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For The Labourer is Worthy of His HireLocal Government and Industrial RelationsMichael Moore'This is your last chance to ask yourselves the ultimate questions, laze and gems, positively your last chance; 'How long could a modern city function without the garbos,the sanos and the pissos?' Frank Hardy
Hardy's initial idea for the book from which this quote came the 'Outcasts of Foolgarah' was conceived from a strike of garbage workers in a Sydney suburb circa 1956. The book is described as "the epic confrontation of the lurk men versus the lurk detectors". It depicts a culture where 'every job has its prerequisites---a politician has the VIP plane and the chauffeur driven car to take his wife shopping, the business executive has the expense account, the wharfie has the busted crate of cigarettes, the jockey has the percentage punter, the slaughterman has the odd lambs fry and sweetbreads, the vice squad detective has the occasional bit of vice, the investor has the tax free quid.' Over the past 40 years or so we seem to have built up a culture where it has been seen as legitimate to take a bit on the side if you can get away with it. Local Government has been no exception. By and large Councils are a monopoly within their particular fief. The services they provide and the facilities they control are not subject to competition nor are they subject to any formal comparative performance measurement. This fief is protected by State Government Legislation---the Local Government Act---and confers autonomy for each of Victoria's 210 Councils within their boundaries. Professor Fels of the Trade Practices Commission was recently quoted in 'The Age' as saying 'If there is an artificial monopoly, it is likely to be associated with high prices, inefficiencies and usually unjustifiable cross subsidies'. His remarks were aimed at public water and sewerage authorities, but could equally be applied to local councils. Evidence abounds about multiple failings in how local councils are run. The Melbourne City Council has been no exception. In the five years prior to 1990/91 the following trends could be identified.
In a public speech in July last year, the new Chief Executive, Elizabeth Proust, said "I have never worked in an organisation with such antiquated financial systems, nor in an organisation with such fragmented information systems..... We are in no position to know the cost of our services, let alone to know when we bring down a budget we can actually be confident we have included all the costs that we need to include." The accounting system being used defined types of transactions by a combination of Workgroup, Costcode and Dissection Codes. There were over 600 workgroups, many of which duplicated one another. 25% had no budget amount against them but had incurred expenditure. There were 12,000 cost codes most of which were obsolete or duplicated. The dissection codes had insufficient breakdown for management to know how much the Council had spent on a particular kind of goods or service. With Capital Budget expenditure in excess of $30m per annum there were no guidelines on the follow up of outstanding projects, or projects with large cost variations, nor was there any criteria for deciding capital works priorities. In one case machinery was purchased with 70% of its cost set aside for a provision. Rate Income is by far the most important source of revenue for the Melbourne City Council. This year more than $108m will be raised. Annual property rates are based on Council valuation as are also Land Tax and Melbourne Water Rates. In August 1990 the manager of the Valuations Department reported as follows:
Given the two above examples of inefficient management it is not surprising that there have been difficulties with labour management and work practices. Last year a private consultant reported the following in relation to the MCC refuse collection service. In the Residential refuse collection current runs require a staffing level of 50. Within the service there are 50 assigned staff plus a pool of 18 to cover absences. However, absenteeism is so endemic that there are frequently insufficient refuse personnel in attendance to make up a complete crew. In these circumstances the refuse service is completed by ad hoc transfer of staff from cleansing operations. As a result streets are unswept or swept to a lower standard. There are 217 working days in a year. The average employee in the residential refuse collection area has 12 RDO's, annual leave and is absent for a further 21 days. The average employee is therefore present for 75.6% of normal working days. Weekend work which attracts overtime and penalty rates, is well attended. As the average refuse collector works a job finish system a normal working day is 5½ hours. Under this system they knock off on completion of their run. On a rough calculation they were working less than 20 hours per week last year. In January 1991 the MCC experienced a strike in the refuse collection area. No garbage was collected for 10 days in the hottest month of the year. The issue was the dismissal of an employee who had taken the day off to work a second job. The opening negotiating position of the trade union was an offer that if the Council re-employed the man he would not claim sick leave for the day absent. The report gave details of comparative production levels on a tonne shifted per employee per annum, as follows:
The MCC has a twice weekly collection compared to the other municipalities which have only one and the residential service is largely unmechanised using cans rather than bins which most other municipalities now use. Previous attempts to improve productivity have been unsuccessful. Even when the Union agreed the staff have rejected solutions. The Council needs to spend $1m on the purchase of mobile bins. WorkCare claims have been especially bad in the garbage collection area. Indeed WorkCare claims have been bad for the whole of the MCC workforce. In a 2 year period for 1988 and 1989 on average every employee made a WorkCare claim. The WorkCare premium rose to $5.2m or about 7½% of wage costs. This being for both blue and white collar staff. Actions taken to rectify this problem have this year resulted in the premium falling to $3.6m. It is expected to fall further next year.
