Rates focus in review of stadium

The Dunedin City Council's review of the Forsyth Barr Stadium operating model will have to grapple with the potential to fuel a money-go-round that could drive up rates across the city, council staff say.

Councillors considering the Dunedin City Council's draft budget this week asked staff to reconsider the stadium's rates bill, as part of a wider review announced by council chief executive Dr Sue Bidrose.

The move came as the council confirmed the stadium's value was set to increase on July 1, from $153 million to $164 million, following a recent assessment by Quotable Value.

QV figures would normally be used to calculate the stadium's rates bill, but councillors in 2010 granted the venue a subsidy amounting to 93%, reducing its nearly $2 million annual rates bill to $134,000, later adjusted for inflation.

The discount aimed to avoid ''distorting'' the rating system for other properties, and meant the council would receive the same rates as it would have from properties previously occupying the stadium site.

Cr Lee Vandervis on Monday called for that to be reconsidered, despite warning it could drive up general rates, saying more council funding to cover a higher stadium rates bill would be ''more honest''.

But, with Dunedin Venues Management Ltd already unable to meet budgets, council financial planner Carolyn Howard said any increase in the company's rates bill could come back to ratepayers.

''If we did rate the stadium and we had an increase in its value like that, then we'd have to look at the funding issue again, so you'd get that circular problem.

''If the stadium was rated normally, like a normal non-residential property, and if the stadium needed to pay that, then they would require more financial assistance from the council, and that would drive general rates up.''

The issue would be considered as part of the wider stadium review announced by Dr Bidrose last week, which it was hoped would be completed by the middle of the year.

Cr Vandervis said when contacted yesterday it was the stadium's rates discount - not the threat of a full rates bill - that distorted the rating system.

The discount meant the stadium paid only ''a fraction'' of its infrastructure costs, including electricity, water and roading, ''forcing other commercial properties and businesses to pay for those services''.

''It would be more honest for the stadium to pay its rates and claim them as an operating expense like every other Dunedin business enterprise. Then the public would have a better idea of how much greater Dunedin ratepayer bail-outs of the stadium are.''

Cr Richard Thomson, chairman of the council's finance committee, disagreed, telling Monday's meeting that would leave the average ratepayer paying more.

''That would be the impact. That's why we changed it in the way in which we did.''

The QV figures also showed the stadium's value had increased by 7.2%, above the city-wide increase in property values, which stood at 3.6%.

QV staff said yesterday the increase in the stadium's value reflected the rising cost of construction, minus depreciation, ''but the costs are going up faster than the depreciation''.

Ms Howard said the QV valuation was separate from work by Darroch Valuations, in 2011, which put the venue's value at $225 million, and an earlier council report, which discussed a value of between $175 million and $200 million.

A review by PricewaterhouseCoopers put the stadium's construction cost at $224.4 million in 2012, while the council last year said the cost could be as high as $266 million, if a list of $42 million in stadium-related extras was included.

Ms Howard said the work by Darroch Valuations had been used to calculate DVML's annual $4 million rent requirement - paid to Dunedin Venues Ltd to help service borrowing costs - but QV figures were used for rateable values.

Councillors on Monday also voted in favour of a CPI adjustment of the stadium's rates bill, amounting to a 1.4% increase for 2014-15.

That would lift the stadium's rates bill by almost $2000, from $135,600 - excluding GST - to $137,500.

- chris.morris@odt.co.nz

Roading

@ Lynden.

So you're trying to tell us that as the stadium was rushed through along with the job of finishing the road before the WRC (to ensure they could keep the grant from Govermnet) this has nothing to do with the stadium?

The two are inextricably linked.

Had the DCC taken the appropriate time to ensure that all legal processes were followed they wouldn't be in this mess with Mr Hall, which is a further waste of our money.

But they couldn't take the nesessary time, the job HAD to be done regardless. I put it to the DCC that they knew they were flouting with due process but had no option as there was a deadline. Get it done and deal with the consequences later...

Blinded by their thick rosey glasses. 

