ORFU back from the brink

Wayne Graham.
Wayne Graham.
A year on from the financial meltdown at the Otago Rugby Football Union and it seems everyone wants to look forward, not back.

One year ago tonight the financial mire the union was in was revealed to all at the annual meeting of the union.

The union almost went belly-up, drowning in a sea of debt, and it was only through hard work, the support of the community and some people and organisations stepping up to the plate which saved the union from going out of business a year ago. It was a pretty scary thought at the time - no rugby union, no blue and gold, no team for players to aspire to. The team that greats such as Wilson, Willocks and Duncan played for would no longer exist.

It seemed hard to believe after 131 years of existence. But it was saved, and it appears most have moved on.

New union chairman Doug Harvie and new general manager Richard Kinley declined to be interviewed.

They both said they were not there when all the drama unfolded, so could not comment on it.

Until the accounts were released for the 2012 year, which should be in the next week or two, they could not comment on where financially the union stood.

They had budgeted for a small profit and that should be the case.

Former ORFU chairman Wayne Graham, who fronted throughout the days when the union lurched towards liquidation and finally avoided it, had little to say when contacted by the Otago Daily Times.

He had a job to do and he did it, he said. He was no longer involved in rugby administration at any level, although he still watched the game.

Graham and board deputy chairman Laurie Mains got involved in a legal stoush with Dunedin Mayor Dave Cull over comments Cull made the day after a financial rescue was announced.

It was eventually settled and Graham did not wish to comment on that matter.

Former ORFU general manager Richard Reid, who led the union for more than four years up to November 2011, declined comment when approached. He has never commented on the issue.

New Zealand Rugby Union chief executive Steve Tew was at the meeting that fateful night a year ago, and uttered those scary words ''the hole is too big''.

The next day, he said he would be the first one to buy the beer if the union avoided liquidation.

In a recent interview, Tew joked he owed everyone a beer in Dunedin.

''But what has happened down there has been really positive in the past 12 months. The group that put their hand up to help and the new board are working really hard and being sensible,'' Tew said.

He said it was good for the union to have the Otago team make it through to the ITM Cup championship final, and maybe it was good to stay down in the championship for another year.

Tew said it was very tough to stand up at the meeting and outline the perilous state of the union last year. Things were not getting any easier. Costs were rising, funding was shrinking, but the same rules still applied: ''You can't spend more than you earn.''

Stadium debate

Perhaps a debate at the stadium on the stadium might raise money for the stadium, especially considering some of the wit displayed in comments here. (Interesting public debate is at least  one totally unexpected and unforseen benefit of building it.) 

However, I suggest that the central question is not whether stadiums make money for some businesses in a city. 

It’s rather whether stadiums should be paid for out of public money (both to build and later to operate.) 

This is a wordwide debate and certainly not limited to Dunedin. Here a good  case is made  for both sides of the argument.

All the longbows of Old England

Lest readers think of CST/Uni folk going around taking bows, a long bow is drawn to reach a target at distance. It is therefore a tenuous shot aimed skyward. Yay for the yeoperson service of yews.

A CST/Uni long bow!

guadalajara: The actual example I gave clearly demonstrates how a hypothetical possibility can be seized by others (CST) and used for their own purposes. You are correct on one point - I do not know if 500 additional Uni students enrolled because the stadium was built, and nobody else does either.The multiplier effect used by the Uni for their theory has never been challenged openly. The CST has never investigated whether the 500 students did in fact enrol. There are many such examples easily found online where badly researched, theoretical "economic benefits" have been touted as gospel by those pushing their own boat while ignoring the truth.The Dunedin stadium is not the sole example of mischevous misuse of unsupported information - there are many other examples - if you look, that is!  

But wait, there's more

Hypo.Thermia reminded me of a further unforeseen positive spin off from Stadium attendance, that of the local gym that I am about to join in order to reverse the effects of mass consumption of pies!

I can only speak for myself, but the alternative that I was facing as opposed to going to the likes of the recent rugby/league matches and devouring a plethora of steak & cheese goodness was a night at home with my dearly beloved, so I can categorically confirm that my stadium pie money would not have been diverted to alternate pastries.

I can fully appreciate the theory of those posting on this thread that a $120 going to the DCC is $120 not being invested within the local economy, but I believe that it is just that i.e. theory, as in practice, consumer spending habits will only vary if the rate payer is living on the breadline and if that $0.33 per day is a notable proportion of their discretionary spend, otherwise I don't believe that consumer habits will vary, (and so far no one's managed to come up with a single example to say otherwise) there will just be slightly less savings in their (predominantely Australian) bank accounts at the end of each year.

