Stadium model contributors defend decisions

Those who contributed to Forsyth Barr Stadium's operating model have defended their decisions in the wake of an announcement it will be reviewed.

A review and rebuilding of the stadium's complex operating and financial model was under way, the result of the stadium being set to make another loss this year and a bigger one next year, Dunedin City Council chief executive Sue Bidrose said on Thursday.

Peter Chin, who was mayor during the planning and approval of the stadium, said commenting on decisions made between 2004 and 2010 now did not add any value to the discussion.

''The decisions made by the council, which I chaired, were made on the information available to them. Things always change.''

People might now say ''I told you so'', but the council did not have the benefit of hindsight and the stadium and other council projects helped keep an important workforce in the city at a time when there was very little other construction going on, he said.

The council chief executive during that period, Jim Harland, said councillors voted for the stadium to go ahead.

The operating model, based on best practice at the time and that of V Base in Christchurch and Westpac Stadium in Wellington, was peer-reviewed by PricewaterhouseCoopers, he said. Indicated revenue-source assumptions were at the ''upper end'' of what was likely to be derived, Mr Harland said.

''I recall writing a report with Athol Stephens [council chief financial officer at the time the operating model was designed] identifying the high risk of the revenue assumptions.''

It was one of the reasons stadium management were to report to the council rather than through a holding company, he said.

The funding model assumptions had also been tested in the High Court and the Court of Appeal.

''Like all assumptions, the trading environment comes to pass or not.''

Carisbrook Stadium Trust chairman Malcolm Farry was on leave and did not want to comment until he had been ''briefed'' on the review.

Dunedin Venues Management Ltd board chairman Sir John Hansen said the review proved its managers' long-held belief the budgets set for it were ''very, very optimistic''.

Because of the rent set by the stadium's shareholders, it would always be ''very, very difficult, even in a good year'' to meet those targets, Sir John said.

''We are very, very supportive of the review.''

Two rugby tests being held at the stadium this year would mean it would come close to meeting its budget, but the following year ''was frankly very, very difficult''.

That year was Rugby World Cup year so there were no tests at the stadium.

Staff were seeking events or acts to fill the gap but nothing had been formally signed at this point, he said.

Mr Stephens could not be contacted for comment.

- rebecca.fox@odt.co.nz

Poison chalice

It is now very clear why Mr Burden terminated his employment with the Stadium and moved on to Christchurch. He could see what was coming and he knew the future for him was bleak to say the least. I don't blame Mr Burden for the stadium debacle as he was handed a business model that he could not possibly make work. Another contributor has spoken of the negativity surrounding the stadium and that we should just get on with it. Whilst I understand their frustration it is important that we as a community and rate payers know just how much money we are going to lose and what our ongoing commitment will be going forward. No more creative accounting, just the facts as they are regardless of how ugly it may be. I think it is fair to say that we have for the most part been kept in the dark as to the true losses past on going forward. Once we have this knowledge perhaps there may be unexplored savings and operational changes which may mitigate the losses we are facing. People are rightly angry but in the end we are stuck with the stadium as no-one in their right mind would take it on as a business venture. We must learn to accept we will be paying millions toward subsidising our grossly under-utilised stadium for many years to come. We have no choice but to accept the inevitable.

Stadium woes

I had to giggle when out of curiosity I checked the Dunedin Venues web site to see what they were doing to promote the venue. If you click on the link "View Forsyth Bar Stadium Events" you are led to a page that displays the message "Sorry, it seems you were trying to access a page that doesn't exist"

How appropriate and sad at the same time.

As others have noted, Dunedin Venues Ltd should stay at home and let the OUSA do the grown up work.

Back peddle

You know things are really bad when those who made the stadium happen are ducking for cover and distancing themselves from the decisions they made. Even those who supported the stadium are now seeing the light. It is not time for "I told you so" we should all be in this together, we all own this financial disaster and somehow we must stop the bleeding. I cannot believe the Council is investigating itself and the review will take six months to complete. An independent external review should be conducted which will ensure there are no financial cover ups, no spin and no deception. The record of successive councils on this issue has been one of deception and dishonesty from start to finish.

Chin the Builder

How lame of Chin. You put the city in hock for an unviable building project as a kind of temporary scheme to help the building industry. You would have to doubt the man's record as mayor on that alone. I'm sorry Peter Chin but that excuse does not wash. I suspect you know this, but what else could you say.

