Whistle to blow for stadium deals

Terry Davies
Terry Davies
The company which runs Dunedin's Forsyth Barr Stadium faces an uncertain future as it eyes the expiration of deals with sponsors, members and even the Highlanders Super rugby franchise.

It also continues to operate under a cloud while awaiting the outcome of a major review of the stadium operation, now expected by early August, that seeks to address the venue's multimillion-dollar losses.

The predicament prompted Dunedin Venues Management Ltd chief executive Terry Davies to deliver a blunt message about the need to reduce the venue's annual rent.

But he also remained ''bullish'' about retaining members, sponsors and the Highlanders, while saying the company's finances were already showing small signs of improvement.

His comments came as DVML's latest statement of intent was to be considered at today's full council meeting.

The document included forecast losses totalling $3.34 million over the next three years, a slight improvement on the $3.79 million projected in February.

That was based in part on reduced costs, tightening budgets and an expectation the venue would secure two All Blacks tests, in 2016 and 2017, but none next winter.

However, the venue faced risks, including the looming expiration of revenue-generating agreements, the document showed.

That would begin with the Otago Rugby Football Union's venue hire agreement, due to expire at the end of the year, followed by the Highlanders at the end of 2015 and most membership and sponsorship contracts in 2016.

Mr Davies said part of the difficulty was most membership contracts were signed close together, when the stadium was in start-up mode, meaning renewal periods were not staggered.

That made the threat of existing members opting not to renew ''a big risk'', he said.

''In any business, membership retention is a major priority and this is no different.''

The company planned to introduce new offers to stagger expiry dates, but was also trying to improve benefits for its 2200 members, he said.

That included free entry for members to next month's football clash between Newcastle United and Sydney FC.

The company had earlier this year budgeted for a 10% drop in memberships as they came up for renewal, but was now more ''bullish'' about retention, he said.

Talks had also already begun on new venue hire agreements with the Highlanders and ORFU, and he was confident there were no ''alarm bells'' ringing yet.

''You never know, but at the moment it's all positive.

''We're working closely together to ensure all rugby content is held here. We don't want to lose any of those partners that we've got operating out of the stadium.''

However, the key to the stadium's future could come with the findings of the stadium review unveiled by Dunedin City Council chief executive Dr Sue Bidrose earlier this year.

Mr Davies was unequivocal the company's $4 million annual rent burden - used to repay stadium-related debt - was ''unsustainable'' and needed to drop.

''I'm not afraid to say that's a major stumbling block and we need to get that model right.

''We need to get the community to understand that until that model is right, there will be no confidence around this.

''The $4 million rent is unmanageable.

''A desired outcome would be no rent, or a peppercorn rent like others pay.

''That's my ideal result.''

Even a cut by half, to $2 million a year, would help the company's financial projections turn from red to black, allowing profits to be reinvested in the venue, reducing the risk to ratepayers in future, he said.

However, whether ratepayers would be asked to pay extra - to offset the reduced rent from DVML - was not something Mr Davies would comment on.

''I can't answer that.

''All I can put forward is what is the right direction for our stadium.''

-chris.morris@odt.co.nz

Left speechless

24 hours after reading this article and I'm still left speechless. And we're paying him about a twelfth of the rent. I can think of a very good way of making that 12th managable. [Abridged]

Aghast

17 out of 18 comments are aghast at Tel's effrontery to even suggest this.

DVML...Davies's Vision Mostly Laughable.

P.S. Terry, I'll stop making these up for a reasonable sum, 10% of my rates bill each year would cover it.

Stadium finances

nightimejohn: Terry Davies wants to show us his trick of making $4 million/year of rent vanish. This financial magic seems to be supported by the DCC Chief Executive. They will tell us that this will be good news, but I think we all know that they are just moving the problem to a less obvious place. 

