AN ALTERNATIVE APPROACH TO IDENTIFYING COUNCILS ‘AT RISK’: A REJOINDER TO BOB WALKER AND STEWART JONES

Abstract

Murray and Dollery (2005) developed a statistical model that sought to determine whether the key performance indicators (KPIs) published by the NSW Department of Local Government (DLG) could adequately predict the ‘at risk’ status of local councils that had partly been assigned to councils on the basis of these KPIs. Walker and Jones (2006) contend that Murray and Dollery (2005) were (i) attacking a ‘straw man’ by erroneously misinterpreting DLG procedures and (ii) their model exhibited various econometric problems. In addition, Walker and Jones (2006) developed an alternative model that defined municipal sustainability as the ability to maintain service provision at pre‐existing levels. This Rejoinder addresses the criticisms raised by Walker and Jones (2006) and assesses their alternative model. It is argued that such a concept is more relevant to the public sector than conventional ‘financial distress’ prediction models. The estimates provided by NSW local councils of the cost of upgrading infrastructure to a satisfactory condition were used as a proxy for levels of distress. Independent variables were selected from a range of KPIs published by the DLG. While MD found that most of the DLG performance indicators were not statistically significant in their model (and therefore not useful discriminators of council distress), this study reaches different conclusions using a different selection of indicators, and a distress variable construct more appropriately linked to service delivery.