The $15m dollar day – update

This morning the ORC met to talk about whether to continue with the stadium given the condition for $15m funding from other sources to be found by yesterday.

After going into committee to talk about the “new information” Councillors came out 20 mins later.  Stephen Cairns read a statement which went something like this:

I am pleased to confirm the Crown is prepared in principle to underwrite the construction of the Stadium up to the sum of $15m.

The letter was written to Mayor Chin of the DCC and he had given Cr Cairns permission to read the first line.  Any request for further information was to be referred to Peter Chin for comment.

It was apparent from the following discussions there would be conditions attached to the $15m and these weren’t yet known.

Although not a grant, the underwrite could be seen as a form of guarantee or insurance policy should the Carisbrook Stadium Trust (CST) fail in its efforts to collect the $15m shortfall.

The ODT have the story online here -

 http://www.odt.co.nz/news/dunedin/45836/govt-meets-15m-stadium-shortfall 

Wasn’t today 15 million dollar day?

At the Otago Regional Council’s (ORC) meeting on 11th February 2009, Councillors resolved among other things that their funding of $37.5m be conditional on:

… assurance acceptable to Council by 2 March 2009, of a likely Government or other sources capital contribution of $15,000,000 to help meet the shortfall of private sector capital funding.

Today I was at a Dunedin City Council (DCC) meeting to approve its Draft Long Term Council Community Plan (LTCCP) for consultation.  Just after the start, the meeting went into non-public for a stadium update.  I wondered if this would mean an announcement was imminent.  After 1 1/2 hours there was no announcement or even comment on what was discussed.

I guess the $15m hasn’t been found yet.

The ORC have a meeting tommorrow at 10:30am to decide whether this condition has been met.

Bring back the brook

Stuff reports an article by Tony Smith in the Press today.  The last few comments make interesting reading …

 

I may be swimming against the tide, but I’ll miss Carisbrook as a rugby test venue. Never mind the creature comforts of flash food and liquor outlets and corporate boxes.

 

At the mighty Brook, you’re much closer to the action than at any other major rugby ground outside Waikato Stadium.

 

I’ll never forget Carisbrook for the endless hours of pleasure I had there viewing Gordon Hunter’s early 1990s Otago side, a more exciting side to watch than any provincial team I’ve seen in the professional era until Dan Carter’s emergence at the Crusaders.

 

I’m surprised Dunedin’s canny council is set to swat away the moths as it opens its sporran to fund a new super-duper white elephant, er, stadium. Never mind Bring Back Buck, how about Bring Back the Brook.

A glum moment?

My colleague Dr Rob Hamlin, a senior lecturer in the Department of Marketing at the University of Otago, and stadium opponent, responds to the many people who have asked him what can be done now …

So, the result is finally in.  Upwards of $140 million of public money will be poured in to the proposed Awatea St Stadium.  The money has been allocated to this project by our elected representatives using procedures that are (broadly) correct.

For those of us who opposed this proposal, it is a glum moment.

I have been approached by so many citizens asking my advice as to what should be done next, that I am moved to write as a form of collective answer.

My recommendation is to do nothing overtly for the time being. The greater public, which elected these officials, is sick of this issue, and of those of us who have had a high profile in the debate both for and against the proposal.

There also appears to be no will within central Government, the Audit Office, or within our local group of MPs to do anything about it.

The $140 million is already lost. It is a “sunk” cost.

While I understand Rob’s frustration about this, I don’t entirely agree with his recommendation.  The $140m isn’t lost until it’s spent.  So far, about $12m has probably been spent.  That leaves savings still to be made of over $100m.

Until the contracts are signed later this year or earlier next year, there are still plenty of opportunities for the Council (DCC) to back out.  Deadlines already set could be missed, the District Plan Change might be delayed, the private sector funding might not eventuate or the contracts might come in higher than budget.  Whether they will or not is another matter.

Those who oppose the project can still have input into the process.  Submissions can be made to the District Plan change process, lobbying can be done to central government, and certainly lobbying and media attention can be brought to bear on City Councillors.

