Major stadium losses looming

Grant McKenzie
Grant McKenzie
Major ongoing losses are predicted by the company running Dunedin's Forsyth Barr Stadium following a review identifying operating costs and expenditure.

The company's latest draft statement of intent shows Dunedin Venues Management Ltd (DVML) has gone from predicting a profit of $10,000 in 2014-15 to predicting a loss of $1.4 million.

The new information leaves the Dunedin City Council once again scrambling to find savings to plug the $1.4 million gap if it wants to stay within its self-imposed 3% rates rise limit for 2014-15.

Ratepayers should expect an increase in stadium-related rates after that as DVML's losses are expected to continue, with a $1 million loss forecast for 2015-16 and a $1.4 million loss for 2016-17.

Last month, company chairman Sir John Hansen warned the projected profit for 2014-15 was gone, as no rugby test was booked at the stadium for that year.

Yesterday, he said the dramatic turnaround reflected not only the lack of a major event but the reality of the cost of operating the stadium, following a board review of income and expenditure.

''It could be called a 'rethink' of the original budgets.''

He would not criticise individuals for the situation, saying the original budgets had been produced, peer reviewed, and then accepted by the council.

''We were instructed to work to a budget that had certain figures for maintenance and income and such like, that our operation over two years has shown to be very optimistic.''

The revised budgets were drafted with the support of council chief executive Dr Sue Bidrose, Dunedin City Holdings Ltd and council chief financial officer Grant McKenzie.

They were much more realistic around both income and expenditure, particularly expenditure, and would dovetail into the review Dr Bidrose instigated last month to find a long-term solution to how the stadium was financed.

He said the stadium was still in a strong position to attract test matches, but the DVML board now viewed it as optimistic to think Dunedin would get one or two concerts each year at the Elton John level.

''It is also optimistic, because of the lack of infrastructure, to be able to expect to get Springsteen or the Rolling Stones, to be honest,'' Sir John said.

''We've got to concentrate on the ones we do well, which is the Paul Simon-sized concert.''

He said he hoped to announce a new chief executive for DVML in the next week.

''I can tell you they will be someone with a very strong event acquisition and marketing perspective.''

The financial loss situation should not come as a surprise to many, he said.

''I'd expect the people opposed to this from day one would say the expected things, and that's fair enough. I think most people have seen what's gone over the past few years and understand where we are at.''

The company was still tracking for a small loss this financial year, as two or three events planned for December and January did not happen, but staff were at present negotiating an event for Easter that he hoped would be announced ''quite soon'', which ''might make up for it''.

Mr McKenzie said with a realistic budget in place, council staff would now work on options for how the stadium could be funded and operated into the future.

Dr Bidrose said whichever model was chosen, the stadium was ''undoubtedly'' going to cost ratepayers, who are already paying $9.25 million a year towards the stadium, additional money, although that was unlikely to start from next year.

It was highly unlikely a new funding and operating model based on the realities of the stadium's costs would be in place before the council's 2014-15 budget was signed off, so it was up to staff to find DVML's $1.4 million shortfall within its existing budgets.

Staff had expected another loss and were already looking into where the money would come from. She planned to report back to councillors during their deliberations on the final 2014-15 budget in May.

Council had had to make efficiencies to cover stadium shortfalls for the past two years, leaving little wiggle room, but it would be done, she said.

''[Councillors] want us to live within our means. My job is to make sure we do and and advise how we can, and that's what I'm going to do.''

Dunedin Mayor Dave Cull said the results were no surprise, and backed up Dr Bidrose's position that things could not carry on as they were, with DVML asking for extra money every year, and a review was required.

He looked forward to hearing how the situation could be dealt with in the long term.

 

Huhh?

So we sell all the assets (because we would need to to pay for the stadium) and end up with a fully paid up sports field and nothing else? I don't think so.

One more detail

Qsrc: I forgot one detail - check out DVL's latest financial results - do you see the line item where the money to pay back the $50m in faux CST fundraising is being received? I can't - it can't be in the $4m/year rent that DVML pays - $50m over 10 years would require $5m/year in principal repayments and another $2-3m/year in interest - where does the money from the luxury box rentals go?

It's just a rugby stadium, right?

Scrolling thru' facebook recently and came across the following post, lodged by Forsyth Barr Stadium, titled 'The week that was!'

It read: Monday - Hypnotist. Tuesday - Toga Party. Wednesday - 7 Days. Thursday - Chet, Faker and Hermitide. Friday - Summer Thieves, David Dallas and Six60. Saturday - Highlanders v Blues. Sunday - NZ Warriors v Brisbane Broncos. (I've no idea who, or what Chet, Faker, Hermitude (etc) are, but are willing to bet they're bands of some sort).

