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Breaking up is hard to do: the costs of de-amalgamation of the Delatite Shire Council

Author: JOSEPH DREW and BRIAN DOLLERY
Published in PFM, Vol. 15 No. 1

In 1994, the Victorian Government instituted a radical council amalgamation program which eliminated over 60% of all local authorities. In the forcibly merged Delatite Shire Council local resentment engendered a sustained grassroots campaign which eventually reversed its contentious compulsory consolidation. The resultant de-amalgamation was the first in modern Australian local government history, although demergers have occurred in other countries, most notably in Quebec in Canada. Whilst economic theory sheds much light on decentralization, by contrast little work has been done on how best to conduct council de-amalgamation. In this paper, constitutive accounting theory is applied to the Delatite Shire Council demerger. The empirical evidence flowing from our analysis contributes to the embryonic literature on municipal de-amalgamation and thereby provides public policymakers in other local government systems with an account of how accounting decisions play a critical role in the future of de-amalgamated municipal entities.

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