Glenorchy City could become the second council sacked in less than six months, after local government minister Peter Gutwein put aldermen and staff on notice on Friday.
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Mr Gutwein said he would consider the move over the next seven days, after “a number” of issues were brought to light.
He would not comment on what had prompted his position.
The council faces suspension and the appointment of a commissioner, if the minister decides to take action starting next week.
“It is clear to me and to many in the community that the Council is not functioning as it should, which is why a Board of Inquiry is currently underway,” Mr Gutwein said.
“The Inquiry will continue regardless of whether the councillors are suspended. I expect that the Board of Inquiry will be completed within the coming months.
“I do not take this action lightly, but I must do everything possible to ensure the best interests of the Glenorchy community are protected. Councillors now have seven days to write to me and explain why I should not exercise the powers I have under the Local Government Act to suspend them.”
In October, Huon Council was sacked, after it became clear to Mr Gutwein they could no longer work effectively together.
Mr Gutwein said the state was looking into a review of the Local Government Act.
But he would not be drawn on whether the review would see changes to law that would equip him with powers to sack council officials singularly, without having to remove the entire delegation.
Mr Gutwein would also not comment about who was in line to be appointed commissioner of Glenorchy City, if the council is sacked.