Left the building

guadalajara: not long after rugby stadium build started the Uni cancelled the vaunted sports management course it was using as its big example of what it would be using the stadium connection for - those students wont be coming, nor will their money, the people who taught it, and their salaries have left the local economy. That CST continues to advertise the connection is just par for the course.

The true multiplier effect

Autonomouse: You quote Marlows pies as a multiplier effect resulting from stadium events, however, please consider the net gain from such sales - not the gross gain from selling how many pies at the stadium. (This same net principle applies to booze,water,food purchased at the stadium). I quote:"Thus, including all retail spending rather than only retail margins and omitting the cost of goods that are not made locally greatly exaggerates the economic impact: Rarely will the gasoline that tourists purchase be locally refined and except for local arts and crafts and agricultural products, the souvenirs that tourists buy are imported from outside the region" (Stynes 2001). "

In the case of stadium pies, the meat may have come from outside the Dunedin region, the flour in the pastry would probably have been imported from Australia, more local staff may or may not have been employed to make more pies for the stadium. My point is that the net cost of such goods and services must be considered - not the gross cost.

[Abridged]

One spend of one's dollar

Leaving aside questionable pop-accounting "trickle down" and "multiplier effects", I cannot understand what needs explaining about how MikeStk's "$500 rate contribution had physically resulted in reduced expenditure on goods and services".  It is because he has a certain income out of which he pays for necessities and nice-to-haves.  As a ratepayer he has no choice about paying rates, so they fit in the "necessity" box.  He is forced to pay stadium rates, so he does not have the same amount left to spend on other things. 

As for Autonomouse's example of Marlows Pies - "I have personally purchased about a dozen of them thus far"  isn't there another side to the story?  If he eats a pie is this in addition to everything he normally eats, or is it instead of food made by or bought from another shop?   Another point, if many of the people buying pies while they sit around as spectators at the stadium are eating these on top of their normal daily intake they will be adding to their health risks from obesity and the additional high saturated fat content.  This is not to denigrate Marlows Pies, they are fine pies and a serious temptation due to their deliciousness.  Steak and cheese may bring a wince to the faces of dieticians but not to Autonomouse and me.  We now have one thing in common, so that's an improvement isn't it?

[Abridged]

And speaking of rugby pies

I remember "The Good Ole Days" when the pie was a Laurensons Mince and pea pie in the tin tray,  Mmmm. Bring back the Laurensons pie.

And just out of curiosity, just wondering who got the biggest chunk out of the $4 or $5  of the sale price of said Marlows Pie?

I have pies, therefore I am

Come on Trev is that all you've got, I offer you pies that I've smelt, touched and tasted, pies for which it cannot be disputed that they would not have been purchased had it not been for the stadium, yet you bring your own personal conclusions regarding enrolments at the University. It's impossible to determine as to the impact of the stadium on enrolments, who's to say that it didn't aide in stemming a possibly massive decline.

Here's another one for you; an acquaintance has just rented his house (via an online holiday home site) to a group of Australians (none of whom have apparently ever been to Dunedin) as they were unable to secure hotel or motel accommodation. The Aussies are paying handsomely, and that money's going to go towards a new deck for the house.

I personally don't really care about the multiplier effect either way, I'm just sharing some tangible positives of the stadium, and how those positives have flowed onto others. I welcome others to share their examples as actually experienced (no surveys, studies, opinions or hypothesis please), both positive and negative.

[Abridged]

Spurious

Trev, you're drawing a long bow on this one. How do you know that the stadium hasn't had a positive impact on student numbers. It's quite possible that without the stadium, student numbers may have been down by 500 on the current level. You don't know (nor does anyone else for that matter).

I do know however that many OU children of my friends are very excited about having the stadium so close to the campus. Just saying. 

My lost $500

autonomouse: you miss my point again, the $500 that used to grace my wallet and was available for me to spend in local stores isn't there any more, it was appropriated by the DCC, was used to pay the interest on the stadium debt and now probably graces the wallet of a stock holder of whatever Aussie bank holds the loan. It's certainly not still in the coffers of my (kiwi) bank.

That money and that of my neighbours and those 50,000 other ratepayers won't be used to buy local pies or icecream or be spent in any local store. 

Of course anyone buying a pie at the stadium is going to be short of the (inflated) cost of the pie at the stadium and as a result will be short of the cash to buy the same pie (at a normal price) or some other product elsewhere in the local economy. In other words it's close to a wash and frankly a red herring.

Can you still believe?

autonomouse:Can you still believe in the multiplier effect after reading this excerpt from the Carisbrook Stadium Trust's own web-site?

