Shellharbour councillors have voted to increase the city’s liability in Shell Cove Marina, in a show of confidence as the mammoth harbour project reaches its construction peak. Councillors agreed to up the project’s shortfall funding to $35 million.
They voted 6-1 to allow this increase after council staff warned the development would, in January, need go into deficit for the first time since construction began.
Mayor Marianne Saliba said the shortfall funding would be set aside by developer Frasers Property Australia (formerly known as Australand, now part of Frasers) to be used when construction costs outstrip the project’s income.
“We always knew there would be a time where we would be spending more than we were making,” she said.
“Now, we expect there will be a pointy end and that’s because we want to finish off the harbour. And, of course, there’s no houses to sell off to fill until that work is completed.”
The vote means, if Frasers was terminated as the project manager of Shell Cove, the council would be liable to pay any outstanding loan funds up to a maximum of $35 million.
The council will also have to pay an extra $340,000 in interest to the developer, taking it’s total interest paid for the shortfall funding to $2.02 million. In 2012, the council signed off on an original amount of $20 million – allowing the project to get under way. Since then, there has been no need to use this shortfall funding, council staff said.
However, executives from Frasers and the council recently briefed councillors to say that development costs were soon expected to outstrip income by about $33 million.
This was mainly because of early construction on the marina piling, as well as town centre construction costs and delays in receiving sale incomes, staff said. A report to councillors said the consequences of deferring construction contracts were “not considered to not be in the project’s best interests or would cost significantly more”.
Cr Saliba said she was not worried about increasing the council’s liabilities, pointing to the high prices and demand so far for Shell Cove properties.
“We don’t want anything to hold this up – no delays in paying workers or companies we’ve got doing this,” she said.
“I’m not concerned about any genuine risk – you only have to look at the project so far and the great demand for people who want to come and live here. And as we get closer to the harbour front, there will only be greater demand. ”
At the last estimate, council will make profits of over $70 million once developed.