The Press Council considered a complaint from Bayside Council about an article published by the Sydney Morning Herald in print on 31 October 2020 headed “$1b lost in council merger failures” and online headed “‘Rates will have to rise’: Council mergers in crisis as losses mount”.
The article reported “[the] NSW government’s controversial merger policy is in crisis, with the 20 amalgamated councils losing $1.05 billion in three years and ratepayers facing hike in rates and cuts in services”. It reported that LSI Consulting, “[u]sing the published audited financial statements of NSW’s 128 councils … created a productivity index to measure the operating performance of councils dating back to 2016, when NSW forced the super council mergers”. It reported that LSI’s productivity index “measures councils’ output relative to input. Output measures the services delivered by each council relative to the income they receive from rates, parking fees and other regulatory income. Input is what each council pays to deliver the services”.
The article reported that “[t]he data showed that the productivity index of the 20 merged councils went backwards 16 per cent since amalgamation” and “[t]he worst-performing council in NSW was Bayside Council, formed from the merger of Botany Bay and Rockdale City councils. Its productivity has gone backwards since the merger, losing the equivalent of $155.7 million in productivity losses over three years”. The article also includes a chart compiled by LSI Consulting called ‘In the red: The 10 worst-performing merged NSW councils’ which showed Bayside Council at the top with a loss of $155,721,400.
The article reported that a Bayside Council spokesperson said: “‘On a cumulative basis, for the past four financial years since amalgamation, Bayside has reported an operating surplus of $162.5 million (including capital grants and contributions) or a surplus of $17.9 million (excluding capital grants and contributions)’”. It also reported that principal LSI Consultant “disputed the council’s figure and said part of the deterioration in productivity since the merger was due to a blowout in labour and other costs”.
The complainant said that the article was inaccurate as Bayside Council is one of the state’s strongest performers, making productivity gains of $78 million from September 2016 to June 2019 and productivity gains of $104 million to June 2020, and is operating in surplus. The complainant said the publication used incorrect figures from LSI Consulting’s report as it failed to include inputs from rates revenue of $70 million for 2016-17, and did not account for the fact that in the 2016-17 financial year the rates revenue for Bayside Council was recorded in the financial accounts of the two former Councils (Rockdale and City of Botany Bay) before the merger. It said while the expenditure was recorded in the accounts of Bayside Council, it was not formally amalgamated until September 2016 and not May 2016, when other NSW councils were amalgamated. The complainant said that re-calculating the index would result in Bayside Council being the best-performing merged council with positive productivity measure.
The complainant also said it was factually incorrect to allege that Bayside Council had a blowout in labour costs as Bayside Council’s labour expenses had only risen in line with inflation and standard award increases.
The complainant said the publication relied on factually incorrect data and that Bayside Council was not given the opportunity to correct the record or a right of reply to the claims before or after publication. It said the journalist sent a query a week before the article was published and that no questions were asked about productivity gains and losses. The complainant said Bayside Council had written to the Sydney Morning Herald editor about the factual inaccuracies in the article within two days of publication. It said it is looking for a retraction, an apology and for the publication to cease referring to the original article in subsequent articles.
The complainant said that the article has caused alarm and unnecessary angst amongst leaders in the community regarding Bayside Council being the worst-performing council.
The publication said there were no errors in the original article and that it accurately reported LSI’s findings at the time of the article’s publication and that since publication, LSI’s productivity index has not changed. It said there was no reference to a rates revenue of $70 million in Bayside Council’s annual financial statements for the period of 10 September 2016 to 30 June 2017. It said that, since the $70 million was not included in the publicly available financial statements, it was therefore not included in the 2017 calculations.
The publication said that in relation to labour costs, the employee numbers reported by former councils in 2016 were 324 FTE (Full-Time Equivalents) in Botany and 361 FTE in Rockdale, totalling 685 FTE. It said that Bayside Council reported in June 2019 a total FTE of 767, which is an increase of 11.97%.
It also said that prior to publication of the article it spoke to the relevant person at LSI who confirmed its calculations included Botany Council revenue from 2016. The publication said it had reported the correct figures from the outset and no error had been made. The publication also noted that Bayside Council’s entire response to its queries was included in the original article. In regard to the correspondence it received from the Mayor of Bayside Council, it said it responded to his concerns and suggested the Mayor contact LSI Consulting about the methodology it used to arrive at the conclusion it did. The publication proposed to attach a footnote to the original story to the effect that a recalculation of the index taking into account unaudited financial information subsequently provided by Bayside Council to LSI, would show that Bayside was not the worst performing council.
The Council’s Standards of Practice applicable in this matter require that publications take reasonable steps to ensure that factual material in news reports and elsewhere is accurate and not misleading and is distinguishable from other material such as opinion (General Principle 1) and that material is presented with reasonable fairness and balance, and that writers’ expressions of opinion are not based on significantly inaccurate factual material or omission of key facts (General Principle 3). They also require publications take reasonable steps to provide a correction or other adequate remedial action if published material is significantly inaccurate or misleading (General Principle 2) and provide an opportunity for a response to be published by a person adversely referred to (General Principle 4).
The Council considers that in writing the article it was reasonable for the publication to rely on the factual material contained in the report by LSI Consulting, as it was a reputable source of productivity information regarding Local Governments over a number of years and its report was based on publicly available information. The Council accepts the information in the LSI report was relayed accurately in the article and concludes General Principle 1 was not breached. The Council also considers the publication took reasonable steps to present material with reasonable fairness and balance by including comments from Bayside Council and other relevant Councils in the article. Accordingly, the Council concludes that General 3 was not breached.
However, while the Council accepts that the publication relied on information that it believed was accurate at the time of publication, and that the authors of the report do not wish to update that information as previously considered, the Council nonetheless considers that the publication had an obligation to update the story. The Council considers that independent of any action by LSI Consulting, once the publication became aware there was an apparent anomaly relating to the base year for the productivity calculation, it was obliged to update the article. While the Council acknowledges the publication’s subsequent offer of a footnote, it does not consider this proposal sufficiently remedies the matter given the relevant information relied on was not itself being updated, and notes the publication ought to cease referring to the original article in any subsequent articles. Accordingly, the Council concludes that General Principles 2 and 4 were breached.
Relevant Council Standards
This Adjudication applies the following General Principles of the Council:
Publications must take reasonable steps to:
1. Ensure that factual material in news reports and elsewhere is accurate and not misleading, and is distinguishable from other material such as opinion.
2. Provide a correction or other adequate remedial action if published material is significantly inaccurate or misleading.
3. Ensure that factual material is presented with reasonable fairness and balance, and that writers’ expressions of opinion are not based on significantly inaccurate factual material or omission of key facts.
4. Ensure that where material refers adversely to a person, a fair opportunity is given for subsequent publication of a reply if that is reasonably necessary to address a possible breach of General Principle 3.