"The University of Otago believes that the Forsyth Barr Stadium at University Plaza has the potential to improve the attractiveness of the University amongst potential students and could assist in attracting approximately 500 more students than it might otherwise. This could result in a positive economic impact of more than $30 million per year based on the University's estimate of $63,000 per student, due to the multiplier effect.."

Did this happen? No !

Nothing wrong with my reading glasses

Nowhere in my post do I dispute the theoretical "negative multiplisation"; what I did ask for was actual evidence and genuine, practical examples of the negative multiplier effect in action.
Mikestk at least made something of an attempt, but failed at the final hurdle as he didn't outline how his additional $500 rate contribution had physically resulted in reduced expenditure on goods and services - is he now just looking longingly at the local coffee shop, resigned to the fact that he can only sniff the beans, as opposed to savouring the flavour of an actual coffee? Or he still spending the same, and it's the level of savings being held by his Australian bank that has been negated?
As stated in my last post "I welcome any observations of fact that indicate consumer spending has been negated as a direct result of the stadium", so how about posting a few practical actual examples that have been forced upon the regular contributors of this forum?
I'll kick the ball off with a positive tale that is directly tied to the stadium. How about Marlow Pies? Great to see they're once again the supplier of glorious steak & cheese pies at the stadium. Marlow's staff and suppliers must be rather chuffed that their sales have increases by tens of thousands of pies so far this year as stadium attendees gobble them up. I have personally purchased about a dozen of them thus far - let the positive multiplier begin as pie money spreads through the local economy.
Post away people, looking forward to hearing both the positive and negative examples as physically (not theoretically) experienced by yourselves. [Abridged]

Rugby stadium

The Price Waterhouse Cooper report commissioned by the DCC to look into the stadium finances was quite clear. We have a rugby stadium, built at the behest of rugby interests. Its  finances live and die on whether or not rugby can be made profitable.

As far as DVML and the city is concerned, anything else is gravy, and if DVML's management are actually earning the enormous salaries we are paying them, and not stuck in some Stockholm Syndrome death spiral with the ORFU, then that has to be their first priority.

If they don't see this then it's their board's job to put it right, and if the board doesn't see it its time for a different board. Let's start with the chairman who's also the chair of the organisation planning to build Christchurch's covered stadium. [Abridged]

Confused

Does Dunedin have a new Rugby stadium, as well as the new Multi-purpose stadium?

Very clear

Put very clearly, Mikestk, but it's the inclusion of the velocity of exchange in assessments of how much was actually made by these events that is specious rather than the theory itself. 

Bunk

Automouse: please read carefully what I said.  I said I think that counting that way is bunk. But I also said that if you do believe in this bunk then you have to believe that removing a dollar from the economy has the exact opposite effect as adding a dollar if an added dollar is multiplied say ten fold then so is a removed one.

I pay about $500 a year for the rugby stadium - there's $500 that is going to some Aussie banker and not into the local economy. There are 50,000 ratepayers who are paying higher rates for the stadium. That's 50,000 people who are not spending as much as they might in the local economy. 

I can't prove there's a negative muliplied effect because as I said the multiplier is bunk, just a way for people to make up inflated numbers. 

Flowing both ways

Autonomouse: Our income is finite. Our rates include a sizable amount specifically for the stadium. Pre-stadium, our "assets" operated as sensible businesses and paid a reasonable, affordable dividend out of their earnings. This helped to pay for the many things a council has to do to keep a city's infrastructure and amenities working well. This genuine earned - not borrowed - dividend helped to keep rates down.
But the squeeze was put on these companies to provide the council more money than they earned, so they had to resort to borrowing. And you know what happens when millions are borrowed - there is a lot of interest to be paid, year after year after year.
When we have had to pay more for rates (directly as property owners or indirectly as tenants and clients of businesses that have to pay rates) we have less money for spending elsewhere.
This is not good for businesses and service providers in Dunedin. What makes it even harder is that unlike the "flow-on" dollars whose effect around town Autonomouse refers to, a large amount of this money flows not only out of the region but out of NZ, to pay interest on all those millions of dollars that have been borrowed.
The amount flowing out will take a lot of replacing. Autonomouse or others may have figures that show this is happening, from out of town visitors coming to events in the stadium. But since all so far have required some kind of assistance such as an "events fund" and below-cost hire of the venue, I have my doubts. [Abridged]

-

 

 

Silly me

Sorry MikeSTK, I understand now. You're saying it's the flow-on of a dollar spent by a stadium-goer flowing through many hands thereafter. 
Oh, hang on, that's exactly what my comment said (stadium attendee dollars flow to hospitality, retail & accomodation providers who in turn employ more staff and those staff spend their additional wages at businesses whom in turn spend that dollar and so on).  I also made a statement of fact regarding the large events at the stadium specifically bringing people (and therefore their wallets) to Dunedin.
Regarding your generalisation of it flowing both ways, I welcome any observations of fact that indicate consumer spending has been negated as a direct result of the stadium. 

