Boom projects drain Hedland council’s finances

The Town of Port Hedland has admitted it cannot pay for the upkeep of all its assets, raising ratepayer fears showpiece Royalties for Regions projects could fall into disrepair or be bulldozed.

The revelation comes after the Town opened five South Hedland facilities – the Wanangkura sports stadium, swimming pool, Marquee water park, JD Hardie Centre and skate park – to great fanfare between 2011 and 2015.

Built at a cost of $78 million, government planners viewed the community facilities as key building blocks to grow Hedland from a dusty mining town into a city of 50,000 people.

But now the Town is under increasing financial strain to meet the facilities’ high operating ($6.4 million) and depreciation cost ($2.4 million).

Chief executive Mal Osborne said this financial year, the Town faced a $2.19 million funding gap because it could put only $350,000 towards the depreciation costs needed to one day replace the facilities.

“The Town still has a significant body of work relating to the identification of asset renewal funding requirements,” he said.

“(But) it will be evident that the Town will not be able to meet 100 per cent of renewal funding requirements and strategies will need to be implemented to address this funding shortfall.”

The Town’s admission seems set to ignite further debate about whether it ran up too much debt during the recent mining boom to build facilities that were not needed.

The debate links back to the State Government’s 2008 decision to create its Royalties for Regions program, aimed at funnelling the riches from the Pilbara’s iron ore mining boom back into regional WA.

The program set aside more than $1 billion in annual funding for regional cities and towns, and government planners began to think big.

They set a bold target to grow Hedland, with its 20,000 or so residents, into a city of 50,000 people by 2035, leading the Town to begin work on new infrastructure projects in Port and South Hedland.

Securing vast grants from the State Government and Pilbara mining companies, the Town refurbished and built its five key South Hedland facilities at discount rates, contributing just $21 million towards their $78 million construction cost.

Supporters hailed the outcome a huge success.

Before the new buildings, Hedland residents had relied on small community facilities, many built in the 1970s and 1980s.

The old facilities along with limited health services and some of Australia’s highest housing and living costs had led many families to previously baulk at moving to Hedland permanently.

Pilbara MP and architect of the Royalties for Regions program Brendon Grylls said the new buildings changed these perceptions.

He said they proved to families Hedland was not just an industrial port for workers, but a nice place to raise children.

“I stand very firm on the notion that ... Port Hedland ... should have the infrastructure of a modern growing city,” he said.

“We wanted to (show) ... in its infrastructure ... and liveability that it had participated in the biggest economic expansion in Western Australia’s history.”

However, even as the buildings opened their doors in 2011 and 2012, soaring iron ore prices began to peak and then crash.

Far from a city of 50,000 residents, the downturn has left Hedland with fewer than 8000 rateable properties.

Port Hedland Ratepayers Association president Roger Higgins said while ratepayer numbers had not greatly increased their bills had.

One of the greatest costs to the Town, and by extension ratepayers, is its community buildings and services.

The Town recovers on average only 4 per cent of the costs of running Hedland’s community facilities from fees it charges to those who use them – the rest comes from other sources, such as rates.

Mr Higgins said these costs had been blown out by building five South Hedland facilities where one might have sufficed.

He said Town staff and councillors had been carried away by the riches of the mining boom and viewed Royalties for Regions as a goose that kept laying golden eggs.

Rather than using the funds to build a separate sports stadium, swimming pool, skate park and drop-in centre for youth, he said the facilities should have been built in one spot.

Not only would it have created a more vibrant hub that drew the community together, it would have saved costs in everything from construction to weekly lawn mowing.

Mr Higgins said the Marquee Park Splash and Play, in particular, was a white elephant that should be knocked down to save costs.

As a free facility, he said it drew paying customers away from the South Hedland swimming pool, which already competed financially with the Port Hedland swimming pool.

With the Town also forced to duplicate other facilities in Port and South Hedland, including sports ovals and parks, Mr Higgins said it was time for the local government to live within its means.

He said this meant shutting down some community facilities and cutting services.

“They are the sort of decisions I believe the administration is going to be compelled to make,” he said.

Mr Osborne said while these buildings had proved “transformational” for residents, he agreed they could have been planned differently.

“Our facilities being spread out across South Hedland create destination points, however it also creates challenges with servicing and maintaining separate facilities,” he said.

“An alternative model would have been to co-locate the facilities to achieve economies of scale.”

But he maintained the Town was financially secure.

Having leased Hedland airport to investors in a 50-year deal, the Town this month took possession of its $165 million cash payment.

Mr Osborne said this would deliver financial stability to the community for decades to come.

However, Mr Higgins said ratepayers were worried the Town would repeat its recent mistakes and spend its airport income to maintain its South Hedland facilities.

He said the airport income should be kept separate from the Town’s regular budgetary items or it would be depleted within 15 to 20 years.

“I am going to certainly be seeking to ensure that the proceeds from the lease are (treated like a wealth fund and) kept intact completely,” he said.

Depending on your point of view, South Hedland’s five facilities can either be considered huge boosts for the community or millstones around ratepayers’ necks.

WHO BUILT SOUTH HEDLAND’S FIVE FACILITIES?

So who deserves the credit or blame for their construction?

Council records show they were built with widespread support.

Councillors Kelly Howlett, Jan Gillingham, David Hooper, Arnold Carter, George Daccache, Stan Martin, Steve Coates and Bill Dzombiak voted unanimously in 2010 and 2011 to approve the construction tenders for four of the five projects.

With Chris Adams and Paul Martin serving as Town chief executives in this period, this included the tenders for the JD Hardie centre, Wanangkura Stadium, Marquee water park and South Hedland swimming pool.

Councillors Kelly Howlett, Jan Gillingham, Gloria Jacob, David Hooper, Julie Arif, Lorraine Butson and Troy Melville later unanimously approved the construction tender for the South Hedland skate park in 2013.

Current chief executive Mal Osborne had taken over the role by that time.

However, former councillors, such as Jan Ford and Grant Bussell, also played important roles in the planning of the facilities.

Council records also show that no member of the public attended the council meetings where these tenders were awarded to criticise the deals.

SOUTH HEDLAND FACILITIES BY THE NUMBERS