Shell Cove funding - an alternative view.
Here is a copy of a letter we (Sue and I) sent to Premier Kristina Kenneally on 23/05/2010. It is in response to Shellharbour Council's attempt's to attract State Government funding for the Shell Cove project. Joanna Gash, Member for Gilmore, regards this as somehow improper. I regard it as a reasonable and responsible attempt to ensure that ALL information and all perspectives are available to the funding authorities.
Council has always had an overly optimistic view of this project, and this shows not just in their funding applications. Former ALP Mayor Cec Glenholmes offered the Shell Cove marina as a venue for the yachting events at the Sydney 2000 Olympic Games! If they had taken Council up on it's offer we never would have heard that phrase "best Olympics ever" as the games would still not be over!
Sue & Peter Moran
24 Barton St
OAK FLATS NSW 2529
23 May 2010
The Hon. Kristina Keneally MP
Governor Macquarie Tower
Level 39, 1 Farrer Place
SYDNEY NSW 2000
Via e-mail: premier@nsw.gov.au
Dear Ms Keneally
SHELLHARBOUR CITY COUNCIL APPLICATION FOR LOW COST LOAN TO FUND BOATHARBOUR SHOULD BE REJECTED
I am writing to you because Shellharbour City Council (SCC) is seeking government funds, either through grants or low-interest loans, to fund construction of the boat harbour component of the Shell Cove Project.
In 1993, SCC signed a Management Agreement with Australand (then Walker Corporation) to develop ’Shell Cove’, a new town of 10,000 people, 3000 residential lots, marina, golf course and compensatory wetlands. Under the Agreement, SCC is the developer and supplies the land, and Australand is the Manager and finances the project. Apart from the Management Agreement itself which is perfectly clear on the issue, and many, many other documents, Council acknowledges that Australand are supposed to finance the project, in the following documents:
http://www.halledit.com.au/conferences/lginfrastructure/2008/agenda.pdf
http://www.lgsa-plus.net.au/resources/documents/Phil-Woodcock_1403081.pdf .
The financing arrangement is also confirmed in the Shell Cove Quarterly Reports to SCC, each of which states, ‘Australand finances the Project… and this supplements the profits from land sales to fund future land development and major infrastructure costs, such as the boat harbour and golf course’. SCC advise that Australand have announced that they have put on hold construction of the boatharbour ‘indefinitely’, and SCC are pursuing every avenue to secure the funding from other sources despite it being Australand’s responsibility.
Management Agreement
Both entities draw fees during the life of the project (Australand 5% (3.75 & 1.25 in separate fees) and SCC 1.75%) based on a percentage of residential land sales at Shell Cove. Once the boat harbour is complete, both parties will split the net profit from each financial year 50/50 as time goes on. If there is anything left at the end of the agreement, i.e. when all the land & commercial space is sold, then SCC keeps the balance.
Australand manages the project by drawing up the Feasibility Studies, Annual Programs and Monthly
Reports required under the Management Agreement, and by performing the works contained in the Annual Programs. They were selected out of a number of applicants based on the timetable, costings and profit structure that they put forward in 1992/1993, even though they were rated 3rd best tender overall out of the 3 acceptable tenders. To date, the project has developed about 1300 of the 3000 residential lots in Shell Cove. They have also developed the golf course and ‘compensatory wetlands’, both of which are constant drains on SCC finances.
Golf Course
Despite being contracted to build the golf course, Australand would only commit to spending $10.1 million on it. They and SCC General Manager Brian Weir convinced the council to take it over saying it would require an extra $1.9 million
( http://www.illawarramercury.com.au/news/local/news/general/questions-still-remain-over-shell-cove-deal/1322997.aspx?storypage=1 ) .
To date the golf course has cost Shellharbour residents upwards of $13 million on top of the original $10.1 that was paid by the Project. All current predictions are that the golf course will not turn a profit in the foreseeable future. The only part of it that makes a dollar is the sale of alcohol, which in our view should not be the business of Council.