Beneath the words were around a dozen photos, showing a snap-shot of what I guess are people attending / participating in each of those events. I'm gonna' guess that most of that line-up relates to O-week, for there is clearly OUSA branding in some of the shots. And there are clearly 1,000s of people enjoying themselves in those photos.

I'm also gonna' guess that the bulk of people in the photos are young(ish). Probably students, or folks around that age. And, by the look of it, it appeared that every one of them were having the time of their lives. Dancing... doing toga stuff ... listening to the bands... enjoying the footy (both codes). All under the roof, out of the weather, in our FBS.

So, seven nights. Seven different events to go and enjoy. Including, on one of those nights, a game of rugby.

But... FBS. It's just a rugby stadium, right?

(PS: to whoever organised/coordinated all those things, and made 'em all come together - take a huge bow! You have done very, very well. Be proud of what you've achieved: for yourself, for the Uni, for Dunedin and for Otago.) 

Rugby stadium?

Mike please point out where in their report PWC states that this is a rugby stadium , in all the documents i never saw it.

I have only seen people claim it. All the non rugby events that have been held there show it is multipurpose.

However if PWC did say that I would be interested in reading  it and the justifying reference material.

Asset sales not the only answer

@Stevesone57: Asset sales may not be a sprofitable as you may think. We only have to look at the DCC's laughable 'investment' in Carisbrook and associated propertied and DCHL's property development scheme to realise that neither has the business acumen to make a profit from such schemes.

If the DCC was to sell off part of its property portfolio as is being clandestinely done at the moment then in all probability it will be seen as fire sale and probably not realise any beneficial profit. Mind you, with the number of commercial buildings they have losing money then maybe any money is better than none.

The one non-community asset that is causing the majority of the financial pain is FBS. A solution:

1. Mothball FSB except for major events i.e. events that pay the full cost (plus profit margin) of opening up and running the stadium. There will be certain fixed costs but significantly less than current.

2. Reduce DVML to a manager experienced in events, conferencing and the like, preferably with no direct links to rugby, an experienced event co-ordinator, an office manager, a couple of office support staff and two or three staff for venue setup and the like. And of course a couple of grounds maintenance staff though this could possibly be contracted out to Delta (lol).

3. All the above, except grounds staff, based at the Dunedin Centre and only needed at FBS when there is a significant event on.

4. Cut the ORFU loose to pay its own way rather than continuing to sponge off the ratepayer as they currently do.

5. Use a smaller projected stadium rates rise to reduce the debt quicker, possibly targeting businesses and individuals who are advertised supporters of the stadium to pay an extra 'priviledge' rate.

Or 6. Sell or lease FBS to the Polytech or University or both. 

Court case

I'm glad someone raised the court case. In light of the revelation that STS have been proved right ( the figures don't add up) and CST et al have been proved to have misled the Dunedin Ratepayers ( at the least), shouldn't the case be revisited?

I'm happy to pay $66 pa, pity the DCC Rates demand hides the actual Stadium cost.

Bring on a rates strike! 

On the other other hand

@Lyndon: A pittance compared with the money owed by the ORFU before they were bailed out by the private citizens or in the case of the DCC, loans wiped.

If the major beneficiary of the FBS is the ORFU then it is highly hypocritical of any FBS supporter to expect STS, which is defunct, to pay money that it doesn't have.

[Abridged]

reply to mikestk

The so called supporters majority stood up for the stadium's build according to the chair of the trust that promoted it. As did many other prominent people in Dunedin.

The thing they won't do now is the right thing. Put their money where there mouths are, support their beloved project, put their hands in their wallets.

Suddenly all is quiet except for a dwindling get over it, it's not going anywere brigade. 

Fact:

They totally expect it is reasonable for the current council and ratepayers to fit the bill what ever the cost to the city.

So stand up now, be counted, pay up!

Well done

Lynden, some sense displayed here.  The analogy that the CST used in effect was that if you decided to build a commercial building and got the future tenant to front up with some rent in advance that this could be counted as a construction donation.  We all knew that was BS, and so did the PWC report.  It was blindingly obvious - so why did the CST persist with that stance? And why on earth did all those clever, experienced governance people on the DCC and the ORC not see it?  Answer?  Only the stadium councillors will ever know, and sure as God made little green apples, they aren't telling so far.  But one day soon, they may be compelled to explain.  And as far as those large donations go - well, better to ask those that promised much and delivered nil.

