Planned stadium funding $9.1m

Darren Burden.
Darren Burden.
The cost of Forsyth Barr Stadium for Dunedin's ratepayers will rise to more than $9.1 million a year if extra spending signalled by city councillors this week is confirmed.

Despite that, Dunedin Venues Management Ltd chief executive Darren Burden said yesterday there was no guarantee more money would not be needed in future - although he hoped that would not be the case.

Mr Burden told the Otago Daily Times extra support signalled by councillors this week would allow DVML to turn losses into small profits, while the events fund helped attract more big acts to the city.

However, he could not rule out a further call for council cash, saying there were ''always going to be risks'', as well as opportunities, associated with budget forecasts.

''This gives us the best opportunity to ensure we don't come back to council, but there isn't a cast-iron guarantee.''

His comments came after a breakdown of funding arrangements for the stadium was presented to councillors during the 2013-14 pre-draft annual plan meeting, which concluded on Monday.

The breakdown showed the stadium already cost the council - and therefore the city's ratepayers - $7 million a year in reduced dividends, extra debt repayments and the cost of a service level agreement with DVML.

That included $5.25 million of annual dividends from the council's group of companies, normally used to offset rates, which had been diverted to Dunedin Venues Ltd - which owned the stadium - to pay stadium debt costs.

Councillors last year also decided to spend an extra $1 million a year to accelerate the repayment of DVL's stadium debt, reducing the loans from 40 years to 23.5 years and saving $94 million in interest costs.

In addition, councillors gave DVML an extra $750,000 a year last year for a new service agreement that promoted greater community use of the stadium.

That brought the bill for ratepayers to $7 million a year by last week, when the council's 2013-14 budget meeting began.

Then, on Monday, councillors indicated a desire to spend another $1.725 million a year accelerating stadium debt repayments across DVL ($1 million a year) and DVML ($725,000 a year).

That increased the total cost of the stadium for ratepayers again, to $8.725 million a year, while also freeing up DVML cashflows and saving another $25 million in interest.

And, if the proposed $400,000 events fund was included, drawn from existing council budgets to begin with, the total cost of the stadium for ratepayers was $9.125 million a year.

Extra spending signalled this week was yet to be confirmed, but would be part of the council's 2013-14 draft budget to be released for public consultation in March.

Mayor Dave Cull said yesterday it was important to note extra spending to accelerate debt repayment meant greater savings in the longer term, by reducing interest costs.

''The ratepayers are going to have to pay this debt sometime, and the longer we take the more interest we pay.

''I see this as an investment in savings.''

Any decision to increase the repayment of DVL stadium debt by another $1 million a year, signalled on Monday, would also come in part from within operational savings identified by council staff.

Mr Burden said the financial boost would see DVML's budgets move from the red into the black, with forecasts of a $98,000 loss for 2013-14, followed by small profits of $9000 and $88,000 in the following two years.

The extra spending on stadium debt and the events fund - expected to generate more revenue for DVML - had already been included in DVML's draft budgets.

Asked how confident he was of the new numbers, Mr Burden said a ''pretty thorough'' review by Dunedin City Holdings Ltd had concluded DVML's revenues were at optimum levels and expenses tightly controlled.

DVML operating costs had been cut by 5.8% for 2013-14, while staff costs were down 10% since 2011, the review found.

However, the company still had to pay rent worth $4 million a year to DVL to cover its share of stadium debt costs, which came from revenue and had, to date, turned DVML's operating profits into end-of-year losses.

Mr Burden, in a report to councillors on Monday, said it was ''reasonable'' to expect operating profit of $3.5 million a year, before rent to DVL.

However, without the changes signalled, DVML would continue to post annual losses of $300,000 to $350,000 a year, he said.

Mr Burden would not say if progress on the events fund would help secure deals for two more major concerts already ''on the table'', but talks were continuing.

The company's latest six-month result, covering the first half of 2012-13, would also be released at the end of February.

It would show another operating profit - before rent - for the period, and forecast a full-year result that would ''certainly be an improvement'' on 2011-12, when the company lost $3.2 million, he said.

 


The bill

Already in place:

• $5.25 million a year - reduced dividend from Dunedin City Holdings Ltd to Dunedin City Council (goes to Dunedin Venues Ltd instead to pay debt costs)

• $1 million a year - DCC to DVL to accelerate stadium debt repayments (agreed 2012); reduces loan repayment period from 40 to 23.5 years; saves $94 million in interest.

• $750,000 a year - DCC to Dunedin Venues Management Ltd, in return for service level agreement providing more community use.

Yesterday (subject to consultation):

• $1 million a year from DCC to DVL to further accelerate stadium debt repayments, from 23.5 years to 18.5 years; saves $25 million in interest.

• $725,000 a year from DCC to DVML to pay off debt in four years.

• $400,000 events attraction fund (from existing council budgets in 2013-14).

Total: $9,125,000


 

chris.morris@odt.co.nz

 

The only chickens to pluck . . .