(Compensatory?) Wetlands
The 1996 Minister’s approval of the boat harbour required ‘compensatory’ wetlands to be constructed, almost 3km north of the boat harbour site. This was supposedly to compensate for the destruction of SEPP 14 wetlands that construction of the boat harbour would necessitate. The Project has funded part of the new man-made wetlands. General Manager Brian Weir convinced Councillors to incorporate sporting facilities at the site, at Council’s sole expense. The community was told, ‘The sporting facilities proposed were determined following an extensive recreational user survey that was conducted prior to the development of the Section 94 Plan in 2000.’
http://www.shellharbour.nsw.gov.au/FileData/pdf/28.2.06_11.9.pdf .
However, up until this month, Council has been unable to convince sporting groups to use the new fields, despite years of negotiations.
In December 2005, Councillors were told that Myimbarr sportsfields would cost residents just over $5 million http://www.shellharbour.nsw.gov.au/FileData/pdf/11.9%2013%20Dec%2005.pdf.
Myimbarr has cost ratepayers several millions of dollars with no sign of the cost abating. Council is currently proposing to dedicate a landscape maintenance crew to Myimbarr 2 days per week, while at the same time announcing that it will cut mowing of other public parks in the LGA (except at Shell Cove) from every 3-4 weeks to every 6-8 weeks during summer. This is a continuation of a pattern of unreasonable allocation of council/community resources to the whole Shell Cove project at the expense of the rest of the community.
Residential and Boatharbour
Australand have made many, many millions of dollars out of the Shell Cove project. They stand to make many, many more millions from development and sale of the remaining residential lots, most of which will be aimed at the high end of the market. The majority of the remaining lots will be developed around the proposed boat harbour/marina, in what is called the Harbour Lands.
In 2008, SCC announced that Australand had notified SCC that they would not fund construction of the boat harbour due to the down turn in the property market. SCC stated at first that construction of the boat harbour was delayed ‘indefinitely’ and lately they are saying that construction was delayed until 2012/2013. SCC have so far refused to allow the community to see the advice from Australand, despite the Ombudsman directing SCC to release those documents (in response to our FOI application).
Ever since that announcement, SCC, under the direction of General Manager Brian Weir and Administrator David Jesson, have been seeking government funding to ‘kickstart’ the boat harbour/marina. Brian Weir has been the Town Clerk/General Manager of SCC since 1985 and has been the main proponent for the project. He and Shell Cove Business Division Director Phil Woodcock and employee Kevin James have been involved since the beginning. They have convinced SCC Councillors many times over the years to make certain concessions to Australand that have turned out to be detrimental to residents. Briefly, some of those concessions include the loss of the community golf course, the take- over of the Project golf course by SCC (relieving Australand of their duty) as mentioned above, the substitution of works-in-kind to the tune of almost half a million dollars in s94 funds and changing the Management Agreement in 2007 by adding 8 years to the project life.
Even in 2007, Australand were reluctant to proceed with construction of the boat harbour. See report dated 3 July 2007:
http://www.shellharbour.nsw.gov.au/FileData/pdf/13.1%2024%20Jul%2007.pdf .
In an effort to convince Australand to continue, a concession was made whereby Australand would be able to purchase commercial land within the Harbour Precinct prior to development of that land. The previous arrangement was that the harbour would be developed first, before any of the residential and commercial within the Harbour Lands. The 2007 amendment provides that, ‘In order to provide sufficient funds to augment the Boatharbour Development Program, Australand are offering to acquire the town centre site in stages, which will enable additional Development Funds to be provided if a shortfall in residential cash flow occur’,
and that, ‘Australand would enter into a contract for the Town Centre where it makes part
payments of the price into the Trust Fund (or other) on call for Boatharbour construction costs.’
There is a shortfall in residential cash flows now. The Management Agreement amendment provides for Australand to purchase these ‘SuperLots’ (commercial) within the Harbour Lands, so that there would be sufficient cash flow to build the boat harbour etc. That purchase should take place now as we are in precisely the situation that this amendment envisaged.
We have reason to believe that Australand have advised SCC that they will not build the boat harbour at all and that SCC have not passed that information on to residents. Rather, they are implying that this is only a temporary hiccup.
Residents who want the boat harbour to go ahead have been waiting since 1993. If Australand say they will commence its construction in 2012/2013 then that is not very much more time to wait, in the scheme of things. There is no real reason for SCC or the State Government to take over financing the project just to bring it forward by 2 or 3 years.
