Concern for marquee project as Wollongong council faces budget crunch

One signature project that could feel the impact of this is the new Warrawong Library and Community Centre, after council sought tenders for the construction of the project for $30 million last year.

Wollongong Lord Mayor Gordon Bradbery said while he couldn't comment on the outcome of the tender itself, if the project does not receive additional funding from other sources, the community would be left with a "basic" centre.

"It'll be interesting to see how we manage that one," he said. "It is concerning that a $30 million project of that calibre won't leave us with much change and few options."

Demolition of the existing community centre is scheduled to take place in March, however Council has not yet announced the final winner of the construction tender.

In its 2022-23 annual report, Wollongong council noted the project is delayed, while construction drawing and pre-tender estimate is nearing completion.

"Options to re-house existing tenants are continuing," the report notes.

"Council continues to advocate for NSW and Commonwealth funding for the project."

Cr Bradbery said while grants from the state and federal governments were an important source of funding, these had been drying up. The state government has its own budgetary pressures, and while the federal government may be technically in surplus, this did not equate to largesse for local governments.

At the same time, construction costs are surging, with building materials costs rising by 7.4 per cent in the 12 months to June 2023. In some cases, smaller profit margins have pushed developers out of the industry, while in other cases it has forced contracts to be renegotiated at higher prices than initially budgeted.

"It's not just Wollongong council, it's every council right across the state," Mr Bradbery said.

To solve this conundrum, some councils have sought to raise rates, in the Shoalhaven's case by up to 40 per cent to cover the cost of rebuilding after successive natural disasters.

Cr Bradbery said Wollongong was not considering such a sizeable rate hike, but with rate rises capped by IPART at levels below inflation, the council was playing "catch up".

"[The rate peg] is very inadequate," he said. "Things of that nature just don't keep up with inflation, the cost of labour, resources and materials."

Wollongong's rate peg - the amount it can raise rates each year - was 1.8 per cent in 2022-23, 3.7 per cent in 2023-24 and the cap for 2024-25 is proposed to be 5 per cent.

Inflation - the general cost of goods and services - rose by 6.6 per cent in 2022 and 3.2 per cent in 2023.

Amid this maelstrom of price rises and rate caps, the Wollongong council budget is under pressure, with new projects requiring fresh funds, depreciating assets hitting the bottom line, as well as the ongoing cost of running services, leading to council making this statement in its yearly report.

"The Delivery Program 2022-2026 and Operational Plan 2023-2024 have been adopted with a revised set of budget parameter and assumptions in response to the rapidly changing economic environment experienced and the lower than sustainable rate peg applied to the 2023-2024 rating year.

"In the context of those external pressures, the opportunity for creating increased capacity was extremely limited."

With council elections only a few months away, whoever takes charge of Wollongong council will have to make some difficult decisions.