. . . are the ones that are coming home to roost. Alas we are all suffering from it, forced to pay even further for this folly of gargantuan proportions. [abridged]

 

Can't be right

Sounds like figure were plucked from the air, qsrc, the minimum was $66 a year, but most I know have that well exceeded, plus ORC side of the bill.  Do you live in a very small cottage?

well said

What QsRC also forgets is that the amount on their rates bill for the public library enables every member of the public FREE access and use of the library and its facilities and NIL or minimal charge for borrowing books etc.

The $250+ that the stadium is costing each and every rate payer gives them absolutely nothing other than reduced services and lost opportunity for other council departments.

Generally, other than the odd free community event, you then need to pay $20 for each of a dozen or so rugby games or $200 for a very infrequent concert.

The library, water, sewage, refuse, roads etc are all established core council services. The stadium is a business plain and simple. If the numbers don't stack up, close it (or a better suggestion would be to suck up the fact we have to pay the capital debt but sell the stadium operation to the highest bidder, with stipulated operational conditions).

[Abridged]

Violated by rates demands

That may be an analogy too far. No one enters your house, the invoice arrives in the mail (or not, the way things are going). You should talk to victims of real crime about violation.

No chicken to pluck

@QsRC Is that your gross or net rates?

Our rates are offset from profitable council owned assets.

But the gross is important  as you are liable for that if the subsidy is removed in the future. Basic risk management, hope for the best, expect the worse.

My DCC rates for the stadium are $97 a quarter gross, $66 a quarter net. Not much to me as I do well for myself but for families on low incomes it has a massive impact, especially as we have one of the worst income medians in NZ.

Not that I care much, but increased financial pressures on people have side affects like increased drug and alcohol abuse, petty theft, violence and vandalism, all of that can affect my lifestyle.

Library costs

QsRC  on my rates bill I pay $92 for library costs. I do read at least two books a week that if I had to purchase would cost me around $60 a week, so I consider I'm getting value for my money there. The stadium is a totally different kettle of fish that is only occasionally used and remains empty most days of the year, yet continues to drain more of our hard earned money away on absolutely nothing apart from an Elton John concert, a rodeo (that should have been banned decades ago)  a few rugby games and a circus (Dunedin has had a continual circus since 2006 anyway. It's known locally as the DCC.

A turd will always be a turd

No matter how you try to polish and dress it, a turd will always be a turd, smell like a turd, and for ratepayers of Otago, taste like a turd.

Spending other people's money

Every time I read about rates increases due to the FB rugby stadium I feel like my privacy has been violated. It is as if a stranger has walked into my home and helped themselves to the contents of my wallet without asking. There seems to be no shame or regret, instead all I see is arrogance and a sense of entitlement in spending other peoples money. This has to stop.

Stats, stats and more stats

Just checked my rates bill:

Forsyth Bar Stadium $44.31! heap as chips shodul get another one!

Library $67.91! what's that all about, shut it down!

Who wants next go and plucking numbers out of thin air?

It's a scandal!

Where is the inquiry?

It was never $66 per household

Not so sceptical. $66 is the amount charged by DCC. If you look at the other part of your rates bill, that charged by the Regional Council, you will see an additional charge of $34 per household. So the total levied per household is $100 per annum, although the real cost per household is more than 4 times that.  

Build it and they'll come...

...for more cash.

But wait - there's more!

Your article seems to have overlooked the approximately two million dollars per annum  rates account, that the council 'donated' by way of discount when it became apparant the stadium could not pay the bill. (Neat bit of how to dissapear a bill book-keeping that one.)  Perhaps I'm being a little harsh. It may have been mentioned somewhere in there; my eyes are inclined to glaze over when I see the word 'stadium' these days.

true costs now coming out!

so divide $9.125M by the number of ratepayers (circa 50,000?) and add that to the $66 they are already taking and you get upwards of $240 per year per ratepayer?

Surely this can't be the true cost? 

Paging ex-Councillor Guest

The amount is over $200 per ratepayer.

Former councillor Michael Guest said it would be no more than $66.

There should be a full enquiry into the actions of former Council, including those still sitting, and the former Chief Executive.  During the term of this enquiry, Commissioners should be appointed in place of the dissolved Council.

The new Chief Executive is doing the right thing in paying down the debt.  However, surviving this situation does not absolve those Councillors who voted for the stadium to avoid joint and several liability for this loss.

So far, Delta has written down $9 million, the stadium is $9 million (and the rest) per year, the SH88 transactions will cost another $9-10 million in legal settlement.  Pretty soon it adds up to real money. 

[Abridged]

Creative accounting

$66? we were promised only $66 each a year - this is 3 times that, it's time we stopped throwing good money after bad and make rugby pay for the running of their rugby stadium rather than having the ratepayers continue to stump up with  a large portion of the cost of their tickets - it's not hard, charge the Highlanders $9.1m more a year and have them resolve the issue. If they refuse shut the place.

Saying that DVML will now be "making a profit" because the city is giving them a large cash grant every year has to be some of the most creative accounting I've ever heard of- it's a bit like saying DVML can afford to pay its $300k of rates because the city set them close to 0 (something not included in the above number, it should be).

It's time we finally installed that piece of public art in the plaza out front, a giant toilet sculpture/fountain in which hourly $9.1m in small bills are symbolically flushed.

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