Corporatisation what it means

With many Victorian Councils setting up business units as part of the Compulsory Competitive Tendering process, the question has been raised should the next step be taken - to corporatise? This was the theme selected for a recent seminar conducted by Local Government Professionals.

Speakers, including Councillors, Officers, union representatives and the CEOs of corporatised utilities, looked at the pros and cons of Local Government moving down this path.

In introducing the seminar program, Judy Leitch, General Manager of Human Services at Glen Eira Council said that corporatisation means the legal separation of one or more business units from the main entity, in this case the Council. Business units would be fully commercial, operating as a private corporation and headed by an independent board of management.

She pointed to the irony that, at the same time as the business world is realising that trust, loyalty and ethics affect profits, community services are putting these aside to make profits.

Looking at the governance issue, Councillor Andrew Rowe from the Victorian Local Governance Association said that a Council's legitimacy comes from it representing the interests of the local community, where the interests of the citizens are primary.

"If you think Local Government is merely the agent of State Government, the purchaser of services, then Local Government and Councillors may as well pack up their tents and go fishing," he said. "We have turned citizens into customers and now we are talking about turning them into shareholders, but when did we include residents in this debate?"

He warned that CCT began under Commissioners, when elected representatives were out of the equation. With the return of Councillors they have found themselves locked in to a schedule and unable to view tender documents on the basis of commercial confidentiality.

"Councillors must be involved as elected policy makers," he said. "There must be a full debate on these issues. If your Council does not do this, you do not need to debate the issue, you are already in corporate governance."

Five different approaches to an increased business focus by Local Government were presented at the seminar by Manningham, Surfcoast, Moreland, Wodonga and Ballarat Councils. When Surfcoast Shire set up SurfLink in December 1995, creating a client/provider split in response to CCT, this also provided the opportunity to broaden the Shire's economic base.

"Council's Vision 2020 seeks to facilitate economic development that will not compromise the natural environment," said Michael Courtney, General Manager SurfLink. "With Telecommunications and Information Technology being growth areas and consistent with Council's Corporate Strategy, SurfLink now not only comprises Council's Business Units but has established NetPress Digital Printing, NetExpress Internet Services, Powerband Data and Telecommunications and TouchLink touch screen technology."

With an annual turnover of $7.1 million, comprising 41% from Council services and 59% from commercial and external activities, SurfLink has already created jobs for 20 people. Its profitability also feeds back into the community by way of reduced rates.

"We did not approach increased competition as merely a means of saving money, but an opportunity for Council to become proactive, to diversify and create jobs, bringing increased wealth and prosperity to our local community," Michael Courtney said.