Stadium loss rates fears

Ratepayers could be asked to reach into their pockets again, or the city's bars and restaurants could be slapped with a new targeted rate, as the Dunedin City Council grapples with a $3.2 million loss from Forsyth Barr Stadium.

Richard Thomson
Richard Thomson
The suggestions came from Dunedin city councillors who expressed disappointment and worry - mixed with some bullish optimism - while yesterday digesting news of the result.

Cr Richard Thomson told the Otago Daily Times the result, while worse than expected, was not a surprise for those councillors concerned about the project.

He believed it would be "very difficult" for Dunedin Venues Management Ltd to cover its costs and also pay nearly $4 million in rent, and it was "almost inevitable" rates would rise as a result.

"I think it could easily add a couple of million dollars a year to rates, and I may be being optimistic in that regard," he said.

That could result in about 2% added to rates next year, at a time the council was hoping to meet a self-imposed goal limiting the rates rise for 2013-14 to 4%.

Dunedin Mayor Dave Cull confirmed a rates rise could be an option unless the situation improved.

"Clearly, if a council-owned operation continues to haemorrhage and cost, ultimately, it will have an effect on rates."

Deputy mayor Chris Staynes agreed, although he hoped it would be "a last resort".

"We will have to find the shortfall from somewhere, and the last port of call is rates," he said.

DVML's result was "a bit disappointing", but not a surprise, and the council needed an events fund to lure more events to the city's stadium, he said.

To pay for that, he believed the council should consider increasing the city's economic development targeted rate - or applying a new one - to boost revenue from the city's hospitality sector.

The extra money raised could pay for the fund, which would help DVML but also the city's bars, restaurants and accommodation providers, which gained the most from each big event, he said.

Cr Staynes planned to raise the idea during the stadium review and at next year's annual plan, but consultation with businesses would also be needed ahead of any decision.

He hoped there would be a "willingness" throughout the sector to support the idea because of the potential benefits of an events fund.

"If we are doing that then I think [the funding] should predominantly come from the commercial operators who benefit from those events being on in the town."Asked if it could be forced on businesses if there was opposition, Cr Staynes said it would ultimately be up to councillors to decide.

"We do have the ability to set a rate. I personally think we need to see some commitment from that sector for that type of activity, because they get the direct benefit."

Mr Cull confirmed Cr Staynes' suggestion was "a live one" and would be considered as part of the stadium review, but he would need more information before supporting it.

Council chief executive Paul Orders said he was part-way through a "bruising" budget review process, ahead of next year's annual plan, and intended to stay within budget parameters set by councillors earlier this year. That included the 4% rates cap, the extra $750,000 a year in funding to cover DVML's shortfall, approved earlier this year, and the need to find additional "head room" within the council budget, if possible.

"I have not come to the conclusion any additional resources are required." However, work was continuing and policy options were for councillors to decide, meaning that position could change.

"Those options need to be explored."

While other councillors contacted yesterday expressed concern at DVML's result, Cr Bill Acklin was almost alone in backing the company.

He said it was "early days" for DVML, which would receive a revenue boost when the town hall reopened early next year.

"It's only been one year. It's a hell of a business to take on and to iron out whatever problems there are, and to come out with a rosy profit at the other end.

"I think there's improvement available, and to expect it to be done in the first year I think is probably a bit much."

Cr Lee Vandervis said he had expected the results to be bad, but the extent of the loss showed "things are absolutely dire", while Cr Syd Brown stressed the company was in start-up mode, but lessons would be learned for the next year.

"I would have hoped for a better result in the first year."

Cr Neil Collins hoped the stadium review would identify changes that helped after a "tough year", while Cr Paul Hudson said the challenge was now to improve the position.

Cr Andrew Noone said the results were "obviously worse" than expected, but believed the city needed to be "patient" after a disrupted first year of operation.

"We need to give it time."

Cr Kate Wilson said she was "disappointed" and "frustrated" by the result, and expected service levels could yet face cuts as a result.

Cr Jinty MacTavish said the result was no different than most of the city's residents had predicted when the stadium was first mooted.

"It's disappointing, but not a surprise," she said.

chris.morris@odt.co.nz 

 

We are the laughing stock of the nation

NVL;
I've got a number of friends and relatives from other parts of the country, and most were incredulous a city would build another stadium when it had one, yet a lit of things we don't have and would do well to have.

The thing of 'only hearing what they want to hear' well and truly belongs on the pro stadium side, especially now the chickens are coming to roost.

