Doing it the Indigo Way (A story of a mouse that roared)

Today I want to tell you all about Indigo Way, an organisation that I believe is somewhat of a peculiarity not only within Local Government circles within Victoria but for my observations it is unlike any other local Government operation any where in Australia. But in the words of the great Scottish comedian Billy Connelly before I can tell you that story I need to tell you another one.

Not so long ago within this State there was once a Premier called "Jeff dot com" who had a grand scheme for the reformation of local government. As most people in the room would know this involved a complete shaking of the local government tree.

The legacy of this reform process can be seen today across the State with some shining examples of success on the one hand and at the other end of the spectrum Local Councils that are still at odds with themselves, still waiting for the proverbial dust to settle. Just this week for example Moira Shire was in the press again with a particular Councillor calling for a break up of the Shire into two smaller entities. In the middle ground are the vast majority of Councils who virtually continued on with a business as usual attitude and who will now probably use the latest policies of the State Government to retreat to more comfortable positions than could be afforded under the pressure of achieving CCT targets.

I don't want to talk about the problems that Jeff created as a result of his Government's reform program. Rather I want to talk about an extremely positive experience that can be directly attributed to this reform process.

Indigo Shire Council - The Birth:

Indigo Shire was created on 18^th November 1994, following the amalgamation of the former Municipal districts of The United Shire of Beechworth, the Shire of Chiltern, the Shire of Rutherglen, and the Shire of Yackandandah.

As an aside, for those of you that don't know - Indigo Shire is the southern half of the rural donut that surrounds the urban area of Albury/Wodonga. The NSW Shire of Hume is our northern counterpart.

We stretch from the Hume Weir in the east to the Ovens River in the west. The Murray river forms much of our northern boundary except for the bit were Wodonga squeezes in. We lie within the "Legends Wine and High County" tourism region and today boast a marvellous range of natural and built heritage including the National trust Town of Beechworth, the century old streetscapes of Chiltern and Yackandandah, one of the counrty's newest National Parks - the Chiltern Box Iron Bark National Park [which I recently read is to be expanded under the current government to include the Mt Pilot area], the world renown wine region centered on Rutherglen, a gold heritage to rival the more well known destinations of Bendigo and Ballaratt and a landscape setting equal to any in the State.

Today the Municipality comprises approximately 2,000 square kilometres with a population in the vicinity of 15,000.

Anyway enough of that........back to the story. The interim report provided by the Local Government Board for North East Victoria, originally recommended that Indigo could be consolidated with the Rural City of Wodonga. Despite this recommendation, the intense public pressure and political processes that followed resulted in the separation of the Municipality from the urban centre of Wodonga to create what was to become known as the Historic Towns Shire.

This decision mystified some of "those in the know" who thought the Greater City of Wodonga was a formality. The pundits predicted that it wouldn't last 5 years before Wodonga was put back together and Melbourne could say "I told you so" to the troublesome locals. The words of Jeff and later reiterated by his Minister Maclellan that "78 wouldn't be the final number of Councils" hung like the sword of Damocles over the fledgling Shire.

The creation of the new Municipality was a challenge to the newly appointed Commissioners in many respects including the particularly onerous task of consolidating the financial operations of each of the former Municipalities, made even more difficult by the 20% loss of rateable land to the neighbouring Shires of Alpine, Wangaratta and Wodonga.

The early budgets of Indigo were very difficult processes and the fact that the State Government introduced mandatory Municipal Rate Cuts certainly didn't help the situation either.

Indigo retained one of the lowest rating structures of all of the new Municipal districts due to the inherently low rating structures of the former Municipalities. This combined with the mandatory 20% rate cut presented the Commissioners with significant challenges. After intensive negotiations with the bureaucracy of the then Office of Local Government it was finally agreed that the rate cut to be applied to the Indigo Shire would be in the amount of 10%. Despite this reprieve the new Council was still required to pay out all of the cash reserves to the regional water authority and neighbouring Municipalities who had acquired parts of the original Shires.

As already mentioned there are those who argued at the time that the Shire was set up for economic failure. But looking back in hindsight there were a number of key factors that which weren't factored in, when forming this early opinion.

Firstly, despite some minor personal differences, the Commissioners who were appointed, held a deep genuine interest in the future of Indigo Shire. The Commissioners did not share the views of the bureaucracy in Melbourne and fought strongly to retain the independence of Indigo Shire and its financial sustainability from day one.

Secondly there was a strong sense of community for the establishment of the Indigo Shire. Very few Municipalities could boast that their community ‘marched in the streets’ to support a local government entity in its establishment.

Thirdly the geographical areas that now make up Indigo Shire collectively gave a tremendous focus to the Municipality from a tourism perspective significantly influencing its future economic direction. The Rutherglen Wine Region provided an excellent focus for the tourism industry in the central and western parts of the Shire while the development of the historic towns of Beechworth, Chiltern and Yackandandah provided Indigo with an image and a brand to market and promote itself; not only from a tourism angle but also in Government and community sectors. In this regard particularly the Municipality has been used as a case study by many other communities attempting to revitalise small country towns.

Lastly, a particularly significant factor that worked against the conspiracy theory was the key appointment of a CEO who had no local government experience. This was to be crucial in many of the early decisions of the Shire and in its attitude to managing change.

Doing it the Indigo Way

The need to embrace the changes caused by the introduction of Compulsory Competitive Tendering (CCT) and the creation of Indigo Shire was immediately recognised by the commissioners and the newly appointed CEO. Early on the need to completely separate the provider and purchaser side as far as possible was endorsed. When the new executive structure was created the commissioners created a vertical split as one of the options modelled by the MAV.