Workplace Restructuring
September 1991 has become a watershed for employment conditions of all municipal employees in Victoria. All of the 387 pay scales were abolished and a new broad band classification structure introduced. This reduces the number of pay scales to 30: Under the old scales most employees received automatic pay increases each year. These have been abolished and replaced with a new system which absorbs all allowances previously paid. The new scales have 8 bands and 4 levels. Generally speaking the Municipal Employees Union or Outdoor Employees will be in bands 1-5, Australian Services Union (old MOA) or indoor employees 3-8 and engineers 5-8. In the Victorian classification those on minimum rates of pay and over-award payments can be negotiated. However progress between bands must be agreed with the Councils on the basis of gaining agreed skills or by attaining satisfactory performance objectives. The MCC has a different arrangement which does not allow for over-award payments. Workplace Restructuring provides for a system of work and job redesign. The MCC began this process over 12 months ago and is about 50% through. It anticipates completion by the end of the calendar year 1992. However, 300 positions have now been eliminated. In the opinion of the Industrial Officer at the Victorian Employers Chamber, Metropolitan Councils will have the ability to achieve cost neutrality. In other words the improvement in work practices will offset 100% of the wage increases. The MCC is anticipating a 4% reduction in wage costs after 5 years by which time it will have been able to shed 20% of its workforce. In the case of rural councils where workplace inefficiencies are less the cost is likely to be substantial as savings will be much less achievable. Also rural councils have always had much more multi-skilling. There is a training clause in the award which provides for improvement of skills through training programmes. The MCC claims it has in-house training programmes in place and is providing for employees to attend TAFE courses. It appears that not much is being done in this area by most councils as yet and it will probably be another 12 months before staff appraisal and improvement systems are in place.
Superannuation
The MCC has its own superannuation scheme. Currently every employee has the option to contribute 6% of their salary to the fund. For those employees who contribute the 6% the Council is contributing 15½% making a total of 21½% going into the fund. An employee doing this would have to contribute 20% of their salary to a private fund to retire with the same benefits, according to public comments made by the Fund Executive Officer. The Council plans to have the benefits from the fund 'fully funded' by the year 2000. The 15½% contribution is assessed as being necessary to achieve this. The investments of the MCC Fund are professionally managed by Rothchilds and NatWest. I was elected a Councillor in August 1988 and appointed by the Council as a Trustee of the Fund. The other Trustees were, another Councillor, the Town Clerk, and three employee representatives, a welder, a gardener and a union organiser. At the first meeting I attended a report was tabled on the Investment Performance of the fund then managed by ANZCAP, a fully owned subsidiary of the ANZ Bank. The Report indicated 25% of the Fund had been lost during the year with no contribution from income on the investments, roughly $12.5m had been lost. The Trustees employed a consultant to examine the investments by ANZCAP over the previous 4 years. ANZCAP was replaced as investment manager. The investments in the fund over these 4 years had been rolled over on average twice per year incurring commissions for ANZCAP of in excess of $1m per year. The Consultant described the investment management in gambling terms---'punting'. Very little had been invested in 'blue ribbon' stocks in the top 50 or 100 stocks of the All Ords. At one stage about 15% of the fund (over $5m) had been invested in Quintex. Subsequently $2m was lost in this stock. Investments had been switched from one continent to another frequently ($2m lost in the UK) and large punts had been taken in narrow areas like developers and gold at various times. During the first 3 years leading to October 1987 they had been quite successful, but after this everything went wrong when Second Board Stocks became unwanted. Legal advice on the possibility of a negligence suit resulted in rejection along the lines of 'caveat emptor'. That is the Trustees should have been aware what had been occurring from the regular reports being received. Some meetings of the Trustees became tactical battles between the three worker representatives on one side and the two Councillors and Town Clerk on the other. Of particularly sensitivity were decisions relating to Disability Benefits available from the Fund. These are available for anyone judged to be Totally or Permanently Disabled. Sometimes some very sad stories of workers unable to move because of a bad back were found to be not quite true when the doctor at the Industrial Clinic found dirt from gardening under their finger nails. There was one case of a former street sweeper, a batchelor resident at Macgilles Hotel for many years, who consumed over 40 beers per day. His physical systems were in such a poor state he was for all intents and purposes useless. However, although his state of health was certainly self inflicted he qualified for the extra benefit.
