Stadium loss may blow out by $2m

Dunedin Mayor Dave Cull is refusing to rule out adding another $2 million to the Dunedin City Council's bill for losses from the sale of Carisbrook.

That was the value of a council loan to the Otago Rugby Football Union more than a decade ago, and subsequently repaid when the council bought Carisbrook and surrounding properties from the union in 2009.

The Otago Daily Times reported yesterday the council was likely to be left about $100,000 out of pocket as a result of a conditional agreement with Calder Stewart to buy the old stadium, in a complex deal believed to be worth about $3.5 million.

The council had borrowed $7 million to buy the stadium and surrounding properties from the ORFU, but had since recouped $3.4 million, in part by selling eight Burns St homes and half a car park in the area.

In theory, if the Calder Stewart deal worth $3.5 million was confirmed, that would leave the council just $100,000 short of covering its $7 million debt.

However, when contacted yesterday, neither Mr Cull nor acting council chief executive Tony Avery would rule out adding another $2 million to the bill for losses.

The extra cost could be considered because the ORFU only repaid its loan from the council using the additional money borrowed by the council to buy Carisbrook from the union.

If the ORFU had instead sold Carisbrook to a private buyer, and used those proceeds to repay the council's loan, the council would have received its $2 million back without borrowing any more money, Mr Avery acknowledged.

The ODT was told yesterday that meant the true loss faced by the council from the deal could be seen as $2.1 million, not $100,000.

Mr Cull would not comment on the calculation yesterday, but would not rule out the numbers when pressed. Discussing specifics would reveal the details of the conditional deal to buy Carisbrook that was still confidential, he insisted.

Instead, he would only reiterate his belief the council would not cover its costs as a result of the sale of all properties associated with the deal.

''In the wash-up, we are unlikely to recoup the full prices paid, so we will make a loss,'' he said.

The $2 million loan to the ORFU was originally drawn down in 1997 to rebuild the Railway Stand at Carisbrook, and was covered by interest-only payments by the union.

In 2008, the council agreed to extend the term of the loan to June 30, 2009, the same year the deal to buy Carisbrook from the ORFU was confirmed.

By late 2008, the ORFU's then-chief executive, Richard Reid, was publicly stating the union's intention to use proceeds from the sale of Carisbrook to repay the council's loan.

In 2009, the council's then-chief executive, Jim Harland, also publicly stated the council's decision to buy Carisbrook, in part, aimed to help the ORFU clear debts and ensure it was in a ''viable financial position'' to use Forsyth Barr Stadium.

In the end, the purchase did not wipe all the debts of the ORFU, which also owed $4 million to the Bank of New Zealand, and the union narrowly avoided liquidation after being left with a $1.2 million debt and annual losses, even after selling Carisbrook.

Mr Avery said yesterday the facts behind the loan arrangements were ''quite plain'', but also refused to be drawn on whether the true loss faced by the council from buying and selling Carisbrook was $2.1 million.

However, it was ''quite possible'' the council could have had its $2 million loan repaid, without further borrowing to buy Carisbrook, if the ORFU had sold directly to a private buyer, he said.

''How people then view that $2 million [loan to ORFU] is where different parties will diverge.

''It's up to people to draw their own conclusions,'' he said.

stll outstanding

MikeStK - the ORFU welched on a $400,000 debt to the DCC - not $200,000. Therefore the sale of the various properties bought is still short $3.3m at least.

Last one to leave Dunedin . . .

Turn out the lights!

Scubadoo, we sympathise with your decision to sell up your Dunedin house. If we didn't have commitments here that make it hard for us to leave, we too would sell up and get out of this doomed city.

It is a very depressing state of affairs and one that the current Council doesn't seem to recognise or wish to address at all.

I am usually a very positive person but I cannot for the life of me see any light at the end of the tunnel for Dunedin. The saddest thing is that any of us with any business nous have been predicting this for years. It amazes me how many people out there still do not recognize how serious the situation is.

We desperately need to get rid of the majority of the current Councillors, have a full, independent, audit of the Stadium fiasco and hold those responsible for it accountable.

Dunedin future

We have felt so strongly about the direction in which Dunedin is heading and where the its future lies that we have sold our home so that we no longer have to foot these bills. 

We'll rent for a short time and then likely move on.

Good luck Dunedin, you're going to need it!!! 

I predict that the 'new' stadium will continue to make losses until the public eventually supports its sale. The stadium will then be sold, again at a loss, to somebody 'in the club' who will again make even more money on it! 

The Carisbrook issues

The facts are that the DCC spokespeople, whether elected or staff, don't seem able to adequately explain any of these transactions.  So many questions remain unanswered including just why the DCC took it upon itself to loan $2m to the ORFU which was essentially unsecured, why did it decide to pay the ORFU $7m for the Carisbrook purchases when the CV was a fraction of that sum and the market sale price was about half what it paid, and why do our elected representatives continue to ignore any reasonable requests for an independent enquiry to establish facts, identify those responsible and most importantly, hold them to account?

[Abridged]

Audit

The purchase of Carisbrook in 2009 by DCC was unnecessary.

Given the financial loss incurred, it also appears to be imprudent.

There should be a full independent investigation of the original deal. [abridged]

True loss

First of all this is not the "stadium loss" - the rugby stadium is run by DVML and has already announced a much larger loss for the past year. This loss is for the Carisbrook transaction - a separate transaction that needs to be added to the stadium loss to get the true magnitude of the amount the ratepayers will have to cover.

However for the Carisbrook deal a $2.1m is too low, the true number is something like $3.1m - the math works out:

On the outgoing side of the ledger should be

  • $2m loan to ORFU
  • $7m purchase of Carisbrook
  • $860k debt servicing/upkeep
  • $200 ORFU rent that was never paid

total $10.06m debt

On the income side of the ledger we have:

  • $2m loan repayment
  • $3.5m sale of Carisbrook
  • $727 sale of carpark
  • $692 sale of houses

total $6.92 income

The difference is a $3.1m  loss

Conclusions

I've already drawn mine.

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