DVML debt much understated

Where is the Dunedin City Council with its budget and how much the stadium is costing the council and ratepayers? The deputy chairman of the finance committee, Cr Richard Thomson, explains the official council view while council critic Calvin Oaten adds up all the costs as he sees them.

Full marks to the folk at the ODT for disclosing in greater depth the financial commitment of the ratepayers to the cause of DVML.

This comes as a result of decisions made over time by the DCC in response to the needs and requests of DVML, more specifically in its report which was tabled at council last Monday week. At that point the announcement was ''$2.1 million boost for stadium.''

But to their credit , the ODT has filled out a more detailed position. In this it defined what was already in place plus the new, all adding up to $9.125 million.

But is that it? Well, it seems there is more, much more. Firstly, there is the decision by council to purchase shares in DVML for an amount of $3.381 million. This is done by way of reducing DVML's debt by that amount. No money actually changes hand, but it is a cost to the ratepayers, nonetheless. Then there is the fact that the stadium's rated value is $1.8 million but only $134,000 is charged. A subsidy of $1.66 million.

Further, it shows in the draft budget's contents, an item concerning the Dunedin Centre, nearing completion. Section 2 page 19 it explains that the sole revenue of this complex is rates at $1.050 million. It goes on to say that DVML has been appointed to manage the complex and it will be paid $1.050 million in return for its management and operation of the Dunedin Centre.

This now brings the total DVML support to $15.216m. But the public's support doesn't stop there. If we add in the collateral cost factors (which is reasonable) we must consider the $480,000 of debt owed by the ORFU which was written off. Then there are the holding costs on the owning of Carisbrook, amounting to about $450,000 a year. So we now have $16.146 million.

Then, if we look at DVML's position up to 30-06-12 we see in its annual report that it has a consolidated deficit of $6.470 million. This, of course, will be ameliorated in part by the DCC injection of the share purchase thereby reducing the deficit to $2.001 million. In view of this, it is difficult to see how CEO Darren Burden can meet his claim of moving from the red into the black with forecasts of a $98,000 loss in 2013-14 followed by small profits of $9000 and $88,000 the following years.

It would seem that on balance, the stadium is no busier now than it has ever been, so why would there be a turnaround in its fortunes? Then there is the position of DVL, which assumed ownership of the stadium. It took possession on May 31, 2012 for the sum of $225 million. In its annual report for the year ended June 30, 2012 it showed an operation (before subvention receipt and taxation) deficit of $12.379 million After subvention receipt, tax adjustments and the ubiquitous interest rate swaps and hedges losses, the final result was negative $12.891 million.

Why this result? Who knows? Obviously its revenue was below requirements, but why? It seems that DVL's only obligations are to service and pay down the stadium debt. This, in return, requires $4 million in rental from DVML, plus the $5.25 million from DCHL, plus who knows what? Private Funding? It seems that the only revenue was $3.667 million from DVML offset by depreciation of $7.655 million and interest expense of $8.381 million.

On balance it seems that the whole exercise is very precariously balanced with the additional risk of DCHL's ability to produce annual requirements of $10.450 million to the DCC, plus $5.25 million to DVL out of profits. This is because DCHL stated that it was no longer prepared to increase its borrowings in order to meet demands.

Based on last year's result showing a loss of some $5 million it is difficult to see a turnaround of more than $20 million, in order to meet the need. Will that vow to not borrow stand fast?All in all, a very unsatisfactory situation, into which the ratepayers have been coerced, with the fall-back position fully placed on them. A shame on the mayors and councillors who have created this abominable state.