One of Australand’s senior NSW staff stated at a recent Australand AGM that they have no intention of building ‘council infrastructure’, being the boat harbour, which they said was agreed to by Walker Corporation, not Australand. We have put this to SCC at a recent council meeting and it was not refuted.
We believe that Australand have decided not to build the boat harbour at all. We believe that Australand do still want to finance and construct the residential and commercial components of the ‘Harbour Precinct’, but not the boat harbour itself. Australand has a financial interest in the residential and commercial components as they will receive their fees from sales of those components. They do not have a financial interest in the boat harbour.
To date, the community, and Councillors, have not had access to all of the information relating to Shell Cove. Councillors have never had all of the history in front of them when asked to make decisions. They were never allowed to have a copy of the Management Agreement and were only allowed to view it in a ‘chaperoned’ room in the Council building. Council has refused to release a consolidated version of the Agreement; only the original and 6 amendments,
(http://www.shellharbour.nsw.gov.au/default.aspx?WebPage=131).
Councillors never saw what promises were made to previous Councillors and had no yard-stick with which to measure the Project’s success. The only people on board from the beginning are General Manager Brian Weir, Shell Cove Business Division Director Phil Woodcock, and Shell Cove Project Engineer Kevin James. As a result of our appeal against Council’s refusal to release project related documents under FOI, the NSW Ombudsman recently directed Council to reconsider its determination and release most of the documents. Within 2 weeks of the Ombudsman’s direction, Mr Brian Weir announced that he would retire on 27 August 2010, after more than 25 years in the role.
Funding
General Manager Brian Weir and SCC Administrator David Jesson are ‘exploring every avenue’ to bring forward construction of the boat harbour. They have applied for every government grant and/or low cost loan of $20-$30 million to ‘kickstart’ the marina. So far they have been unsuccessful. Seemingly, government departments consider hospital beds and roads to be more deserving of government funds than boat harbours, which are playgrounds for the wealthy.
Should the government provide funds for this development, the main beneficiary would be Australand, a private company whose main shareholder company (CapitaLand) is owned by the Singapore Government. Why would the NSW Government make such a donation to the Singapore government?
SCC has indicated that a Government loan could be repaid out of the Administration Fee that council receives from Shell Cove land sales. This raises many concerns, including the following:
1. The Administration Fee that council earns is meant to reimburse council for expenses it incurs in administering the project.
2. That fee does not currently cover SCC’s Shell Cove expenses, which are currently covered by council’s general revenue, in effect by ratepayers’ funds. For example, SCC’s 2010/2011 budget estimates Shell Cove income of $275,000 and expenditure of $682,460. This is typical for any year. There is an extremely high risk that Council would not be able to afford the loan repayments.
3. To suggest that Council would repay the loan is an admission that Council is willing to take over the financing of the boat harbour, without necessarily changing or reducing the amount by which Australand will benefit from the project.
4. The timing of receipt of the Administration Fee, being based on land sales, is an unknown. It is possible that council would be unable to make a repayment that is required under the loan agreement.
5. It has recently come to light that the bonus of $30,000 p.a. that Mr Weir receives for overseeing the Shell Cove Project is funded out of the Administration Fee. Councillors were always told, and Mr Weir told me himself, that his bonus was paid out of ‘the Project’, which implies that SCC (residents) are only responsible for half of that bonus.
6. The Administration Fee is only expected to total about $8 million from day one until the end of the project, about $3.3 million of which has already been received. It will never be enough
to repay a $20 million loan. This would unnecessarily expose ratepayers to commercial risk.
7. There has never been any community consultation regarding this project. The Administrator says that successive councils approved the project going forward, but those successive councils never had all of the facts before them at any one time, since the agreement was signed in 1993. Most importantly, those councillors were always told that the project would be funded through land sales and finance from Australand. No sitting of council has ever decided that the project should be funded by ratepayers or by government handouts or loans.
8. Any finance scheme other than that already approved would change the very fabric of the Management Agreement, and show the ad hoc nature that the project has progressed over the last 16 years.