Highway work

That money is not the fault of the stadium but the fault of the council that tried to cut corners and didn't follow proper proceedure.
The statement "DCC's unlawful actions in having the highway developed in the begining"is completely false. As I said, this project had been planned years before the stadium -, in fact I remember it was being dicussed not long after I moved here in 1993.
The development by the DCC and NZTA of the realignment was perfectly legal - it was the notification and designation processes once it was decided to bring it forward here the DCC ignored their own legal processes.
Even the fact that it was brought forward to align with the stadium build was good - it should have saved the council money in at least 2 ways:
1: The work was concurrent and shouldn't incurred some of the additional cost seperate projects do.
2: The NZTA took over the ongoing costs of the piece of road from the DCC earlier than they otherwise would have.
The subsquent mess with Mr Hall (who I support) is not the stadium's fault but the council's - if it had done its job correctly it wouldn't be in this mess.

 

Highway work

Lets not dismiss the hundreds of thousands of our dollars being poured down the drain regarding the DCC's unlawful actions in having the highway developed in the begining. This is what happens when you rush through an ill-conceived plan.

Legal fees from both the DCC and having to pay Mr Hall's legal bill are still mounting.

They have to redo the consent process which may include substantial road works to rectify that awfull botched piece of road.

Roading

MikeSTK says "roads to service it (including new roading built just for it)"

Those road works were already on the books to be done and were not done just for the stadium. They had been fought for long before they had even thought of the stadium. They were simply brought forward and in fact saved us some money as the  NZTA picked up the majority of the cost and took over resposibility for that section of road earlier. I supply this extract for you:


State Highway 88

Approximately 1.1 km of State Highway 88 (SH88) was realigned around the back of the Stadium in time for the Rugby World Cup in 2011.

The realignment of this section of State Highway 88 had already been proposed, but was brought forward to run alongside the Stadium project. The New Zealand Transport Agency (NZTA) contributed about $16 million of the project costs, which at June 2013 were $26.6 million. When the project is complete, the NZTA will take responsibility for that section of highway and the only ongoing costs to the DCC will be debt servicing.

As well as its share of the project costs, the DCC has one-off operational costs of $104,000 relating to the highway realignment.

The Wickliffe Street walkway, which is due to be installed in 2013/14, is part of the State Highway 88 project. It is budgeted to cost $447,000. 

Sorry, my misunderstanding

Sorry, upon further research and re-reading I see I was wrong, I had thought they had reduced the value of the property for rating purposes (to the total value of the original properties), When in fact it is the rates themselves they have fiddled with.

This being known I agree that while having no effect on other rates whichever way they did it, it would be more honest to increase the subsidies to the stadium than charge it full rates.

 

Who pays the rates doesn't affect the neighbours

Lynden, re  your point that charging unsubsidised rates for the stadium would "unfairly raise the rates the surrounding businesses would have to pay as the value of a given building isn't just the building and the land but the area it is in."  Rates are charged on the valuation, not on whether the rates are actually paid by the owner or, as in the case of the Fubar Stadium, by the ratepayer via the DCC subsidy.  The valuation does not change according to who pays.  If you paid my rates for me (I wish!) it would not alter the valuation of my property, therefore would have no effect on my neighbours' valuations and rates bills.

Quietly foisted upon the ratepayers

Jimmy: yes I think Lynden betrays a fundamental  ignorance of how rates are struck - what the city does is decide to collect a fix number of dollars from ratepayers each year - then they add up the valuations of all the properties in the city and rate each property at it's proportion of this sum, times the amount of money the city wants to raise.

If the amount that the rugby stadium is rated at is returned to a normal rate (ie the portion of its valuation that's used to calculate the above sum) it won't change the valuations of the properties around it (the city didn't change the rugby stadium's valuation by reducing its rates, if anything they probably raised it, it only included 7% of its value in the sum). What would change would be that the proportion of that total city valuation the stadium represented, its proportion would go up and everyone else's proportion would go down, the rugby stadium's rates would rise to become normal and everyone else's would go down by the same number of dollars.

Of course that would leave DVML with more of a shortfall, because of the ratepayer subsidy that the lowered rates represent - the stadium after all is a big user of city water, roads to service it (including new roading built just for it), street lights in and around it, councilors to debate it, etc etc there's no real reason it should get this special treatment, the bogus rugby stadium rates are just a way to quietly hide some of the real costs of the rugby stadium to the city, and to quietly foist them on the ratepayers without creating a line item in any DCC budget document.

