a merger”.

The minister also indicated mergers would be on the cards for 87 NSW councils judged not fit.

Wollongong and Shoalhaven councils were among 52 councils judged to be financially fit.

The report indicated that although Kiama council has been assessed as not fit for the future, it satisfied criteria relating to scale and capacity, as well as infrastructure and service management. 

The council was assessed as not satisfying criteria regarding sustainability and efficiency. 

Councils must respond to the report by November 18.

According to a Kiama council statement, the main criteria being used by the state government to assess potential mergers is the ‘scale and capacity’ category.

“Kiama council has satisfied this criteria and therefore we believe that Kiama will remain independent,” the statement said. 

“Despite meeting most of the criteria, council is disappointed with other conclusions drawn by IPART in the report.

“Kiama council is confident that the issues raised in the report are addressed in our long-term financial plans.”

Council expressed concerns that some of the assessment methodology used for this evaluation does not take into account these long-term financial plans.

“We also note that the assessment contains ambiguous comments and inconsistencies that we will raise in our response to the state government’s assessment.”

Council believes the long-term financial and social gain to result from the completion of the Centre of Aged Care Excellence was not properly considered by IPART.

A report to Tuesday night’s council meeting indicated that it appeared the Blue Haven Centre of Excellence is a key factor in the calculation in areas such as loan indebtedness and operating performance comparison. 

However, the IPART report points out the council will “meet the benchmark for the own source revenue ratio by 2019-20”.

Cr Petschler said council was surprised by the report, given the previous Independent Local Government Review had indicated the region’s councils be left unaffected by boundary alterations.

“I believe that council is close to meeting the assessment, when taking proper account of our investment in the Aged Care Centre of Excellence and our involvement in a key trial Joint Organisation (with neighbouring councils),” Cr Petschler said. 

He said they were not in talks with other councils regarding potential mergers.

At Tuesday night’s meeting, councillors resolved to host a briefing to help develop an appropriate response. 

The topic was the issue of passionate debate at the meeting. 

Cr Petschler said he didn’t believe Kiama was “an urgent area that they’re looking at” for amalgamation. 

Deputy Mayor Warren Steel said “we’re a long way from amalgamation”. 

Councillor Andrew Sloan said he was less optimistic than some of his fellow councillors.

“This IPART assessment of council is the flimsiest, shoddiest thing I’ve ever seen in my life,” he said.

“The fact that they have marked us as not fit for the future… They’ve done that, predominantly on the fact that we’re going to be in a fair bit of debt in 2018/19 because we’re building a revenue raising Blue Haven.

“It really is pathetic.

“I just think it’s completely unreasonable that they’re giving us 30 days to put forward a proposal on how we’re going to become financially fit for the future, when we know ourselves and (from) our long-term planning that we are.”

Council will meet with their auditor on Wednesday to begin work on their submission. 

Cr Petschler said their submission would propose that they are a “sound council, we do have scale and capacity, and we do have the financial standing to be able to continue as we are.”

Kiama MP Gareth Ward said the report was conducted independently, and the government would consider all responses received from councils.

He also wished to emphasise that the review didn’t recommend any amalgamation for Kiama or Shellharbour. 

“(Kiama) council met many of the criteria,” he said.

“I have some tremendous faith in the Mayor, and I’ll continue to work with Kiama council throughout this process.”

A community-based “Say NO to Kiama Amalgamation” Facebook page has also been established in response to IPART’s findings.