PORT Stephens' koala colony is "on its knees" according to a volunteer group that rescues the marsupials and has helped spearhead the construction of a sanctuary to boost their conservation.
NSW Environment Minister Matt Kean, NSW Shadow Environment Minister and Port Stephens MP Kate Washington, Paterson MP Meryl Swanson and Port Stephens mayor Ryan Palmer visited the council-owned resort, Treescape, at One Mile on Sunday for a sod turning ceremony.
It marks the start of work on a development that will include Port Stephens Koalas' (PSK) hospital with an operating theatre and four intensive care rooms and a sanctuary open to the public to display up to 30 koalas.
The development also includes extra accommodation and a tourism centre.
PSK secretary Ron Land said the ceremony was "fulfilling and heartening to see genuine concern for the koalas".
"It was also daunting because of the enormity of the job - we're a relatively small but highly professional community volunteer group," he said.
"But I'd much rather look at building up physical and financial resources to tackle the problem than walk away and say 'It's too hard' or 'Let someone else do it'."
Mr Land said PSK, which formed in 1987, helps an average of 50 koalas each year.
It has three rescue vehicles, three home carers and opened a rehabilitation facility two years ago adjacent to where the hospital will be built.
More than 30 rescuers and carers are involved with the facility, which has capacity for 14 koalas.
"The biggest challenge is the destruction of habitat through development," he said.
"We now take koalas from Muswellbrook to southern Lake Macquarie and everywhere in between.
"What's worrying in Port Stephens is we're getting an increase in the numbers of blind and almost blind-koalas. That could be stress-induced chlamydia."
The sanctuary will open in three months and the hospital by next March.
Mr Land said the hospital's staff and volunteers will triage koalas and may perform "less invasive" procedures. Some koalas will still be taken to vets.
Mr Land said it was "disgraceful" the koala population was declining.
"The number one thing incoming tourists want to do is see a koala, but we all sit back and watch the habitat perish - and them with it," he said.
"We're saving one of the last colonies of koalas on the eastern seaboard of Australia.
"This colony is on its knees. We're in the fight of our lives.
"If this project fails, koalas here are finished.
"If they drop to two thirds of their current numbers they'll survive in isolated clumps for five to ten years but then they are gone."
He said the state government and council each committed $3 million to the development. PSK will fund the hospital fit out.