Spot the difference

QSRC: you seem doubtful - lets see what happened with CST's pretend 'private fundraising'

  • the city borrowed about $50m to pay for the portion of the capital costs that were supposedly covered by the CST's 'fund raising'
  • the city gets paid every year by the people who rent the seats at a special lower rate used by the CST to tempt people to sign up
  • the city pays interest on the loan

What would have happened if the CST's 'fundraising' hadn't occurred? Well, it would go something like this

  • The city would have borrowed about $50m to pay for the capital costs of building the rugby stadium
  • the city would sell the box seats at a premium and gets paid every year for them
  • the city would pay interest on the loan

Do you see the difference between CST's 'private fundraising' and them not doing any 'fundraising' at all? Because I can't. The CST didn't actually do anything other than take something they would be doing anyway and call it 'fundraising'.

The DCC is the one who owes

lynden: at this point I think that the STS's case has been proven by subsequent events - everything they were claiming in the court case has come to pass - and some of the DCC's evidence has proven in hindsight to be um 'misleading' - I believe that it's the DCC that should owe the STS an apology and probably a bunch of money too to cover their legal expenses.

Sell assets

We can argue all day about this stadium but in the end we must find a way out of the mess. It seems Dunedin's current debt is $625 million (that we know of) and on the rise. Without selling assets how can we trade our way out of this mess? It seems the council is out of options other than raising rates. It seems a simple option to put up rates, but doing this inhibits growth and employment and puts a squeeze on the finances of businesses. So how about council sells off some assets in order to reduce the debt? By doing this we can pay down the stadium debt, promote economic growth, and keep rates at managable levels. We are getting nowhere by arguing with each other. It's time for some serious action before we end up like Detroit.

$50m

QsRC: I'm pro stadium like you but they're right. While there was some private funding, classing future sales as private funding does not cut it for me either. Some of the large donations promised didn't eventuate either.

The resentment will never go away

The resentment will never go away unless six ex-councillors, one ex-mayor and the prominent figures from the rugby and business community that foisted this lemon on us "man up" and publically admit they got it wrong and apologise to the people for their misguided decisions. It's not a big ask really, is it?

Even now with all the evidence plain to see, they still cling to the belief they were right. I'd suggest that there's fat chance of that so I'm not holding my breath, and thats the arrogance of it all. 

I'm sure that if this happened, most of us would then get over it and at least be open to trying to make it work. Otherwise, resentment from most ratepayers is here to stay.

And to Dave on the hill - opening games at the Brook usually attracted about the same amount of punters. The big attendance games were always the Blues and the Crusaders, with not a great amount of viewers at most other games. So maybe that's the biggest crowd of the season unless the Crusaders play here as well. 

No accountability.

BMC: None of the current City Council can be held legally accountable for voting in favour of constructing the stadium on 9 Feb. 2009. Only two of the current Council voted in favour on that date - Councillors Bezett and Noone. Your only recourse is to vote them out at the next election. Councillor Staynes and Mayor Cull voted against the stadium proposal. All others are history. Neither can the CST members be held contractually accountable. The Council of the time was so poor that it failed to do this - amongst many other failures in the paperwork trail. Of course you could foment a Revolution a la France !! And wheel out the guillotine! Ooops - who is that knocking at my door? Can it be the KEYspies - already! Gotta run.  

On the other hand

When is STS going to pay the DCC their court imposed costs?

16,000

A 16000 crowd is not bad. Does anyone know how many used to attend the first home super games at the old stadium?

I see

Your'e clutching at straws there to say the least.

 

 

Link

QSRC: The PWC report found that pretending that the promised sale of seats was the so called "private sector funding" was "misconceived" and in fact was not a "capital contribution" but was instead "operational revenue".

Remember that the CST didn't actually raise any money by getting people to purchase seats cheap in subsequent years - the city had to borrow almost the entire amount from the bank and still pays interest. That "private sector fundraising" number is now included in the city's humongous debt.

Imagine what would have happened if they hadn't pretended to do this bogus fundraising - DVML would be able now to sell those same box seats, the best in the house, at a premium, rather than the discount forced on them by CST, and would be in less of a financial hole than it is now. But some rich rugby guys got some great seats cheap at the ratepayer's expense - that thread does seems to run through just about everything that the rugby stadium is about, doesn't it.

No feeding by spoons

QsRC, all you need to look for which is a legitimate source are copies of the budgets submitted by the the Carisbrook Stadium Trust to the DCC that detail the private funding.  Use Google to find them - I don't think that you need to be spoon-fed.  If that is beyond you then I'd suggest that you peruse all of the meeting minutes of the DCC for 2007/8 that include the budget amounts for private construction funding.  If that simple task fails, I'd suggest you give Mr Farry a call in Queenstown and ask him to send you a copy.  I'm sure he would be happy to oblige.