There’s a lot more information which needs to come out about the project, both from the promotors and from the opponents.  A lot of questions still need answering.  Much could be gained by both sides from a higher level of transparency and openness around the proposal.  The more public debate the better.  This is the biggest and riskiest project our City has undertaken, ever.  We are remis if we allow the decision to be taken easily by our elected representatives.

What can the ORC Councillor’s who voted against the stadium do now?

This morning’s ODT contained the following letter to the editor from Bryan Scott, ORC Councillor:

THE June 26 ODT report on the ORC new stadium debate did not name the one councillor who voted against the final ORC proposal. It was myself and my reasons and my view that this project does not stack up have been previously reported. If this stadium has any chance of success at all, the entire community will now need to get in behind it including the ORFU, university and the private sector raising $55 million plus any contributions required for corporate boxes. I genuinely now wish this project well and without stepping aside from my views and responsibilities, will constructively assist this project in any way I can. 

In reality there is little the ORC Councillors who opposed the stadium can do now.  The ORC’s decision has been made and unlike the DCC, there is not much more which needs to be done apart from tick the boxes of the conditions made in their resolution of 11th June.  Obviously, if the conditions aren’t met they will withdraw their support.

I am aware of some concern about the comments Cr Scott expressed in the letter to the editor – that he has changed his mind, and made an about turn.  I will do some more research but I’m fairly sure most Council’s Codes of Conduct require Councillors to support decisions made by the majority even if an individual doesn’t agree with that decision. 

To be continued ….

 

Newsreaders – a great way to keep up

I’ve posted this helpful hint on how to keep up with news and other things which interest you, on my other blog.  Check it out.

http://nicolaholman.wordpress.com/2008/06/24/newsreaders-a-great-way-to-keep-up/

Channel 9 Debates

I’ve just noticed Channel 9 has now posted all the stadium debates on it’s website, including the one held before last year’s Council election.

June 17th 2008 – The Great Stadium Debate Uncovered -

http://www.ch9.co.nz/content/great-stadium-debate-uncovered

June 6th 2008 – Round Two of the Great Stadium Debate Starts -

http://www.ch9.co.nz/content/round-two-great-stadium-debate-starts

September 28th 2007 – The Great Stadium Debate

http://www.ch9.co.nz/content/great-stadium-debate

 

Other news items related to the stadium can be found using the “Search” function under the “Archive” tab.  The archive can also be browsed by date which is also useful.

A recent NZ view on the economic benefit argument

In 2006, the Auckland City and Auckland Regional Councils commissioned Covec to do a Cost Benefit Analysis of Stadium Options as they looked at whether to build a new waterfront stadium or upgrade Eden Park.  They produced their final report in November 2006.

In the Executive Summary they state … “We have classified neither project as having a probable positive catalyst effect on economic wellbeing because, … , stadia tend not to promote economic growth.”

Appendix 1 further explains this:

An extensive economic literature shows that spending public money on stadia does not promote economic growth. It is summarised by this quote from Siegfried and Zimbalist (2000):

Few fields of empirical economic research offer virtual unanimity of findings. Yet, independent work on the economic impact of stadiums and arenas has uniformly found that there is no statistically significant positive correlation between sports facilities and economic development.

Covec then quote from another study by Baadel (1998)    ….

We conclude that measurable economic benefits to area residents are not large enough to justify stadium subsidies and that the debate must turn to immeasurable intangible benefits like fan identification and civic pride.

I will include more material on the economic benefit argument soon.  This is not just Covec’s view – internation research in this area has now moved on to the intangible benefits of having a stadium – ie, public goods like Civic Pride, the “feel good” aspect, cultural and social reasons.

