31 October 2024
by Grahame Lynch
The cost of North Sydney Olympic Pool has blown out to $109 million and is likely to increase further as its likely re-opening date has been pushed back to the second half of 2025.
A Council spokesperson told the Sun: “Currently a total of $109m has been included within cashflow budgets for the North Sydney Olympic Pool Redevelopment Project. This does not include potential future variations, loan interest or costs associated with the operation of the facility once complete.”
“Council has implemented a number of measures to manage ongoing risks and deliver the project. Unfortunately, as indicated in the independent report to the project, many project risks are unable to be fully mitigated and will continue to place pressure on Councils financial position.”
An update to North Sydney Council was released this week, following a formal briefing to Councillors on 14 October 2024, which detailed current construction milestones and challenges, including issues with structural steel that may push the Practical Completion date beyond May 2024.
Its report said: “Council continues to work towards confirmation of delay time frames associated with structural steel issues. Once resolved, the outcome will result in an adjustment to the date for Practical Completion within the contract, which is currently May 2024. The contract date for practical completion may not equal the forecast date if the contractor is responsible for any delay. It should be noted that Council will require between two and three months to operationalise the pool after handover.”
With possibly the best part of a year until the pool begins earning revenue, additional costs such as loan interest could see the overall cost escalate to nearer to $150 million, considerably higher than the original estimate of around $64 million. $15m of this original amount was to be covered by grants from state and federal government and the remainder through budgeted capital contributions and loans. Council has already borrowed $51 million for the project, for which interest payments exceed $2 million annually over a blend of 10 and 20 year loans.
The likely call on council resources for the pool could now exceed $135 million, which is quite an impost on an organisation with a minimal capacity to generate a consistent surplus. The council collects less than $80 million from rates and nearly $40 million from user charges annually, spending the same on its normal operations and activities across a year.
In its latest financial statements, the council said “The escalating costs associated with the North Sydney Olympic Pool Project will continue to exert pressure on the Council’s finances, leading to further reductions in cash reserves, increased borrowing, and a decline in infrastructure renewals. These additional capital expenditures will have lasting impacts on future operational and renewal costs. Compounding these challenges, expenses are rising faster than revenue. The steady decline of key revenue streams such as parking, hoarding, and advertising fees also poses a significant threat.”
There are two potential sources of capital to help fund the remaining pool costs and future loan servicing. One is the council’s estimated $56 million investment property portfolio, which could be sold down. A second could be a special one-off levy on business and residential ratepayers, although this would need approval from the NSW pricing tribunal IPART, which is not a given.
Mayor Zoe Baker was quoted by the Sydney Morning Herald this week stating: “If we do nothing, our 10-year outlook is unsustainable.”
“I think all the options will include some kind of special rate variation. Every option is on the table.”
North Sydney’s ten councillors voted 10-0 this week to accept the Council Pool Report as an “Item Considered by Exception.” This means there were no discussions on its contents.