 

wow, never saw this coming "yea right"

The stadium was built to make Dunedin and its councillors look good to the rest of New Zealand and the world during the world cup. Anything that is said now in defence of the decision to build by the "Then" council members is simply damage control. We the public new we could not afford it and we were told by the stadium supporters we were being negative and stopping the progression of Dunedin City. Well I hate to say we told you so but....

In 1998 millions of dollars were spent on upgrading the Carisbrook grounds only to have it demolished 14 years later. And now we have a stadium draining our city for many years to come when the money would have been better spent on development of the harbour area into café bars and shops for all to enjoy and create both income and jobs. And developing a cable car to run up the hill from the railway station as tourism is the way forward for our city. But no, the rugby heads had to get their stadium.

We did it all for you

I was waiting for the day when somebody would come out with the words 'The decisions made by the council,..., were made on the information available to them". I am sorry Mr Chin, but you cannot excuse the past by simply blaming the information you had as though your only part was to make the final decision. You actively supported this project based on information, some of which was available to the public, and some such as the true state of the finances of the ORFU which was not, yet it still went ahead. The operating model which gave income projections for years into the future was nothing more than guesswork and now they key people behind the decision act surprised that it didn't eventuate.

 

Totally expected responses

Wow, these responses from Chin, Harland, Hanson and of course Farry could have been written by many before these individuals had been contacted. 

Chin cannot appeal to hindsight - he received excellent advice for years from a large number of very qualified people and many would say he sleepwalked his way through the whole process while voting at every opportunity to push the city into mountainous debt.  In my opinion Harland pushed at every opportunity for the project's advancement and it is nonsense to say that he cautioned Council.  He was a member of the various committees set up to progress the project.

Hanson simply tries to blame the excessive rent for not returning a profit.  Truly amazing since the stadium is receiving huge subsidies - and he knows it.  Profit relies on income as much as costs and he is simply not providing any income. 

[Abridged] 

blame it on hindsight

"We didn't have the benefit of hindsight" says Chin. That doesn't excuse your total lack of foresight, possessed in ample volumes by opponents of the stadium who loudly predicted exactly what has come to pass. To say they were constrained by the "data available" is totally disingenuous given that much of that "data" was cooked to produce a foregone conclusion. There were also early indicators that the project was not getting the private support required, but they pushed ahead anyways against all better judgement. I think at the end of all this, the ratepayers will have subsidized a stadium for the University. Who else would buy it, and who else could afford to run it?  

Ask a child - They'll know

The cost of this stadium even at its most ‘optimistic moments was never claimed to be less than 188 million dollars.

As it was an ‘optimistic' business case, the cost of borrowing for it was likely to be high, but even at the council's current borrowing rate of 7% (backed by a ‘ratepayer will pay guarantee'), a 20 year repayment would have led to an annual debt cost of c. 10%, or 19 million a year.

Add to this an 'optimistic' day to day running and event management cost of around five million a year and you arrive at an annual cost figure of 24 million or around half a million a week (give or take).

Taking an ‘optimistic' view of the Stadium receiving a fee of around 10 dollars per bum per event, this would require a weekly stadium attendance of 50 thousand just for it to break even.

Despite 'optimistic' size forecasts, the final pygmy stadium capacity was 17,500. This means that around three sellout events per week would be required year round for the repayment period (25-40 years)

A child can see that this is a completely absurd business scenario, and I opposed it on this basis with complete confidence that if it was built events would confirm the quick child-like analysis above over and above its warped multi-million dollar pro-stadium competitors.

Hindsight!

"...People might now say ''I told you so'', but the council did not have the benefit of hindsight..." Say Mr Chin.

Quite true, but you did have an up & running, existing stadium with which to base your forecasts on.

They got it wrong !

While the Chin, Harland, Farry, faction continue in denial that a bad stadium decision was made, anything they now say just does not matter. The facts are now clear that those with contrary views were and are correct. The whole project was bulldozed through against the wishes of a huge majority of the public, with many construction costs left dangling to be paid later by ratepayers, with future income ridiculously optimistic, with huge staff salaries, with extreme pandering to the rugby faction,-------. The list goes on and on. So to the faction that did the stadium approval, do not come the raw prawn with everybody now! Your views are now worthless. 

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