Lake Macquarie council has deferred a decision on taking over Valentine Hydrotherapy Pools after being told it could cost more than $20 million to take on the aquatic centre.
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The facility, which was established by the community more than 50 years ago and is run by volunteers, closed in March due to the coronavirus and has not reopened.
VHP officials approached the council last year about a potential takeover or providing financial assistance to ensure it remained open.
They had flagged a likely inability to fund overdue upgrades, including a $90,000 roof, in coming years.
The council awarded VHP a $10,000 grant last year while it undertook due diligence on the facility and the feasibility of a takeover.
Council staff presented findings from those investigations at a meeting on Monday night, recommending against taking it over.
A report prepared for the meeting said the facility "does not meet modern standards expected of a public swim centre due to its age, construction techniques used and layout".
Three of the facility's pools did also not meet the NSW Health guidelines for water treatment and "cannot be altered to meet these guidelines in their current state".
Staff said the facility needed to be replaced at a cost of between $11.2 and $14.6 million. Taking it over would also result in annual operating costs of $1.3 million.
Such costs would have to be funded by loans, staff said, and five of the council's existing six swim centres - West Wallsend, Morisset, Speers Point, Charlestown and Swansea - were already in a "relatively poor state" and overdue for upgrades.
The report noted about 80 per cent of the city's population are able to access one of the existing swim centres within a 10-minute drive.
This would rise to 88 per cent if VHP was included but staff said council was already "providing adequate access to swim centres for its population" and recommended building a hydrotherapy pool at one of the existing facilities if VHP does not reopen.
Cr Adam Shultz moved an amendment to defer a decision until a site inspection of VHP and Toronto Swim Centre is undertaken. It passed as the motion 10 votes to one.
The council bought the Toronto Swim Centre in 2006, a process which Cr Shultz likened to the current situation of VHP. It also took over the Morisset facility in similar circumstances in 2003.
Cr Shultz said there was a lack of year-round access to aquatic facilities in Lake Macquarie and VHP offered "something different".
He said the Toronto centre had undergone an $8 million renovation and councillors should inspect both facilities "to see first hand" the benefits of such an investment to "objectively look at the [VHP] situation" and "make an informed decision".
He read out letters of support for keeping the facility open from a variety of parties, including community groups, businesses and the local state and federal MPs.
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