The requirement for competitive tendering introduced by the Victorian Government was to achieve a 50% tendering figure of gross expenditure. (Gross expenditure was to include depreciation.) This alone meant that Indigo Shire had to tender out 85% of its recurrent expenditure to achieve this figure. Interestingly this resulted in the Shire being one of the first Council’s to tender out many of the core functions of local government (including town planning functions).

This lead to the creation of the business arm of Council known as Indigo Way.

Today the process stands as an example of the success of the CCT process. In its first year of operations Indigo Way turned over 3.5 million returning a profit to the Shire of around $250,000.

From its inception, Indigo Way actively tendered in all shires surrounding Indigo for work. The little up-start neighbour was beginning to make a nuisance of itself. The first contracts held with neighbouring councils included health and building contracts with Towong Shire and the running of the Wodonga outdoor pool. This process was the start of the aggressive way in which the business still tenders for work both within and external to the Shire including within NSW.

The development of the in-house teams progressed as time went by. The Commissioners met as a Board and a Section 86 Committee status was created, a separate bank account was created, and the Council transferred accrued assets for employees to be recorded on the business units balance sheets.

The business entity Indigo Way is now based at Yackandandah, trading separately to Council which is located in Beechworth. The Board now comprises two councillors, two independent members of the public, the Shire CEO, the General Manager of Indigo Way, a staff representative and a consultant from the firm Peat Marwick. Payroll, insurances, fleet management, administrative functions etc are all separated. We even rent office space from the Shire. (I'm also proud to say that our ABN turned up last week... though I'm not sure the same can be said for our friends in Beechworth as of Monday). The Shire currently employs about 28 people while Indigo Way peaked at 220 last summer. Indigo Way currently turns over in excess of 8.1 million dollars a year with 30% of its business external to the Shire. It is now the second largest employer within the Shire.

Our staff provides a range of services including road maintenance, park and gardens, animal control, youth services, health, building and planning services, recreation services, waste management, cleaning services, home care and home maintenance, and administrative and payroll services.

Apart from the more obvious jobs, the wide variety of contacts have also included some more unusual tasks ranging from putting up Tourist signs around the state and the control of animals on VicRoads Category 1 roads from the edge of the Melbourne Metropolitan area to the Murray; mosquito monitoring in Moira Shire; waste management in Lockhardt Shire (NSW); planting thousands of trees at the new Albury sewerage treatment facility; and provision of a variety of services in Mt Hotham, Falls Creek and Mt Buller.

Indigo Way - The Future:

So where is this all heading you may ask especially given the recent demise of CCT and its replacement with Best Practice principles.

The 2000 – 2005 Strategic Plan identifies the current Mission Statement:

“To establish Indigo Way as a strong, independent organisation providing a comprehensive range of high quality programs and services through the use of innovative strategies, efficient use of resources and the employment of local people.”

The Strategic Plan identifies 4 key objectives that clearly set the direction for the future of Indigo Way and these are.

1. The Expansion of the financial base of Indigo Way.

That is adopting realistic and achievable financial targets that will underpin the growth of the organisation and its capacity to trade effectively.

2. Continue organisational development initiatives that lead to the establishment of Indigo Way as a separate entity.

Identifying a planned approach to the development of Indigo Way and separation from Council.

The stages of separation identified are;

0 – 2 years Section 86 Committee

3 – 5 years Separation

Separation may include the option of corporatisation and floating the business with Council being the major shareholder. A more likely option in the short term however is the option of Indigo Way being declared an enterprise under the provisions of the Local Government Act.

Linked to this objective currently is an investigation by the Board to the possibility of renaming Indigo Way and marketing the corporate identity in a more dynamic sense.

3. Maintenance of the high quality service provision in a diverse range of industry areas

The 2000 – 2005 Strategic Plan recognises that as a service provision agency Indigo Way must continue to improve the quality and effectiveness of services for which it is contracted.

The diverse range of areas in which work is currently held provides

• strong employment opportunities
• opportunities to meet community expectations and fulfil social commitments
• growth opportunities

4. Establishment of co-operative partnerships

The 2000 – 2005 Strategic Plan recognises the importance of working with other key industry groups and organisations within the region. Such co-operative arrangements will strengthen Indigo Way’s capacity to compete with other private sectors businesses and will increase access to knowledge and new market opportunities.

As a result of the above Key Issues which Indigo Way will face over the next five years include

• Increasing Indigo Ways separation from the Indigo Shire Council.
• Increasing the annual turnover to at least $14.5M by 2003.
• Expanding the number of core business units on which organisation depends.
• Improving the performance of all Business Units in Quality Assurance systems.
• Establishing a separate OHS Committee and structure that takes full account of the legal responsibilities.
• Develop and implement a Marketing Plan.
• Finalise the transfer of Indigo Assets to Indigo Way
• Maintain office/site locations appropriate to the work requirements.

Conclusions

The development of the business arm of the Indigo Shire Council is one of the most significant features of this Municipality and its success story. Created through the vision of the original CEO and the Commissioners, Indigo Way trades as a Section 86 Committee of Council, administered by its own independent Board of Directors. It is a model that has been considered as a future structure by many similar sized rural Municipalities both in Victoria and Australia.

The important key to its operation is a separate identifiable entity, with its own financial autonomy and operation reporting to a specific purpose Board with its own clear financial direction. From a resident perspective many Council services continue to be provided as if by Council, however from an efficiency perspective the operations of Indigo Way and its ability to expand its core service are indeed a testament to the Commissioners and Councillors involved in the establishment and development over the past five years.

From a Municipality with an extremely uncertain future, Indigo is indeed well positioned to take full advantage of the challenges in the new millenium. It is truly a story of a mouse that roared.