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.
Calvin Oaten and I can agree on one thing anyway. Neither of
us thought Forsyth Barr Stadium was a good idea and both of
us thought it would cost ratepayers far more than the
mythical $66 a year. Blimey, that's two things.
Unfortunately, from there it gets a bit more discordant. I
mightn't have thought the financial analysis that justified
the stadium proceeding stood very close analysis, but I'm
afraid neither does the accounting in Calvin's opinion piece.
Let's just get a few disclaimers out first.
To all those people who said it would cost ratepayers far
more than its proponents promised. You are correct.
To all those people who said it could not make a profit
without further subsidies. You are correct.
There we are. No need to argue with me. I surrender up front.
But there is another self evident truth. It's there now.
I recently attempted to explain in the ODT's
online columns why ratepayers were better off paying more to
keep the stadium open than they would be if they closed it
(as numerous people keep telling me should occur). This
resulted in responses that could wound a more sensitive soul.
Indeed, Calvin Oaten said (of me): ''I am not sure where
he learned his maths, but it sure as hell shows what
intellect is around that council table.''
I may be wrong of course, but I don't think he was being
complimentary about the intellect thing. So let me have
It is proposed that Dunedin ratepayers will contribute
roughly $9.125 million a year in real costs to them in
2013-14, made up of. -
Dividend forgone from DCHL: $5.25 million.
Additional debt repayment: $2.725 million (compared to
what was originally promised).
DVL service level agreement: $0.75 million (either a
payment to enable more community usage or a further ratepayer
subsidy depending on point of view).
Events Attraction Fund: $0.40 million (not a direct
stadium cost but only proposed because of it).
Calvin argues that it is much more than this: ''The
decision by council to purchase shares in DVML for an amount
of $3.381 million ... is a cost to the ratepayer''.
I'm sorry Calvin, but it isn't. The council paid this money
several years ago. Converting it to shares has no cash flow
impact (which is what ratepayers fund). ''The stadium's
rated value is $1.8 million and only $134,000 is being
charged. A subsidy of $1.66 million.''
Well, he is correct that the stadium, if rated as a normal
commercial activity, would have generated a rate of $1.8
million. But he is incorrect to imply that somehow ratepayers
are worse off by $1.66 million. Council decided to rate the
stadium based on the rates it received from the properties
that previously occupied the site.
The net impact to ratepayers is therefore zero. If you
dislike the stadium, you will evidence that as a further
indication that it cannot pay its way as a commercial entity.
Fair enough. I agree with you. Your argument, Calvin, is
presumably that if it was paying a commercial rate then
ratepayers would be receiving more revenue and that would
Again, fair enough. But you can't have it both ways. That
$1.66 million would not have been there if it hadn't been
built either. Calvin goes on to argue that the losses in DVL
(the entity owning the stadium) are large and likely to be
ongoing. Again, he is correct, but his implication that this
is a further cost to the ratepayer is not so. DVL's losses
are contributed to substantially by depreciation.
For non accountants, this is an allowance that companies make
for the reduction in value of their plant over time. There is
no actual cash paid out. DVL's role is to own the stadium,
collect the rent, and use it (plus the monies provided from
the figures given in the first leg, at left) to pay the
mortgage on the stadium.
What the ratepayer needs to be concerned about is that the
cash coming in is sufficient to pay the interest and loans
going out. If it was also to fund the depreciation then that
would simply mean DVL was building up large sums of money in
the bank (not something that I think ratepayers want) or it
was paying loans off faster (but at an additional cost to
The ORFU debt write-off had nothing to do with the stadium.
You might be able to mount an argument that the Carisbrook
holding costs are stadium related, but you would also have to
then factor back in the Carisbrook costs now avoided since
its closure. These are complete red herrings.
So, what would happen if we closed it? DVML collects revenue
(around $9 million) and pays its fixed costs including the
rent ($4 million) out of this. It is this rent which allows
DVL to pay off the loans (with the other ratepayer assistance
outlined above). If you close it down, you do not remove any
of the costs in DVL.
They still have the stadium loans and interest to pay but
they do not have $4 million rent from DVML. We would be able
to remove council funding of DVML ($750,000 for the community
usage/subsidy) and the events fund ($400,000). On the other
hand, council would have to put Carisbrook back into
operation. Let's use Calvin's figure of $450,000 per annum
holding costs as an ongoing expense. Adding the pluses and
minuses we are now about $3.3 million worse off per annum
before any net operating costs of putting Carisbrook back
That's roughly a 3% additional rates increase through closing
it. But, what if DVML can't pay the rent? Fair question. Even
if revenue dropped by $3 million (an extraordinary amount),
we would only be at the cost neutral point and still have the
benefits the stadium brings. So, hate it if you like. By all
means continue to argue that it was an unwise decision. Make
the valid point that the real costs to ratepayers are much
greater than they were promised.
But at least do the maths.