With the population base, and relativity to the nearest large city, mixed in with lack of transport infrastructure, and the fact people come here for heritage and wildlife, anyone with half a brain could figure the stadium was a white elephant in the making. 

My uncle from Auckland didn't spare his thoughts when here a few days ago, how himself and most of his mates look at the stadium project as absurd, far from being the envy of the rest of the country, as the stadium pushers would have us believe. 

University

Boldor: the University have nothing to do with the stadium and they paid for the land and construction costs of the building. As the largest employer in the city, would you not think a considerable amount of rates, etc is paid by said staff? Without the university, Dunedin would fade into oblivion...debt-laden oblivion at that! Oh wait, it already is! Take your frustration out on the local councils, they are the ones who have created the debt situation!

Good quote for our next public sculpture

The Thomas Jefferson quote, supplied here by The listening post, is a good find and could be inscribed, in stone, on the next public sculpture for the city. Suitably sited on the stadium plaza.

Oh right I see how this game is played

Not unnaturally, Ian Smith has never heard of anyone from outside Dunedin who regards the stadium as a wonderful facility.
If he is anti-stadium he will likely listen, for a start, but not 'hear', because such people make a practice of not 'hearing' what they don't want to hear.

I have been to a few rugby games if that makes me a rugby head then the standard is pretty low. At the end of the day I am happy to contribute to funding the facility no different then I am happy to contribute to facilities I use even less - libraries for example take 150% more of my rates than the stadium does. I've got sky sport what do I need a public library for?!

Stadium debt

Thomas Jefferson's famous words have a familiar ring to them here in Dunedin.

"To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical."

Stadium loss

Interesting to see not much of a mention of the university here. They are the ones who are laughing the ratepayers' expense. They got a stadium and new building at the front which they don't pay rates on. Time for a bit more financial input from said institution.

Change the model

The current management model should be reversed. Stop catering for elite sport, who don't pay for it, and give access to the community, who do.

Fork out the money for artificial turf and open the stadium all hours 6am-10pm in a similar style to Moana Pool. Community groups pay a gold coin per head and if you are an elite group who needs an all-weather training venue then you pay a higher fee. It was sold as an all-purpose venue but it clearly isn't, with access limited by turf fragility.

Changing the model would remove the need for the proposed loss-leading enticement fund and multiple staff salaries including the CEO. We would still be stuck with paying the construction costs but at least this way the place would be used by the people who are paying for it.

I don't think this model would break even, but it could hardly do worse than is happening now.

Can anyone explain?

It has been reported that a board member of both DVL, who own the stadium, and DVML who run the stadium believes that their accumulated losses should not be added together as they "overlap".  This sounds rubbish to me.  If a business owns a building and has costs associated with it to cover debt, and it also owns the operation that rents the building and this has operational losses, then the total is cumulative and can't "overlap".  Can an ODT reporter perhaps clarify exactly why the stadium annual losses weren't reported to be actually $19.3 million made up by DVML losses of $3.2 million plus previous loss of $3.2 million, plus DVL losses of $12.8m?

Sell the stadium

Selling the stadium is a topic that needs examination: we'd be stuck with the bill for the build but would at least not keep accuring fresh losses every year.   

As an analogy.  Lets say you buy a car for 10% down and after two weeks the engine implodes, taking the electrical systems and drivetrain with it. You go back to the dealership to find an empty yard and a sign to tell you the firm is wound up becasue it was insolvent.   You still have to keep up the payments to the finance company, but to fix the vehicle is pointless because it would cost far more than you can afford (or the vehicle is worth). The logical if horrible solution is to sell the vehicle for parts to reduce the debt even a little and take the bus for a while to get rid of the debt.

As a city I think we're going to have ride the bus for long time.

An object lesson in what not to do...

I think the state of our Council finanaces have served as a lesson to Christchurch, where the news of the plan for a covered stadium was greeted with real hostility by much of the population.  From friends there, the tenor was "why should we subsidise businesses like the RFU at the expense of all the other stuff that needs to be done?.""  I've deleted the expletives.

Stadium honeymoon period?

I'm not sure of the exact words but the previous chap running DMVL said that there would be a honeymoon period that the stadium had to take advantage of as things would get a bit tougher after that. Going by that logic, this loss could be as good as it gets.

I think heaps of people are for the stadium but not the financial pickle it is causing the city to be in.