9. It would be a poor business decision for the government to provide $10 million or $20 million towards a project that has a projected cost of about half a billion dollars
http://www.shellharbour.nsw.gov.au/fileData/pdf/13.1%2022%20May%2007.pdf (Financial Overview: Boatharbour and Harbour Precinct development costs).
The Boatharbour itself has a price tag of $140 million @2007.
10. Should the Federal or State Governments agree to provide the requested funding, you would be contributing to a process that has not been put to the community to ascertain their wishes.
11. As Australand is a major donor to the ALP, it would, yet again, raise the spectre of developer donations influencing government decisions, should these applications be granted.
General Manager Mr Brian Weir has acknowledged that this is his ‘pet project’ (Illawarra Mercury 15 May 2010), and that it has been an ‘obsession of his’. Mr Weir has recently announced that he will retire on August 27, 2010, but that he will do all he can to see a start to the boat harbour/marina before he goes. It is unlikely that Australand would now finance the boat harbour, or agree to repay any loan that SCC obtains, seeing that SCC are showing themselves to be willing to go to any length to progress the project. SCC have shown themselves to be determined to bring forward the start date of construction of the boat harbour, come hell or high water.
We believe that Mr Weir is pushing for commencement of the boat harbour because it would suit his ego to do so. To retire without a start on the boat harbour will be seen as a failure on his part of monumental proportions. We believe that he has personal reasons for pushing this rather than it being in the best interests of residents. As we have explained, above and below, there are many reasons why this project needs to be looked at objectively.
Employment generation
Administrator Mr David Jesson spoke on ABC Illawarra radio on Friday 28 August 2009 about this topic. He said that if the council’s funding applications were successful, ‘7000 jobs would be available right now’
( http://www.abc.net.au/news/stories/2009/08/28/2669762.htm ).
This is simply not true. 7000 direct and indirect jobs would be or have been created over the life of the whole Shell Cove residential and commercial project from 1993 to beyond 2020. Contrary to the Administrator’s statement, the number of jobs directly related to the boat harbour precinct is estimated at only 900 (http://www.shellharbour.nsw.gov.au/default.aspx?WebPage=1280 )
and the number of jobs related to the boat harbour as opposed to the harbour precinct is unknown, but is within the said 900. The Management Agreement provides that at least 50% of employment on the project must be local. Far from the 7000 jobs directly related to construction of the boat harbour as promulgated by the Administrator, there are only 450 (minimum) of locally sourced jobs related to the harbour precinct of which a minimum are directly related to the boatharbour itself.
The bulk of the 7000 jobs for the whole project have occurred, or will occur, even if the boat harbour did not go ahead.
Proponents for the project keep calling it a tourism/residential development, supposedly in order to enthuse the community. They say it would diversify the economy. The majority of past Councillors swallowed it hook, line and sinker. The concept plans for the Harbour Precinct were recently on public exhibition and it came to light that only about 6,000m2, or 20%, of the FSA in the Commercial Precinct woud be ‘tourism retail’. The only other provision in the Harbour Precinct for tourism related activity is the proposed Hotel site and the boat harbour itself. The Commercial Precinct is only 8ha of the 100ha Harbour Precinct. Tourism related retail is only 0.15% of the total Shell Cove project which covers 400ha. This is a RESIDENTIAL DEVELOPMENT. There isn’t even a picnic area, barbecues, playground or anything else that might make the Harbour Lands a tourist spot, apart from the proposed tavern and hotel. The boating fraternity will either stay on board or look to high quality hotel accommodation and food. High quality hotel accommodation and restaurants are not feasible in this residential precinct where the only confirmed outlets are a small public library and an Aldi grocery store.
We acknowledge that there will be employment generated during construction and development of the Harbour Lands. We contend:
1. That most of that employment would be generated without the boat harbour, through construction of the precinct around the harbour.
2. That there will be minimal employment generated post construction from either the Harbour Lands or the boat harbour. On the contrary, the mix of residents to employment will be even worse than it is now. This is primarily a residential development.