Stadium rates subsidy

Lynden: You believe that if DVML was charged full rates, then the nearby businesses would have to pay more rates as a consequence. You say that this would happen because charging DVML un-subsidised rates would increase the value of the land of the properties in the area. I don't see why the land value would increase, so I will stick with what I said below - that charging DVML full rates instead of the 93% subsidised rates would make no difference to ratepayers. See below for details. The thing that would make a big difference to ratepayers would be not having to pay the $20 million of annual stadium losses and costs. This amounts to about $264 of extra rates per year for the average house owner, and heaps more for farmers and businesses. I want my money back.

It seems to me that the mistake that you have made (along with Cr Richard Thomson and the ODT) is to believe the DCC CEO and her staff. Inb my opinion their motivation is to create the appearance that DVML is slightly less of a financial basket-case than it actually is. It makes the books look $2 million better. 

[Abridged] 

The point of the rates reduction

I think the point of the rates reduction and the legislation it was done under is that to they charged for the full value of the stadium it would unfairly raise the rates the surrounding businesses would have to pay as the value of a given building isn't just the building and the land but the area it is in , so to avoid unreasonable rate increases to surrounding businesses.

There are precedents for this.

I'm sure those surrounding businesses would all like to thank you all if the stadium has to pay the full rates.

Stadium Deception

Hype.O.Thermia is exactly right when they say that: "The current subsidy is nothing more than a way to disguise how much it's leaning on the rest of us." By not charging DVML rates, extra rates are charged to the rest of us. Not charging them rates is a deception, because it is not obvious that the extra $2 million of rates that we pay is actually another stadium subsidy. In my view the purpose of not charging the stadium rates is to create another hidden stadium subsidy.

Cr Richard Thomson is wrong to accept the word of council staff without thinking: he is wrong to say that charging the stadium full rates would "leave the average ratepayer paying more". He seems to forget that ratepayers are already paying more because of the hidden subsidy (described above). Now if DVML was required to pay full rates, then it would make no financial difference to ratepayers. It would make no difference because the DCC would be paying DVML an extra $2 million subsidy, and DVML would be paying the same amount back to the DCC as rates. There is therefore no net financial difference to ratepayers, DCC nor DVML. In my opinion Cr Thomson and the DCC Financial Planner are both wrong.

Charging DVML full rates has no financial benefit or detriment, however the advantage of doing this is that it more honestly shows the financial situation. Stadium financial information is severely lacking in transparency and this would be one small step in the right direction.

Mothball it

I say mothball the stadium, put some of our money into our own local mental health system instead of into this great white elephant/black hole of a stadium.

Stadium rates bill

I don't get it.  If the Fubar Stadium were billed for the rates it ought to pay, but then couldn't pay so had to be bailed out by other peoples rates, how would this be different from now?  The current subsidy is nothing more than a way to disguise how much it's leaning on the rest of us.  It would have to borrow, like I would if I couldn't pay my rates.  The difference is that my chance of getting the DCC to lend me the money are approximately zero, so I personally would be getting deeper and deeper in debt, and those grownups who are not completely financially illiterate know what the consequences of that would be for me.

Smoke and mirrors

I'm sorry, but every time I read yet another explanation of the logic employed by the council's finance team, that classic by Sir Walter Scott springs to mind. "Oh what a tangled web we weave, when first we practise to deceive!" 

Make them pay, not the ratepayer

Why is the tenant not paying/meeting the full cost for the rates bill, as in all other rental agreements I have signed or looked at in regards to renting a warehouse etc? Ratepayers should not have to meet this cost.
I wonder if I should asked Dave to consider getting the ratepayers of Dunedin to cover my business cost (rates and possibly part or all of my rent). And while I'm at it, I wonder if the good people of Dunedin would think about covering the rates for my home as well? This would enable to spend more money elsewhere in the city, maybe at the bars or fast food places. And help to give me a better life style.

I say we should make the tenant cover the full cost of this ugly pile of concrete and grass, or close it down - just as I would have to do if my business was losing me large sums of money every year and I required the bank to bale me out. How long would the bank keep lending me money to prop up a dying business?
How long is it going to be before we get intelligent people at the head of our city who understand that sometimes it is best to close down and get out while you still have one set of clean underwear left?

Let's have a show of hands who would like to see this stopped now before it get any worse. My hand is up. Close it down now, or risk me refusing to pay my rates. There should not be one law for you and another for the rest.

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