
Should Kiama Council build its own developments on its catalyst sites? The lessons of Blue Haven Bonaira and Blue Haven Terralong suggest not.
Yesterday I wrote about Kiama’s catalyst sites and what we could build if we got smart about the land council already owns. A thoughtful commenter, Graham, responded with a different idea. Don’t sell anything, don’t partner with developers, don’t do public/private anything. Instead, have council build the buildings itself, retain ownership of the land and the buildings, and lease the spaces out for long-term recurring income.
It’s a position you hear often in community conversations about council assets. Keep everything. Build it ourselves. Lease it forever. The ratepayers win.
In principle, Graham is right. Retaining ownership and capturing long-term rental income is, on paper, the best possible return for ratepayers over a thirty or fifty year horizon. No developer profit margin. No one else taking a slice. Pure value for the community.
The problem is that we already know how that story ends in Kiama, because we lived it.
Blue Haven Bonaira
The last time Kiama Council decided to be its own developer at scale, we built Blue Haven Bonaira. The cost blew out badly. By the time the dust settled, council had taken on debt it couldn’t service from the operating income of the facility itself. That debt is one of the reasons we are now under a Performance Improvement Order. Council eventually sold Bonaira to a Perth-based aged care operator in April 2025, well below what was needed to recoup the build cost.
This isn’t ancient history. It happened in this council, within memory, with consequences the community is still paying for.
Blue Haven Terralong
The Minister’s recent media release on the proposed PIO variation named Blue Haven Terralong by name. See my blog here. The Minister noted that council has advised “major investment is required at Blue Haven Terralong to address maintenance and fire safety compliance issues.”
The number behind that sentence is significant. The facility needs $51.2 million in maintenance and capital works over the next ten years just to bring it from a poor condition rating up to an average one.
That is what happens when a council owns a building it can’t afford to maintain. The asset deteriorates. Compliance becomes a problem. The people who live there, in this case vulnerable older residents, end up housed in something the institution cannot keep up.
Council didn’t fail to maintain Blue Haven Terralong because anyone wanted that outcome. It failed because councils, structurally, are not set up to be long-term property owners and operators of complex assets. That’s not a Kiama problem. It’s a council problem.
Why councils struggle as developers in 2026
The construction sector today is a difficult place for any inexperienced client to stand, and councils are inexperienced clients by definition.
Builders quote a price to win the job. Then, mid-project, they can come back with variation claims and escalation costs that can add millions to the original contract price. This happens because of scope change, events like Covid/Middle-East conflict or even legislative changes in the application of the construction code during the delivery period. Sometimes they threaten to walk if the new numbers aren’t accepted. A commercial developer with a portfolio of projects absorbs that risk across multiple buildings and has the commercial muscle, the legal team, and the market relationships to push back hard.
A council doing one building has none of that. They have one project, one contract, one builder, and limited internal expertise when the variation claim lands. The outcome is predictable, and the public record across NSW is full of examples. Government projects routinely come in well over budget when the client doesn’t have the in-house capability to manage construction risk professionally.
Delivering complex buildings in 2026 is a specialist business. Councils are in the business of running communities, and that’s a full job in itself.
What this means for the catalyst sites
I’m not arguing against ratepayer ownership of long-term value. That’s exactly the right goal. Graham is right about the goal.
The question is the mechanism. How do we capture that value without putting council in the position of carrying development risk, construction risk, leasing risk, and maintenance risk on assets it doesn’t have the capability to manage?
The answer is somewhere in the middle of “sell everything” and “council does everything.” It probably looks like this.
Council retains ownership of the land. The land is the asset that appreciates, and the asset that gives council long-term leverage. Council does not need to sell it.
The buildings are delivered by a partner with the expertise, the balance sheet, and the risk management to actually deliver them on budget and on time. That partner could be a private developer, a not-for-profit community housing provider like Housing Trust, a state government delivery agency, or some combination. The point is that whoever holds the delivery risk should be someone equipped to manage it.
Council captures long-term revenue through the structure of the deal. A ground lease pays rent over 49 or 99 years. A development partnership shares revenue. An arrangement with a community housing provider can include a council ownership share of completed units that produces rental income forever. None of these models require council to be the builder or take all of the development risk.
Manning Street, where it ultimately makes sense to realise capital, can be brought to market at full development potential to fund the parts of the precinct that need council capital.
This is the conversation Graham’s question opens up. He’s right that ratepayer value shouldn’t be handed to developers. The interesting question is how to protect that value while also protecting council from risks it isn’t equipped to carry. There’s a third path between selling everything and council doing it all itself, and that’s probably where the real answer lives.
The lesson worth learning
The hardest thing about Blue Haven Bonaira and Blue Haven Terralong is that they were built with good intentions. Nobody set out to put council under a PIO or to leave vulnerable residents in a facility that needs $51 million in repairs. The people who made those decisions believed, like Graham does now, that council ownership and operation was the right answer.
The lesson isn’t that they were wrong about the goal. The lesson is that the model doesn’t work in 21st century construction conditions, and pretending otherwise just produces more Blue Haven Bonairas.
The current Finance and Major Projects Committee has, I hope, learned that lesson. The right path for the catalyst sites is one that captures long-term value for ratepayers without exposing council to risks it can’t manage. That’s not a compromise position. It’s the only sustainable one.
Thanks Graham for raising the question. The answer is imperative and it deserves the serious conversation you’ve started.