We would prefer that the development of the ‘Harbour Precinct’ occur around a rehabilitated wetland and garden area, rather than the proposed boat harbour and marina. This would be far less destructive to the environment and far less expensive to build and maintain. If that were to occur, the Harbour Precinct (with a more appropriate name of course) would still attract a high end residential apartment market because of the ocean views the precinct would afford (at least from upper levels).
Shell Cove Business Division Director Phil Woodcock gave a presentation to the Local Government and Shires Association in which he stated that, ‘The projected financial returns from the proposed 300 marina berths do not justify the $100 million (AUD) development costs to construct the boatharbour/marina. The development costs can only be justified by the substantial increase in value added to the immediate adjoining 70ha village centre site and also the projected increase in tourism to both the city and the region.’
Basically, what Mr Woodcock is saying is that Shellharbour City Council, or the NSW State Government, or the Australian Government, should pay for the boat harbour, so that Australand’s profits could be increased when the village centre is sold. Council would be left with an unprofitable boatharbour to maintain forever after
. Council have admitted that they have not prepared a business case for the boat harbour.
We say that having a boat harbour and marina in view of the residential buildings would not add much more value than ocean views would provide naturally, considering the cost to build and maintain the boat harbour. Expansion of economy created through development of the hotel, retail, library and business park could occur whether or not a boat harbour and marina went ahead. The area has natural beauty which attracts business, visitors and residents in its current form.
The addition of rehabilitated wetlands, garden and/or some other appropriate use of the area (for example activities for children) could only enhance its appeal.
There are many other things that $120 million of State Government or SCC resources could be spent on, including:
o $13 million to maintain Killalea State Park. According to the Department of Lands and the Killalea State Park Trust an extra $13 million is all it would take to maintain the park for 52 years.
o $8 million or less to rehabilitate Wetland 376. SCC and Australand have spent that amount creating man-made so-called ‘compensatory’ wetlands at Myimbarr. We would expect it to cost far less to rehabilitate the existing Wetland 376 to its former glory.
o $2 - $5 million developing the site adjoining the wetland as a conference centre/education centre/ interpretive centre and provide real employment opportunities based around the natural beauty of the area.
o Other items in SCC’s proposed 2010/2011 budget that are currently unfunded:
o Bush Fire Management – to protect our natural and built assets
o External defibrillators for our beaches and pools – to save lives
o Shade structures for our pools – to protect our children from skin cancer
o Procurement Manager to ensure good governance related to procurement
o Management Plan for wetlands at Dunmore
o Appropriate mowing programs for open space
o Implementation of Council’s Community Engagement Policy in full
o Acceptance and implementation of Council’s Draft 2008 Shared Use Path policy
o Provision of pools and sportsfields for free so that our most disadvantaged can have access to healthy
outdoor activities
.
It is not appropriate for Shellharbour City Council or the Federal or State Governments to fund the project. The real beneficiary would be Australand, as it relieves them of their obligation to fund the project.
If the local, state or federal government contributes anything towards this development, it must take on the whole project and contribute $140million, because there is no point in putting in $20 million & then having the project stagnate again until SCC comes grovelling again for more funds
.
Yours Sincerely,
Susan (Sue) and Peter Moran
OUR PERSONAL CONTACT DETAILS ARE NOT FOR PUBLICATION
Cc:
Barry O’Farrell MP Leader of the Opposition, Andrew Stoner MPLeader of the Nationals, Brad Hazzard MP Shadow Minister for Planning and Infrastructure, Mike Baird MP Shadow Minister for Treasury, Joanna Gash Member for Gilmour,
The Hon. Eric Roosendaal MLC Treasurer, The Hon. Tony Kelly MLC Minister for Planning and Infrastructure, The Hon. Barbara Perry MP Minister for Local Government, Matt Brown Member for Kiama, Lylea McMahon Member for Shellharbour, David Boyle ALP Candidate for Gilmore,
Stephen Jones ALP Candidate for Throsby, Jennie George Member for Throsby,
Sylvia Hale MLC Greens spokesperson for Planning and Local Government, John Kaye MLC Greens Spokesperson for Treasury, Cate Faehrmann Greens MLC Elect, Ben van der Wijngaardt Greens Councillor for Kiama and Greens Candidate for Gilmour,
Regional Development Australia Illawarra
Place Leaders Association