Parking Enforcement
Work practices in this area have been the bane of Councillors for some years particularly since 1985 when parking enforcement officers adopted the practice of 'pairing' to defend themselves from irate motorists. This caused a loss of 22% in productivity. Other practices include all officers returning to their Elizabeth Street Office near Victoria Market for lunch breaks, certain areas not being attended to as they should, lost productivity in wet and hot weather. Coin collectors had substantial down time for occupational health and safety reasons. There has been considerable difficulty introducing shift work in lieu of overtime. Of 197 employees in the Parking and Enforcement Section, 50 are involved in Administration and prosecutions. However, Council reports indicate it takes up to 3 months to respond to correspondence and there are high rates of errors in the issue of Infringement Notices. Even a 10% improvement in productivity would result in savings of $1m in costs and additional income of up to $2.5m. In one incident about 18 months ago, Parking Officers refused to collect fees from a Council car park incurring lost income of over $100,000. The Parking Officers had sued a motorist over an incident on their own initiative incurring costs of $7,000. They asked the Council to pay the bill. The Council refused---legally it is unable to pay someone else's legal expenses. The matter was eventually settled in the Arbitration Court, the Council agreeing to an unusual settlement to avoid further losses. No doubt a large percentage of the responsibility for the mess the MCC has been in was caused by inefficient management and worker and union participation in poor work practices. However, the picture would not be complete without an examination of the role of the elected Councillors. The Central Melbourne region which comprises the municipalities of Melbourne, Port Melbourne, South Melbourne, St Kilda, Prahran, Fitzroy, Richmond and Collingwood, in 1905 had a population of 321,000. In 1989 the population was 227,000. Residential occupation has declined while commercial, industrial and retail has increased. In the Municipality of Melbourne (see Table A) 90% of the rates for 1991-92 will be paid by Commercial, Industrial and Retail Ratepayers while 18 of the 21 Councillors are elected by residential voters. In Port Melbourne where 80% of the rate base is commercial (see Table B) only 9% of enrolments are non residential. Port Melbourne has for many years had a council entirely of ALP endorsed Councillors elected by the residents. The Central Melbourne Region as a whole has a dominance of residential interests even though non-residential interests have the major presence. At the last election for the MCC in August 1991 in Central Ward which this year will pay 77.5% of the total council rate income that is over $80m, 80% of corporations either did not vote or did not enrol. Enrolment and voting is compulsory for residents but not for non-residents. In the Melbourne City Council the make up of the elected membership is further skewed by the social and occupational make up. Two groups dominate---Public Service employees and own account professionals (Doctors, Lawyers and Shopkeepers). Private sector employees and employees in the corporate sector are almost totally absent. Table C indicates the situation is much the same in the Central Melbourne Region as a whole. In addition, there are 225,000 people employed in the Municipality of Melbourne who are excluded from voting. Less than 1 in 20 of the employees live in the municipality. The business sector appears to have a perception that local government is unimportant. The consequence from this is that there is less emphasis on cost and efficiency issues and more emphasis on issues relating to local residential matters. Health, Welfare and Recreation facilities are more prominent. The level of rates is relatively unimportant. In the recent Discussion Paper Central Melbourne---Options for Effective City Government, the author said 'The inevitable outcome is a labyrinth of administration around key strategic issues---to such an extent that a failure to adequately prioritise, a tendency to talk rather than act, and a frittering away of public resources is almost predetermined.' (p.33) The Melbourne City Council along with other municipalities in Victoria is struggling with the award restructuring process to improve productivity. A new management team commenced at the MCC in mid 1990. It claims that over the past 18 months management improvement has included a range of techniques such as commercialisation of internal services, reorganisation, work and job redesign and contracting out. The Council has recently agreed to contract out coin collection services. The contracting out issue is complicated by the social responsibilities of the Council, it has said. Over the past 2 years MCC rate income has increased by 41% (see Table A---Total Rate Collections). Since 1982 average annual rate collections have increased by over 20% per annum. The jury must be still out as the benefits of management improvement have not yet been seen by ratepayers. The Award Restructuring process has emphasis on simplified classifications, multi-skilling, career paths and training. All fine objectives but as yet it has failed to deliver. For example; with the MCC garbage collection service the Council has decided to allow 2 years for the service to be brought up to 'best practice' industry standard. With the description of the service previously described the methods of improvement being employed appear to be painfully slow and certainly unacceptable to private enterprise.
