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7Itiswronglyassumedthatpopulaonsizeaccuratelyrepresentsthesizeofacouncil.Whatfollowsisinvariablyastascalcorrelaonofcouncilpopulaonsizewithpercapitacostsandaclaimthatlargerpopulaonsizesleadtolowerpercapitacosts.Amomentx19srex1aeconsux19cestodemonstratethebasicerrorsinvolved.Numerousfactorsapartfrompopulaonsizeax17ectservicecosts.Forexamplenotonlydoesthecomposionofservicevarygreatlybetweencouncilsbutdemographicenvironmentalsocio-economictopographicalandotherfactorsrendercalculaonsbasedsolelyonpopulaonsizefraughtwithdix19cules.Secondlyinquirieswhichemploypopulaonsizeasaproxyforcouncilsizealmostneverdisentangletherelaonshipbetweenpopulaonsizeanddensity.Cungedgeacademicresearch-suchasthe2009workbyHolcombeandWilliamsintheUS-showsthatlocalauthorieswithlargerpopulaonsalsotendtohavehigherpopulaondensies.Populaondensityisboundtohaveanimpactoncostsasitischeapertoprovideservicesoversmallratherthanlargegeographicareas.Asmallercouncilareainevitablymeansfewerx1cnetworkservicesx1dsuchasroadswaterandsewersperhouseholdaswellaslowertravelandothercosts.x19LocalcouncilsustainabilityhasbeenmeasuredbyagroupcalledFiscalStarwhowerecommissionedbyReviewTodaytodothethirdsurveyin2009.FiscalStardex18nedx18nancialsustainabilityintermsofmaintaininganinvestmentgradecreditrangthroughachievingthreeprimarygoals.SustainableVulnerableUnsustainableInner-Metropolitan1342Outer-Metropolitan1147RegionalCoastalUrban3312RegionalInlandUrban638RegionalRural1328Total461637InfrastructurebacklogcrisisTheheartoftheproblemisthatmostcouncilshaveahugebacklogofinfrastructureroadsstormwaterdrainsbuildingsetc.inanunsasfactorycondionthatneedstoberehabilitatedtobex1csafesoundandsightlyx1d.Forthe99councilssurveyedtheunweightedaverageproporonofinfrastructureinanunsasfactorycondionwas6.InonecaseCabonneitwas39.FiscalStaresmatedthatthetotalinfrastructurebacklogforall152NSWcouncilsexcludingWaterandSewerageassetswas4.5billioninJune2008about15lessthantheLGIx19sesmateof5.3billionforJune2005.Onesuspectsthisimprovementwasaresultofbeerassetcondionassessmentsincelocalgovernmentissllunder-spendingonrequiredrenewalsbyabout150millionayear.Infrastructurebacklogshavedangersincludingroadpotholesunevenpavementconcretecancerinbuildingsandcarparkscollapsedculvertsandstormwaterdrainsbelowroadsroenmberbridgesandunstableretainingwalls.WhatcausedtheinfrastructurebacklogNSWhasbeenunderspendingoncapitalworksrelavetooperaonsinthe30yearssinceratepeggingwasintroducedin197677.Overthis30yearperiodlocalgovernmentinNSWexpandedthecostofitsrecurrentoperaonelevenfoldwhereasitsrealspendingoncapitalworksonlydoubled.Henceitsproporonofitstotalspendingdedicatedtoinfrastructurerenewalfelldramacally.Tox18xtheinfrastructurecrisisandthereforerestorex18nancialsustainabilitylocalcouncilsneedtoputabrakeontheirfastgrowingoperangcostssothatfuturegrowthintheirrevenuescanbeappliedtocapitalratherthanrecurrentspending.FinancialSustainabilityAminimum2.5budgetsurplusraosothatfuturetaxpayersarenotlex1bwithanexcessiveshareofthecostsofcapitalworks.Amaximum60netdebtandotherx18nancialliabiliessothatdebtchargesremainax17ordable.Amaximum2unsasfactoryinfrastructurethatisunsound.ApplyingthesebenchmarksFiscalStarfoundthat37ofthe100largestcouncilsinNSWwerex18nanciallyunsustainable.Another16councilsalsoneededtotakedrascaconbecausetheirx18nancialsustainabilitywasmarginal.Theunsustainablegroupincludedalargenumberoffastgrowingregionalurbancouncilsincluding12ofthe18regionalcoastalurbancouncils.Halfofthe22outermetropolitancouncilswereeitherunsustainableorvulnerable.Theaveragenetdebtandotherx18nancialliabiliesofcouncilsasaproporonoftotaloperangrevenuewasonly4butitrangedfromnilto193Cox17sHarbour.Itshouldnotexceed60forasinglex13Acreditrang.Onaveragecouncilshadanoperangsurplusof2comparedwithadesirablerangeof2.5to8.Overalltheoperangresultrangedfromasurplusof43Parkestoadex18citof29Tweed.37ofthe100largestcouncilsinNSWwerex9nanciallyunsustainable.Over30yearsoperax12ngexpendituregrowselevenfoldwhilecapitalexpenditureonlydoubledLocalGovernmentExpenditureasaPercentageShareofGDP2006The2009NSWlocalgovernmentsustainabilitysurvey