My original position was that the stadium per se was a fantastic idea so long as the council didn't fund and run it.  If it is such a great idea then the great and the good would have built it and run it themselves at a profit.  There were more than a few big names backing this liability and some should have known a lot better.

As for the "common good", as others have stated, well that arguement can be used to ram all sorts of things down the throat of the public.

None of the financial implications of a stadium should be a surprise to anyone why has internet access.  There are many articles on how the public fund loss making stadia.  Many articles are US based but if you substitute NFL with NZRFU you'll get the picture.

[Abridged]

How about...

. . . a Bledisloe Cup game next October Ian?

And with respect, I think you are deluding yourself a bit if you think that citizens of other administrations in New Zealand really care about the finances of Dunedin. And that doesn't just apply to the rather patronisingly termed "rugby heads" you mention.

What would you expect?

Not unnaturally, NVN has never heard of anyone from outside Dunedin who regards the stadium as a laughing stock.
If he is a rugby-head he will likely listen, for a start, but not 'hear', because such people make a practice of not 'hearing' what they don't want to hear.
Secondly, if they are people who might once a year fly to Dunedin to take in a rugby match (although given the status of our stadium I cannot imagine what we would feature to attract them) their last concern will be who is underwriting the true cost of their seats in the stands etc.
Their only concern will be that it is not them.

DVML directors' accountability

Considering the huge Stadium $$ loss, just exactly what do the directors do to assist the stadium CEO, remembering they are paid cumulatively $88,000 per year to do that job. Does anybody know? What is the return on the investment? Can any of the 5 directors respond please?

Laughing stock?

I have never meet anyone from outside of Dunedin that considers us a laughing stock because we have the stadium. Outside of Dunedin the council's financial situation is not even on the radar. You know what would be on the radar? Ripping down the stadium, that would truly make us a laughing stock. Personally I can't see how the stadium will ever make money I just wish the council would bite the bullet and rate fund accordingly because all they are doing right now is making the situation worse.

Just give it a few more years

I've been quiet for long enough. Peter and I still think this thing can fly. Just stick to the plan - more rugby will be great for the city. I don't mind paying more in rates for a great asset.

Where to now?

 

It's so simple an astute ten-year-old could work it out. If you give away use of the stadium to all and sundry at below the cost of mounting events, you run at a loss. In that event, you not only do not pay off any of the 'principal', you put the city and its ratepayers deeper into the financial mire by borrowing to keep it going, not to mention covering the costs of interest-on-interest.
An item which arrived in the mail today puts it all into perspective by inviting input from 'groups' wishing to use the stadium. My view of that is that they will be besieged by those wanting it for nothing and they will capitulate in their wish to see it re-jigged as a 'public amenity'.
We will have then gone half-circle, from totally private-enterprise funding, as initially promised, to ratepayers having to shell out the totality of the operating costs, and I have a sneaking feeling that was the intention of those who foisted it upon the city from the outset.
Of the person on this thread who claimed that by 'mothballing' it we would become the laughing-stock of the country, I would ask: how could we conceivably be a bigger laughing-stock than we are already? [Abridged]

 

Change the tune

Stevepf: In case you hadn't noticed, this town has become the laughing stock. RWC and Elton laughed all the way to the bank.

Float shares in DVML

Stevepf: I did not say pull it down. But here is the way forward. Have a 100% public float in DVML. This will give all the positive, forward-thinking pro-stadium buffs a chance to prove it can be a successful business venture. and then they can say "I told you so" to all us naysayers.
That way the DCC still retains ownership of the asset, but it will not be burdened by any losses in running the circus.
Perhaps welfare dependent rugby union could buy some of the shares and try to learn to stand on its own two feet.

We? I don't think so

What is this 'we' you speak of Stevepf? I never, not once, thought the stadium business plan made sense. From the beginning it was clearly a fiscal lemon.
The egg is on your face, it's not hitting anyone who was saw the massive flaws in the stadium build. Any embarrassment is yours alone, I'm afraid; that's the way the cookie crumbles, as they say. That's one reason I have never allowed myself be sold the spin about the stadium 'vision'.
I wanted to be able to tell people I was not conned, not even for a second.
Sadly for you, you cannot say that. But the good news for you is that the stadium is waiting and ready to be bought by the true stadium devotees. At last you have the chance to put your money where your mouths are.