ODT Mon 16th June – Opinion – “Stadium proposal fails to stack up”

At time of posting this hadn’t made its way onto the online website. The format added to the article is mine,

Otago Regional Councillor, Bryan Scott, writes ……

Stadium proposal fails to stack up

IN MY VIEW, the new stadium proposal does not stack up for the following reasons:

1. No anchor tenant. 

The Otago Rugby Football Union (ORFU) has confirmed that it will not be the anchor tenant. Rather, it prefers to be an occasional hirer and pay on the basis of a percentage of gate takings. The ORFU is obviously reluctant to offer guarantees, which may not be surprising given the Otago rugby landscape of no A-grade tests (even with a new stadium), uncertain Super 14 prospects, declining attendances, and debt. The University of Otago also will not be the anchor tenant. If neither the ORFU nor the university are, who will be?

2. Unlikely to provide net economic benefit.

Certainly, a new stadium will generate economic return. But will its overall economic benefit be greater than the stated $188 million cost combined with other opportunities lost by committing such a vast amount of community money? References and research indicates that even much larger cities struggle to make stadiums pay for themselves, and they hardly ever provide net economic benefit.

3. Unlikely to be built for $188 million. 

Two cost estimates were made at the start of this project, one of $240 million and the other of about $188 million. The lower was chosen on the basis of being able to build it the Southern way. Despite significant cost pressure, such as increased material prices, transport prices, land prices (from $20 million to an estimated $30 million), the $188 million price tag remains. Significant project risk exists with the roof, grass, piles, interest rates, exclusions and actual contract tender price. A recent independent assessment estimates an additional $20 million cost when allowing for capitalised interest. All these estimates exclude the SH88 realignment cost, which may or may not be paid by government. I understand that ORFU Carisbrook sale negotiations and university negotiations are yet to be finalised. The CST advertised statement that the stadium will be built for $188 million appears to be overly optimistic.

4. Lack of real support.

Outside of the hard work by the Carisbrook Stadium Trust, real community support, based on outcomes, has been disappointing to date. Submissions supporting the stadium at the recent ORC consultation process were virtually non-existent, with 177 submissions voting 14:1 against the new stadium. Private fundraising so far also suggests that private sector financial support is slow, especially considering the project time of about two years to get to this point. While publicity may have suggested that 33% ($15 million of $45 million) of private capital funding has been promised, my understanding is that a reduced figure of 17% ($9 million) is in fact correct. For the record, I understand that the other $6 million (thereabouts) goes towards operational costs, including corporate boxes, and that a higher fund-raising target of $55 million is necessary to meet bridging finance interest requirements. Some additional allowance for converting promises into cash may also be required.

5. High ratepayer contribution.

Ratepayers are paying a disproportionately high contribution for this project. Why are the ORFU and NZRFU not contributing ? Why in reality is the university only contributing up to a maximum of $10 million? The statement that city ratepayers will pay $66 per year per $250,000 house capital value is not the complete story, with DCC, ORC, direct and indirect contributions needing to be included. Contributions from DCC-owned companies and ORCowned Port Otago need to be included, as ratepayers will inevitability have to pay other ratepayer charges that otherwise would have been subsidised. I calculate the city ratepayer with a $250,000 house will, in fact, have to contribute a total in the order of $150 extra rates per year for the next 15 to 20 years. This excludes any additional ratepayer funding required to address any capital or operating financial shortfalls.

6. High opportunity cost.

Because of the high community funded cost of this project, other community opportunities will inevitably be compromised. These could include, for example, a peninsula living park, sustainable living, harbourside cycleway/walkway, Tahuna sewage treatment scheme, economic development, Orokonui completion, improved bus system with reduced fares, more direct support of university and reduced debt. 

If the community wants a better rugby stadium, we should strategically upgrade the existing Carisbrook, a project which will need to be managed and judged on its own merits.

Today’s ORC Finance & Corporate Committee Meeting

The following images are from today’s meeting.  The first four characters spoke extremely eloquently at the public forum.  Well done guys.

First up… Syd Adie

Next … Dr Rob Hamlin

Thirdly, Bev Butler.  Notice the determination on Bev’s face and the discomfort on Cr Cairn’s.

And lastly, Lou Vorgers, describing the “Cuckoos” with very short arms but very long pockets.

And some pictures of those in the public gallery