What could be done?
There are now many examples where similar situations to those experienced by Councils in Victoria have existed in other countries. These have been resolved resulting in enormous savings and improvements to services. Wandsworth Council in inner London had been experiencing similar problems to MCC with refuse collection. Management had succeeded in reducing the number of collection rounds by 7 out of 35 rounds and had informed the Council this was the maximum attainable. At Christmas 1981 there was a rash of complaints about the service. No work was being done because of icy conditions--- up to 4 weeks with no collections in some areas. Householders were being intimidated if they failed to pay a Christmas tip. The Council decided to put the service out to competitive public tender. The workers went on strike on the eve of the Council Election. The Council was returned and the strike collapsed. The workers were offered generous redundancy terms (3 times normal). Half of this was withheld as a 'Good Behaviour Bond'. The takeover was painless---the successful tenderer purchased the Council fleet and leased the existing depots. The savings generated over 5 years were 45% after allowance for severance costs. Wandsworth Council has privatised a large number of its activities with average savings of 30% over 5 years. The remainder of its services have been put through a system of competitive tendering against the private sector. These services have remained in-house but the average savings have been 22%. Wandsworth Council now has about half the staff of neighbouring Councils. Total savings over 5 years was 25m Pounds out of expenditure 90m Pounds. In the United States a recent survey of 85 municipalities in Los Angeles County revealed the following services were more costly in-house by the following:
Another report in the United States covering 1400 cities and countries showed that with refuse collection there were 50-60% cost savings with contracting out. The report said most municipalities don't know their cost. They don't put in all direct costs and don't include overheads. There were also more fringe benefits paid in the public sector. In New Zealand all Councils are going through a system of privatisation. For example Wanganui Council, a city of 40,000 people has set up a Service Delivery Working Party. It has two outside business representatives, one wages staff, one salaried staff, three councillors and three executive staff---a total of 10. This Committee is progressively going through each service the council provides and forming it into a Business Unit. The Working Party has a framework for determining the best method of service delivery. Each service is formed into a Business Unit for this purpose. The impetus for this initiative came from Central Government pressure to see that road subsidy funds were being efficiently used. The main advantage of the adoption of the 'competitive tendering' approach to Council Service delivery is that it puts the emphasis on the efficiency and effectiveness of the function being carried out. Most attempts at reform in Victoria over the past 30 years have emphasised boundary change in the 210 Council structure to reduce administrative cost and provide more equity where the users of one Council area may be obtaining benefits from services of another municipality without paying. While there certainly would be benefits from merging Council Administrations there is much greater scope for cost savings in reforming the functions of services being delivered through the 'competitive tendering' process. In the past functions carried out by Victorian Councils have been largely confined to within their own particular boundaries. There is absolutely no reason why economies of scale cannot be obtained by competitive tendering across boundaries. There is also no reason why administrations cannot form themselves into business units and tender for the administration of another municipality. Through competition Councils could move into a natural merging process. In South Melbourne, for example, at the present time, the rates are only two thirds the level of Melbourne City Council. South Melbourne has claimed they are an efficient and effective Council and should not have to share the burden of Melbourne City Council's inefficiencies through any forced merger. If they can prove their point they should be able to make a takeover bid for Melbourne City Council administration.
In Conclusion It seems to be now long past the time when ratepayers such as in the City of Melbourne should have to put up with the bad work practices, inefficient management, minority groups and Councillor control of local Government which is now persisting.
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