by Sahar Foladi
Greater Dandenong Council faces risky capital project blowouts contributing to a “perfect storm of attacks” ahead of its 2024-’25 budget, say councillors.
The Dandenong Wellbeing Centre, an all-electric aquatic project is one of the biggest projects Council has worked on, replacing the 40-year-plus Oasis pool.
However, the project cost is set to cross the $98 million mark in another increase from its initial $89 million estimate.
According to councillor Sean O’Reilly financial contracts and interest rates were different when the council committed to some large capital projects in the past.
“The budget is limited. So if the DWC figures blowout, something else must suffer.
“The DWC project is the largest by far this council has ever considered and we’re still waiting to get a more accurate estimate of what that will cost,” he said.
“Now with the change in economic climate and costs of money, it’ll be extra challenging to deliver the capital projects slated and maintain services.”
According to a council spokesperson, it’s not “appropriate to discuss cost of estimates” while the procurement process is underway.
“Council has an ambitious pipeline of major capital projects, including the Dandenong Wellbeing Centre, the Keysborough South Community Hub and the Dandenong Community Hub.
“Rapid escalations in construction costs will pose a challenge for Council and all local governments in coming years.
“We also need to consider the costs of responding to more frequent extreme weather events.
“Big storms not only create expensive clean-up work but can take a toll on our roads and other assets.”
While the Federal Government has pledged $17 million towards DWC, the council is still lobbying the State Government for a $20 million contribution. Without the latter, it leaves the Council with at least $81 million to find.
“All Victorian councils are challenged in a context of rate capping, with limited avenues to raise more revenue. We appreciate that our community is also faced with severe cost-of-living pressures,” the council spokesperson said.
“In this context, Council is preparing a measured, responsible budget for 2024-25 that will enable us to continue to deliver valuable services and facilities, while maintaining long term financial sustainability.
“A draft budget is expected to be released for community feedback in mid-May.”
A report published by Institute of Public Affairs (IPA) has ranked Victoria as the worst performing state in the nation.
Victoria has the highest tax burden, state debt burden and energy price increases in the institute’s State Economic Scoreboard 2024 report published on Tuesday 12 March.
Given the financial debt burden of the State Government, it would be highly unlikely for the Council to receive state funds for DWC, according to councillor Rhonda Garad.
Cr Garad has had major concerns around the construction cost of DWC and its energy efficiency costs but was outvoted by colleagues.
“It’s too much money for a local council particularly at this time when we have a perfect storm of attacks on our budget from massive cost shifting from the State Government.
“To continue restrictions on our income with rate capping, all councils are under big financial strain.
“For the State government to stretch themselves so much financially has an obvious financial impact on councils because that’s why we’re getting a lot of the cost shifting and which is why we’re not getting any grants contributing to our major projects.”
While the council works towards an exact cost figure for DWC, Cr Garad says they need to re-visit the drawing board and cut down the costs to $60-65 million.
On the other hand, Greater Dandenong Council will lose a bit over $4 million in revenue according to Councillor Garad because of the new waste guidelines introduced by Local Government Minister Melissa Horne, effective from 1 March.
“I personally fear for the future of local government, its financial capacity is getting narrower, services and standards of public service that people expect will be reduced over time,” Cr Garad said.
While she believes funding for capital projects may not directly impact Council’s 2024-’25 budget, it will have a long-lasting ripple effect.
“The overall financial burden does have direct and indirect impact. We must pay interest on the money we borrow for DWC.
“$17 million (from the Federal Government) is not a long way when the project is headed towards more than $100 million.
“Over time these things bite and can have an impact going forward and into the next budget.”
