Nick Reece’s big-spend agenda in doubt as Melbourne’s debt reaches historic levels

More of Lord Mayor Nick Reece’s election promises are under a cloud – including a rates freeze – as hostile councillors threaten to undermine his big-spend agenda, citing climbing debt.

Last week, the City of Melbourne voted in a substantially watered-down version of Reece’s pledge to make public pools cheaper amid concerns of project delays and rising costs.

Melbourne council’s debt is forecast to reach an unprecedented $216 million by the end of June, and councillors are concerned the lord mayor is overspending.Credit: Justin McManus

Capital works expenditure and debt have come in under budget for the past five years due to major construction delays. But a number of councillors are becoming anxious over forecast debt, which is set to reach an unprecedented $216 million by the end of June and peak at $275 million next June before falling.

Reece has already abandoned an unpopular pledge to sell the council’s half of the Regent Theatre for $50 million.

There is now uncertainty over his rates freeze pledge and future funding for the Greenline project, which has begun building more parks and boardwalks along the Yarra River.

Reece promised residents $2 swims at the city’s public pools, which was due to start in January this year, as well as 50,000 free beginner swimming lessons each year and swimming lessons delivered in residential buildings with pools.

But now the $2 pool entry will apply only on weekdays during summer, and only at two of the council’s three pools (all caveats that were not included in Reece’s election announcements). After a trial of 2000 free swimming lessons last summer, there has been a commitment for only 3000 more lessons next summer (not the promised 50,000). There has been no mention of holding swimming lessons in private buildings since the October election.

Reece didn’t receive an outright voting majority in the election to implement his agenda – only four members of the 11-person council were on Reece’s ticket.

Councillors outside the Reece camp have begun expressing concerns about timeline and cost increases on major projects for which the council has taken on historically high levels of debt in low-interest loans from the state Treasury.

The new Kensington Aquatic and Recreation Centre – due to open soon, two years after its initial proposed opening date – blew out by $17 million because asbestos was discovered in the soil.

At a recent council meeting, councillors were told that the Queen Victoria Market renewal project completion date had been pushed out again from early 2026 to late 2027 due to an intervention by the federal Environment Department over permits for planned skyscrapers at the southern end of the site. The project was initially pitched to begin in 2017 and be completed by the end of 2021 but was badly hampered by COVID-19.

At the same meeting, councillor Philip Le Liu (who ran on a ticket with unsuccessful mayoral candidate Arron Wood) expressed concern about committing more council funds to the Greenline project, which has so far cost $25.5 million since 2021. Construction of phase 1 only began this month along Birrarung Marr.

“Given that there’s so much delay ... and also given [the] fact that we’ve got so many other renewal projects like [Queen Victoria Market] ... I don’t really want us to stretch thin,” Liu said.

Liberal councillor Owen Guest – who is chair of the council’s finance oversight committee – also hinted at putting future phases of the Greenline and other projects on ice in the upcoming budget.

The Kensington Community Aquatic and Recreation Centre has been delayed and is $17 million over budget.Credit: Luis Ascui

“We have debts already at the tune of $150 million, which are forecast to go in excess of $200 million in the next couple of years, and that is notwithstanding what would appear to be forced divestment of certain council assets,” he said.

“We really, really do need to look at this project [Greenline], as well as others, and make some real decisions.”

The “forced divestment” Guest referred to was the sale of a multistorey car park to hospitality billionaire Justin Hemmes for $55 million, which he voted against.

The council’s 10-year financial plan had always flagged the strategic sale of assets between 2021 and 2031 to pay off debt taken on to deliver major projects this decade.

The first-phase works of the Greenline project along Birrarung Marr last week.Credit: Luis Enrique Ascui

But Guest criticised the sale, which was well progressed before he was elected to the council in October, because the proceeds will no longer be used to pay off debt and instead will go into the capital works budget to finish projects.

It is not just conservative councillors advocating for fiscal restraint – sole Greens councillor Olivia Ball is also publicly campaigning for the mayor to abandon his pledge to freeze council rates this year.

“We have so few avenues for raising revenue; if we cut our revenue, we will have to cut essential community services and infrastructure,” she said in a recent video published to social media in which she celebrated the “win” of seeing Reece back down on the Regent sale.

After five years of deficits, the council maintains it is still on track to deliver a wafer-thin surplus of $100,000 this financial year.

The council and lord mayor did not directly answer whether the rates freeze would go ahead.

Reece said the council had been “pulverised” by the pandemic and that “prudent financial management is our number one priority as a council”.

“I know our community is eager and excited to see election commitments delivered, and so am I,” Reece said.

“We are working on our first budget, and I look forward to sharing our plans for the 2025-26 year with the community in the coming months.”

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