The missing part of this story is that the rent is paid to the other stadium company, DVL, which owns the stadium. DVL needs every cent of that $4 million to pay its expenses. Apart from ratepayer funded subsidies, this $4 million is the only source of income for DVL. The unfortunate thing is that DVL has annual costs of $17 million (2013 annual report) and that means ratepayers get shafted for $13 million each year to make up the difference. There are other costs as well. The effect of DVML not paying its rent would be to increase the ratepayer subsidy of DVL from $13 million to $17 million per year. [Abridged]

 

Same old, same old

And the beat goes on - and on - and on. The sole party that has the power to take major steps to sort out the Stadium debt and ongoing debt escalation is the City Council. It is the Council that appoints the Directors of the various bodies that "manage" the Council owned entertainment facilities within Dunedin. I do feel quite sceptical about the chances that the Council will be prepared to take radical steps to put a plan in place that will quickly reduce the cumulative debt arising from the whole Stadium saga. All the indicators point towards no change when the Stadium report is made public.

Why do I feel cynical about the Council response? Because all the Key Performance Indicators since the Stadium project inception are bad news and the Council records show a singular lack of Council leadership. The refusal of Council to as a group take a hard-line with the ORFU in relation to debt repayment, the refusal to sell off Council owned companies to repay large amounts of Stadium debt, the refusal of the ORC to pay off any of the Stadium debt, the refusal of the CST to pay the $50m of private Stadium debt, the pitiful performance of DVML Directors all point towards the soon to be published Stadium report being a non-event, unless, the Council finds the backbone to make big, tough decisions. [abridged]

'Uncertain future'?

"Uncertain future"?

I doubt that. Rate-payers pockets will simply be dipped into - again - to cover the costs of a stadium that was always going to run at a loss.

Which is exactly what Mr Davies' comments here are likely the start of a PR campaign for.

Stadium finances

When is there going to be a commission of inquiry into this disaster? All the information was available before decisions were made to build the stadium to indicate it was not financially sustainable. The people asked the DCC not to build it - they were told, metaphorically speaking, to go to hell. Instead the "silent majority" (!) ruled and we now have a financial scandal continually unfolding. Accountability is required.

And since when did any of us get the choice to not pay rent or rates because money was tight? [abridged]

Sunny Dunedin, or stony broke

nightimejohn says in afterthought Please can I stop paying rates? Thought not.

Unlike their counterparts at Dunedin, the savvy ratepayers at Mangawhai have held off paying rates and put the money into Bonus Bonds while they take action in the High Court against Kaipara District Council. Nationwide news media and Mangawhai Ratepayers and Residents Association Inc (MRRA) have strongly voiced the precedent - after KDC proposed an average rate rise of 31% to pay debts of more than $80 million, with more than $50 million of that due to cost blow-outs in the Mangawhai wastewater scheme. 

Now compare DCC's consolidated debt as local ratepayers continue to sun themselves on deck chairs. Why? 

That's your lottery

Look can I please suggest something? How about a province-wide lottery which the main prize is a corporate box for the month? Held every month. $10 a ticket. There must be some needing filled that we could make a little money off this way? We need to fill this thing regularly to even think about it being viable. We need innovation. To do the same thing expecting a different result is madness. How about a Makers fair? (sort of a field day for ordinary inventors) Can anyone think of anything else they might be able to go with?

Time to be tough

Mr Davies doesn't seem to understand that he is in a position of strength, with the demise of Carisbrook there is only one place to play professional rugby in Dunedin and he runs it, with a monopoly life that he can ask for anything he likes and the ORFU and Highlanders will have to raise their ticket prices to meet it. Remember we can't lose here, after all as it currently stands the stadium will lose less money if we mothball it.

I'm not suggesting that he abuse his monopoly just that he should charge them the full complete cost of running the rugby stadium, let's hope that the city has hired someone with the cojones to stand up to the rugby good old boys and fight on behalf of the ratepayers who employ him.

Where else can the Highlanders go?

The Highlanders have nowhere else to go. Sky TV would not have it on. This is just a prelude to more sponging off the rate payer. I think this is the biggest rort in Otago history and the SFO should investigate.

The council should do what the govt did with team NZ, don't buy into it. Sorry Highlanders and NZRU, trim some of your own largesse then you will be able to pay the rent.

Outrageous betrayal

Dunedin has been saddled with this debt and is also about to lose its international airport status . . . the ratepayers of this small city are the biggest losers in this shambles. [abridged]

DVML

You couldn't make it up could you. Not paying the rent as a solution? On top of the rate rebate at some 90+%.Did he really think that would fly? Does he have no idea at the anger that is felt in this town towards this saga of greed and waste? DVML, or Davies's Vultures Milking Locals.

