I’m a Civil Servant but not with local government, there may be a difference in their procedures but the principles should be the same:
On restructuring the current job descriptions are compared to the new job descriptions.
If any changes to jobs are very minor then existing staff automatically map over
If there is a reduction in the number of jobs then existing staff map into a group that is then competed (they effectively apply for their own job)
If there are more changes to the role making it sufficiently different then they don’t map, become potentially redundant and apply/interview for the jobs and only become redundant if they don’t get that job, another role or cannot work elsewhere
These interviews should be limited in scope at first (to those effected), then widened internally and later externally
There may be applications opened for multiple categories of applicant at the same time to speed up the process but with categories getting a different priority.
If they have not actually been made redundant then they will have priority over you as a new external applicant
If they have already been made redundant then if they get the job they may need to pay back some of their redundancy pay (this may depend on department policy - but bear in mind it’s funded by the taxpayer, so often does have time restrictions)
If they have been made redundant due to the changes then they have already been somehow deemed unsuitable.
However if they were made redundant due to a need for reductions etc and the situation has changed meaning their is a job again then employers aren’t obliged to reemploy the same people, but can
I would say to go for the interview, it’s experience and it also shows your face and interest to the interviewers should there be other jobs later
The other person might not get (or actually want) the job. How will you feel about having dropped out if someone else gets it?
It’s not a really a waste of time for any referee - they are likely to only be consulted when you’ve got to a stage, and will just have some questions about you - do they actually know who you are, do they have reasons that you’re unsuitable etc