The company running the Forsyth Barr Stadium is in line
for a multimillion-dollar cash injection from the Dunedin City
Council - including a new events fund - that seems set to drive
the next rates increase up to 4%.
Councillors yesterday backed the plan to spend more than $1.7
million extra each year reducing stadium-related debt,
subject to public consultation in the coming months.
That would drive rates up to the self-imposed 4% limit, but
would also slash at least $25 million from interest payments
over the life of the loans.
It would also help Dunedin Venues Management Ltd, which runs
the stadium, to turn a profit for the first time, rather than
continuing losses created by the requirement to service
stadium loans from its revenue.
The company would also be backed by a new events attraction
fund worth $400,000 a year, which would be used to offer
incentives to lure more major international acts to the
stadium, councillors indicated.
The fund would be paid for initially from within council
budgets allocated to economic development and Tourism
Dunedin, which were together worth about $2 million a year.
Councillors also wanted to consider a new targeted rate,
perhaps focused on the city's tourism and hospitality
sectors, to pay for the fund in future years.
The decisions are not final, but came as councillors
yesterday completed initial debate on the council's 2013-14
pre-draft annual plan ahead of schedule.
A draft budget would be approved for public consultation at
the next council meeting on February 25, after which
ratepayers would have the chance to deliver their verdict on
Council chief executive Paul Orders and his staff had earlier
delivered a pre-draft budget that proposed a rates increase
of just 2.8%, well below the targeted increase for 2013-14 of
no more than 4%.
That left councillors to decide how best - if at all - to
spend the $1.4 million of ''headroom'' available, which Mayor
Dave Cull wanted invested in initiatives delivering greater
savings for the city.
By yesterday afternoon, more budget tweaks - including
changes to fees and charges and an adjustment of the Waipori
Fund investment strategy - meant the available sum had grown
by about $400,000, to $1.866 million.
That set the scene for the long-awaited report into DVML's
finances - following a detailed review by Dunedin City
Holdings Ltd - presented to councillors yesterday by DVML
chief executive Darren Burden.
The report spelt out the options, including a do-nothing
approach which Mr Burden warned would see DVML continuing to
post annual losses of up to $350,000, exhausting the
company's resources and eventually leading to a call for more
council funding, anyway.
Mr Cull, responding to the report, recommended allocating
most of the money to stadium debt repayments, spread across
DVML and Dunedin Venues Ltd, which owns the stadium.
DVML would get $725,000 a year for the next four years to
repay debt associated with some of the stadium's removable
seating, new stadium vision technology and pitch machinery.
The money would be on top of the extra $750,000 a year given
to the company last year, as part of a new service level
agreement, and came after the company posted a $3.2 million
loss for the 2011-12 year.
However, the extra cash would allow DVML to clear its debts
within four years, meet its obligations and post small
profits in the years to come.
DVL would get another $1 million a year on top of that,
accelerating the repayment of more substantial stadium
construction debts and saving $25 million over the life of
The exact sum available for DVL debts would depend on returns
from the Waipori Fund and would be reviewed annually,
Of the rest of the $140,000 available, $50,000 would be used
to support a new breakwater at Te Rauone Beach, on Otago
Peninsula, and $90,000 would be used to continue support for
projects in the heritage warehouse precinct.
The council also planned to convert $3.381 million in earlier
cash advances by the council to DVML - which had covered DVML
set-up costs - into paid up share capital, in a non-cash
transaction, councillors decided.
The $400,000 events fund would also allow the stadium to
target more headline events, boosting revenue for the company
and bringing wider economic benefits to the city, councillors
The debate that followed was limited in part because Cr Lee
Vandervis was prevented from speaking, on a technicality,
after failing to indicate his intention to speak until it was
Cr Teresa Stevenson questioned why stadium debt was being
targeted, rather than debt from another project, such as the
Tahuna wastewater treatment upgrade.
Mr Orders said that was because core council debt was being
addressed as part of the council's long-term plan, which set
a target of debt to $200 million by 2021-22.
However, the size of stadium debt held by DVML and DVL still
represented a ''significant source of risk'' for the council
group over the next five to 10 years, he said.
''You reduce the risk to council in general more by paying
off DVL debt than by paying off Tahuna debt,'' Mr Cull added.
Councillors voted to include the spending in the draft
budget, meaning the 2.8% rates rise would increase to about
4%, if left unchanged.
Cr Vandervis voted against the extra spending.
Extra spending plans
$1.865 million to be spent on:
• Dunedin Venues Management debt ($725,000 a year, next four
• Dunedin Venues Ltd stadium debt ($1 million a year*)
• $50,000 for Te Rauone Beach breakwater, 2013-14 only
• $90,000 for Warehouse Heritage Reuse Fund, 2013-14 only
• Total: $1.865 million(* Subject to Waipori Fund return and
• $400,000 stadium events attraction fund
• Funded from existing council budgets in 2013-14
• Council to consider target rate to pay for fund in future