P.S. Please can I stop paying rates? Thought not.  [abridged]

What's the point?

The ball park cost of running this Stadium and paying its capital debt are around 20 million a year. Around 10 million appear to be running costs as far as available figures can be unravelled. DVML only currently have to deal with 20% of this total cost and about 40% of the running costs - and they are still squealing like a stuck pig about it.

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Me too please !

I didn't know that one could simply not pay rent or rates. Where do you sign? I'm going to save so much money. Ok, someone else is going to have to pay for me but that's their problem not mine. Brilliant! I don't know how things work in England or Australia but here, in New Zealand, you are expected to pay your bills.

Stadium rental

Mr Davies, let's be honest 4m per year with no rates is a peppercorn rental for the Stadium (giving a 1.6% return on the total cost of 250m). What you are asking for is total ratepayer subsidisation of at least 1m per month for professional rugby, which is what the stadium is costing despite the various attempts to shuffle costs and interest around. I await the next wave of public relations where it will be touted as a community asset, therefore requiring full financial backing. I would appreciate some honesty from the powers that be along the lines of "we know it's a money sucking liability but we are going to keep it open regardless, so expect annual above inflation rates rises to enable that."

Stadium Finances

Here we go again with the latest revelations that Stadium management is worried the Highlanders won't renew their tenancy after 2015 and their desire to reduce their own rental payment to the DCC. In an ideal world where the old Carisbrook should have been refurbished for a fraction of the cost then a peppercorn rental could have been charged by us benevolent ratepayers. But the facts are our warnings were rudely ignored, the New Stadium built (despite the majority of ratepayers objecting to our money being used) and promises of $45m private funding coming to nothing. We await the Stadium Review (now due in August) and look very carefully to Councillors to come up with the best option to get the City of Dunedin out of a terrible mess that should never have been allowed to happen.

Not really rent

Mr Davies needs to check with his predecessors about that rent - the rest of us remember that the rugby community promised to raise $55m in "private fundraising" as their share of paying for the building of the stadium, raising that money was a condition set down by the council before they would vote for the stadium being built. As we all know after the stadium OK was given rugby's CST was unable or unwilling to raise the promised money and instead had the city quietly take out a huge loan - adding to the city's debt.

That $4m 'rent' isn't really rent, it's the money from luxury seat sales used to service that huge loan, and by the way, if you read CST's forecasts and promises, it's supposed to be $5m/year not $4m - where is that extra $1m a year going to?

So if Mr Davies wants to get that money from somewhere I suggest that rather than hitting up the ratepayers for an extra $4m stadium subsidy each year he look to the people who originally promised to pay that money - the rugby community - who have been welching on their promises ever since the stadium was born.

How to run a business - not!

Mr Terry Davies does seem to be in urgent need of some basic finance professional development. He is quoted as saying that his ideal outcome would be that if the burden of him having to meet costs from the DCC would be got rid of then he would be able to turn a profit and this could be reinvested. There is no profit when your costs have simply been transferred to another pocket of the long-suffering ratepayer's trousers. The only way in which relief is to be found is the main user - professional rugby - is actually forced up to reality and fronts up with realistic fees, and their $50m that was promised as part of the construction costs which have led to a lot of this debt in the first place. Having rugby matches at this Council owned facility actually loses money every time and will continue to do so until DVML or the City has the cojones to tell rugby that if they want ratepayer funding to run their business they can go elsewhere. All it will need is all council owned grounds up and down the country to adopt the same attitude and the NZRU will be forced to face reality - we don't owe them a damn thing.

Pay your bills (or don't)

Who does Mr Davies imagine will pay the rental costs if DVML does not? Most of us could be substantially better off if we didn't pay our bills, but as we don't live in the sort of financial Narnia that Mr Davies occupies we have to live within our means.

The $4 million rental is not profit for ratepayers, it goes to partly service the massive debt owing on the stadium and should not be made to go away by shifting it off the books just so DVML can pretend they are almost breaking even in future years.

All stadium liabilities need to remain on the books of DVML where they belong and can be seen by those who have been forced into paying them.

Surprise?

Well, who would have seen that coming?

Well overdue

"Reduce the annual rent",  I would think wage reductions are well overdue at this company too!

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