I told you so

Can someone provide a legitimate source that confirms the private funding has not been provided?  A link to a reputable source please. 

Long live the stadium! $60 a week - what a treat! 

Promised vs reality

But we did "tell you so" for ages and ages and before the money was spent, and you and your mates refused to listen.  So now it is time for you to organise yourselves and start collecting money in large amounts for what your mates promised but failed to deliver.  An excellent starting point would be the promised $50m contribution for construction - is that too hard to understand?  Then we can start talking about the operational losses which I'm sure that you will be able to cover by demanding that the ticket prices for the professional rugby games are raised sufficiently to return a profit to the venue.  Again, not to hard to get a grip of.  I'll look forward to hearing news of your progress on both these matters QsRC.

At last a fundraiser

QsRC suggests "Team negative.... Why don't you guys get together and all chant "told you so"?"  

And with Team Positive lined up with their thumbs in their ears so their fingers can cover their eyes, chanting "Lalalalalalalala" we could unite to make a recording that might, if we are lucky - and goodness knows we need some luck - become a huge hit, after which we would be able to fill the stadium for a concert, and the sales of merchandise would further assist with funding - since professional (indeed, any) rugby isn't parting with cash to pay for their facility.

This is a religious debate

Sport is a religion (supporting a failing stadium=faith, game=god, team=denomination, fans=flock, those who dislike sport=blasphemers/sinners).  I do not want my rates going up year after year for this nonsense.  The multi-purpose use is also a fantasy.  Time to throw in the towel.

Keep up the good work

Team negative, your really help the situation! Why don't you guys get together and all chant "told you so"?

 

Did you pass the hat?

QSRC: so there were 16,000 rugby supporters at the game - did you pass the hat? $20 each would have raised a third of a million dollars towards the private fundraising rugby promised us - or did you just sit there, drink beer and yell subsidised by the rest of the ratepayers?

Negative spin

I find it annoying that people are being labelled anti stadium, anti rugby, anti Dunedin etc, just because they are against the way the stadium has been funded and that the rate payers have been left to foot the ever rising tab. I have no interest in rugby, but I have no axe to grind with it as a sport. I really don't mind the look of the stadium either, I find its design and location pretty low impact on Dunedin as a whole and if I didn't love Dunedin I sure as hell would not have settled here.

What I do find damned anoying and increasingly angry about, is the way the stadium was sold and signed off on by a select group of mates, who ignored reasoned arguments and comment that it would be a lemon and that they should not proceed. To cap it all off, the select old boys have vapourised, have not been held to account and with every passing week another layer gets pealed off the financial onion and more debt is revealed. In the first instance people need to be held to account and promised funds must be delivered.

Two interesting options for the stadium have been mentioned here. Firstly Cityrise's water park, that is an inspired idea and the sort of out of the square thinking that this council clearly lacks. It would need to be privately funded though to work, but the venue would be used 365 days of the year. Secondly Avus's selling to the Uni. But not for a dollar, we couldn't sell it at market value either, but somewhere in the middle, so the ratepayers don't get completely shafted and the uni gets a good deal out of it.

Not multipurpose

Lynden: no you're wrong, the DCC instigated PWC investigation and report found that it is a rugby stadium, built for rugby, at the behest of rugby. The whole 'multi-purpose' canard was simply a ruse to try and get people to support it - while it can be used for other purposes the acoustics are designed for creating a rugby atmosphere, not concerts and the local population is not large enough to fill the venue for more than a concert or two a year, the logistics of getting international touring acts here means we have to pay them to come rather than the other way around.

So, as the inquiry found, it's a rugby stadium, if we want it to be viable then rugby has to pay their own way they have to pay more to use the stadium than it costs to run, if rugby continues to simply put its head in the sand and not address their responsibility for the financial viability of the venue it will have to be closed.

Arrogant

Yes Lynden, you could call me that, along with vindictive, sexist and racist.

Just remember though, I didn't promise $50 million to get this edifice pushed through and built against the wishes of most and common sense and expert advice that was completely ignored. And then not front up with the money.

And now that it's been proved to be a lemon most knew it would, all you have left is to call me arrogant? 

[Abridged] 

About the money...

Show us the money trail. It is - after all - our collective rates that are the crux. Who got what, and who signed off; who continues to get paid, and how much.

Where are they! Put faces to the stadium.

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