Dunedin Town Hall/ Dunedin Centre Upgrade

There is considerable talk from some councillors expressing concern at the direction of rates and the capital expenditure. Why? Is it because of genuine concern, or simply because it is election year?

Cr Syd Brown has even suggested deferring some major projects, such as the Town Hall upgrade and the Settlers Museum. Cr Butcher says she doesn't want to see the Town Hall deferred. She says it is necessary for the city.

When the latest version at $45.14 million went into the 2008/09 Plan, Cr Guest said "let's bite the bullet and build it."So what is the position with this project?

Well, it was first mooted by staff in a 2000 report to council, at a figure of $14.5 million for a recommended upgrade. In 2004 it showed for the first time the controversial "glass clip-on." This was then costed at $18.5 million, supported by a consultants economic benefit report showing a return to the city of some $3.5 million. This was based on an additional eight conferences per year, attracting 2970 delegates spending an average of $400 per day, with an average stay of three days and two nights.

However, a survey conducted of the 2006 NZ Federation of Women's January conference, revealed that the daily spend was just $175 per day - less than half.

In November 2006, it was announced that the project cost had increased to $29.32 million. In support of this increase, a new model was presented showing that the project would now result in an additional 16.2 conferences of various sizes, bringing an extra 4400 delegates to Dunedin. These delegates would be divided into two categories - normal and high yield. Overall, there would be 5600 normal delegates, each spending $857 during their stay, while 2800 high-yield folk would spend $999 during their stay. The result would be a total expenditure of $17.028,303.

This was in a report prepared by Debra Simes and approved by Kate Styles.

When the project arrived at $45.14 million there was no cost benefit-information supporting it.

In the September 2009 issue of 'City Talk', Kate Styles said, "The Town Hall Upgrade Ticks All The Boxes." She said: "The business case showed clearly that conferences and events will bring in the revenue that will support the performance and community side of the venture."

Several times I asked for the business plan, only to be ignored. I finally obtained it by invoking the Local Government Official Information Act. It is a document produced by Horwarth HTL, consultants to the hotel, tourism & leisure industries. The same firm produced the financial feasibility reports for the stadium.

So, what did it say? Well, it is 88 pages long including appendices. There were four options considered, but these were distilled down to just two. These were a) a regulatory upgrade of the Town Hall only and b)  the alternative option, consisting of not only the Town Hall but also the remodeling of the Glenroy space, smaller atrium upgrade of the entrance, extended Dunedin Centre foyer/ exhibition space (in the former 'Hungry Frenchman' space) two additional 'heritage' meeting rooms in existing Municipal Building, improved functionality of the Fullwood Room and a new Dunedin Centre kitchen.

The First Option would effectively provide no more space than now, at an estimated capital cost of $22 million. The Alternative Option was $50.6 million, but, by excluding the 'clip on atrium', reduced to $42.6 million. It should be noted that these estimates won't necessarily be met by tendered prices.

The feasibility of either of these options is evaluated in simple terms and decided on the basis of estimated usage and revenue. It all really boils down to guessing how many conferences will be gained by creating the debt for the city to carry. Then guessing if those conferences will be sufficient to cover the servicing and repaying of that debt.

The report discloses that: For 2008 the actual number of conferences held were; over 500 delegates 1, 250-500 delegates 4, less than 250 delegates 11. Total 16

In 2016 the estimates for the First Option are; over 500 del. 0, 250-500 del.1, less than 250 del. 9. Total 10. A reduction on present of 6.

In 2016 the estimates for the Alternative Option are; over 500 del. 5, 250-500 del. 11, less than 250 del. 20. Total 36. An increase on present of 20.

Looking at the 2016 cash flow scenarios for the first option we find the following; with 10 conferences, total revenue $713,333. total operating expenditure (excl. rates, interest, internal DCC charges & deprec.) $997,124. A deficit of ($283,791). We then have the total other charges and depreciation amounting to $883,462 to make the deficit up to ($1,167,253.) Add the loan repayment provision of $2,240,749 and the total deficit is ($3,408,002.) annually.

For the preferred Alternative Option; with 36 conferences, total revenue $1,567,805. total operating expenditure (excl. rates, interest, internal DCC charges & deprec.) $1,277,772. A surplus of $290,033.

Strangely, for each option, we have the same charges and depreciation of $883,462 to make a deficit of ($593,430). Plus the loan repayment provision of $4,338,904 making a total deficit of ($4,932,334.) annually.

How Kate Styles could say that the Alternative Option can "bring in the revenue that will support the performance and community side of the venture" eludes me.

On the face of it, it looks like we will, at best, be in the gun for $3.408 million and, at worst, for $4.932 million per annum. And that is if the 36 conferences eventuate.

The question now is, how many councillors read this information? Indeed, how many councillors over the past nine years have read, understood and more importantly, done due diligence on the project before committing? It would seem, in view of the current situation, that few if any have any concept of just how flimsily based the whole supporting arguments are.

Nothing more than anecdotally dreamed up scenarios, without a shred of empirical evidence to sustain the proposition that by spending upwards of $50 million, Dunedin would become an internationally-recognised conference centre. And now, some councillors are wondering if it should be deferred.

Perhaps Cr John Bezett was right when he once described me as "one who knows the cost of everything but the value of nothing."