People do exist, just not online

Just because the 'yes people' don't spend their days rehashing the disdain for the stadium on the ODT online comments, it does not mean they don't exist. Its the same half a dozen people that frequently comment on this matter, and you cannot assume that this is a majority.
Nor can you claim 80% are against the stadium because of a ore-build survey (quite rightly disagreeing) as a lot of people now despite being against it love the experience and see the value for the city.
No-one in their right mind would expect a stadium in its first year (like many businesses) to make the city money. It's just totally unrealistic. It's made a loss and that's not good but its nothing new.
Other stadiums around the country run at a loss but the city is OK with it for the economic value it brings to the city ... you might not think it brings any, but in reality it does! Just not to you.

 

Why are our local MPs silent?

The silence of the Dunedin Labour party MPs, and especially the MP from Dunedin North, where all this council debt is being generated, is quite deafening. Dunedin, with its low income population, now more ever needs some leadership to help and support those who have nothing more to give.

Who are the stadium yes men?

Who are the stadium yes men? Perhaps they and all the pro-stadium mob could pool funds and buy it from the city and run it themselves. Then the DCC can get down to concentrating on what it was supposed to do - roading, water, wastewater and rubbish collection.
I won't hold my breath, becuase the pro-stadium mob seem to prefer spending other people's money. [Abridged]

Change the tune

Jonkey: "Sell the stadium for $1"? Are you kidding? Lets get real, can we?
I understand you all think the stadium is a 'dead duck', a waste of money etc. Although I do support the loss for the greater good I do understand your point of view. But honestly, Im with GW_Scam - you couldn't seriously prefer that its doors be closed andthat it be torn down, could you? We would be a laughing stock.
Unfortunately it seems that you would rather have us be a laughing stock so you could say "I told you so" than put forward an arguement or solution that would actually be a win-win for everyone. Yes, I know it's not your job to find a solution, but its time to move forward. Say what you like - no-one would allow this to be pulled down, so maybe it's time to change the tune slightly to a tone that's little less defeatist and a little more proactive.[Abridged]

Stadium costs money yet again

 Unbelievable that they never thought to check that big events use 747s and that they cant fly into dunedin.

Golly, who would have thought that it would bleed money? Everyone who marched down George Street, everyone who put in a submission - everyone except the councillors who voted for it.

User pays

Get rid of DVML. DCC takes over and sets up a system in which anyone who wishes to use the stadium pays the full opening and operational costs. If it costs $300,000 to open for a night, charge that amount. At all other times, close it down. Work in annual interest repayments as well as all maintenance costs. The longer the rugby community does not use it the higher the rental cost goes, and the more they use it the cheaper it gets.

Make an unspoken rule: no money or collateral upfront, no stadium. Nothing comes for free these days, especially stadiums and hotels.

Events fund lunacy

An events fund would not bring Dunedin closer to major population bases, make our airport big enough to cope with large touring acts and visitors, improve the acoustics of the stadium or increase the average local income so that ratepayers could afford tickets.
What it would do is enable DVML (ratepayers) to offer guarantees to promoters, which we can't afford to do. It effectively puts the ratepayers in the very risky large events business. This didn't work well for Auckland City Council or Hamilton. Even Wellington is struggling to get major acts so I don't believe they will come here without significant inducements.
All these things were pointed out years ago, but still we are lumbered with $150m in borrowings and huge running costs. There aren't any easy answers. But people are dreaming if they think there will ever be a surplus from the stadium.
Unfortunately we are stuck with ever-increasing subsidies. I believe the review will focus heavily on "community use" as there is no business model that will work.

 

Sell it to a NRL club?

Sell it to an NRL club. They know how to stand on their own two feet, unlike rugby union, which are now the bludgers of professional sport.

Stop throwing ratepayers' money away

"Stop booking events that they lose money over, that's a great way to reduce their losses - just stop losing money" says MikeStk.
While that would only help to stop the debt rising, it would be a good start. Borrowing or taking borrowed money from Delta etc (which is according to the mayor different, but according to Cr Vandervis the same thing) to create an incentive fund encouraging event organisers to use the stadium for free is hardly the way to get out of the deep hole.
Council, please stop digging. That includes "into our pockets".

A dead duck stadium

The stadium, whether we like it or not, is a dead duck. The first year of a brand new stadium should be one of the best, not the worst, especially given all the hype with its opening from those who stood to gain from it most. We had the Elton John concert and the RWC - of course they sucked money out, not in - but they were the 'grand' highlights for the first year of operation. As the stadium ages, with maintenance issues coming further into play, it will only get worse. More money, higher rates.

This stadium is a train wreck that has already arrived.

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