Multiplier effect, divider effect, toothfairy effect

 

Autonomouse says: "...Those brought to the city specifically for events hosted at the stadium will also spend on accommodation, food beverages and shopping. As a result, more staff are required by those industries, who will in turn spend their money," he says, adding, "The facts regarding accommodation occupancy surrounding major events cannot be disputed."

What must be ascertained before we get too excited to sleep, is how many are really "brought to the city" to see how they compare with numbers who come throughout an average month - but spread out so businesses cope with them easily. Are they brought from outside Otago? The Otago Regional Council taxes us to support the stadium, so Otago people who spend here shouldn't be counted, and anyway their meals etc are at the expense of their local businesses unless they have special money that only works when they are away from home.

More staff are required for sudden influxes, yes. And overtime, for current employees. These are low-paid jobs. The staff will almost certainly have to spend their money, paying GST which goes out of Dunedin, out of Otago. Perhaps they will pay off their credit cards. The benefit to local businesses doesn't look all that exciting, does it? Nor can we expect them to be thrilled when people blow their entertainment dollar on one event, one night, and the rest of the month business is slow but they still have the same overheads.

Accommodation has always been tight for special occasions. But anyone who invested in the accommodation sector on the basis of those few days per year would have to have won Lotto several times over because when he tried getting a loan all he'd get is laughter. [Abridged]

 

 

 

Multiplier effect

Autonomouse: No, the multiplier effect is the theory that a dollar spent by one of those people will circulate through many hands after it enters the local economy, and if you add all those transactions of that single dollar up you get a large number like $12m as a hypothetical impact of a stadium event.

I think it's bunk, but if you are going to count that you need to count the same effect as the stadium drains the local economy to pay for its debt.

Riddle me this

The anti crowd appear to be missing a crucial factor, namely that the positive multiplier effect is logically genuine as it assumes that those brought to the city specifically for events hosted at the stadium will also spend on accommodation, food beverages and shopping. As a result,  more staff are required by those industries, who will in turn spend their money, and so on. 
The facts regarding accommodation occupancy surrounding major events cannot be disputed.  Those bestowing the theoretical negative multiplier effect appear to be insinuating that local consumers have been forced to change their spending habits (i.e. spend less on food, entertainment and retail, so less staff required and so on), yet there is not a shred of evidence that I have seen thus far that indicates local consumer spending has been negatively influenced in the slightest.
Does such evidence exist, or is the best the anti-crowd can come up with the hypothetical "Mother of five from South Dunedin" which has been spouted previously?

Explaining numbers

 

Colvin: Let me explain more slowly. I'm trying here to point out how silly the made up numbers - like $12m - that keep being quoted for the advantages that rugby stadium events supposedly have for the local economy are. I don't believe they are real, it's why I called them "mythical magic multipliers".
But let's just pretend they are real. For the moment we'll take these hypothetical economic effects continually quoted by the stadium boosters as a given. If you think these numbers, like $12m for a concert, are real, then supposedly every dollar spent as a result of a rugby stadium event magically results in $40 of downstream economic benefit.
To follow that thought, if you believe this then you must also believe that every dollar of spending removed from the local economy equally results in a loss of $40 downstream - and as a result, according to the thinking of the rugby stadium boosters, the stadium's half billion dollar cost over the next 20 years is going to cost the local economy $20b. - about a billion a year.
Again, this is not my thinking - just a logical corollary of the thinking behind the magic numbers the rugby stadium's boosters continue to quote.

 

$20 billion?

Just watched a rerun of the Highlanders/Chiefs game. What a cracking game. 20,000 people having a great time. What a great stadium. Dunedin must be proud.

But then I read Mike's post and get pulled back into his world. I'll need someone to help me work out the cost per ratepayer using Mike's numbers, but $20 billion divided by 52,000 seems to be quite large.

Still, look at it this way. If Mike's numbers are overstated in any way, think of the money the city is saving.

Sorry Mike, couldn't resist.

Good for the goose

guadalajara: I'm just using the same inflated logic you guys use to pretend that stadium events bring inflated events to the community -  all I'm doing here is showing what happens when one applies the same logic to the downside of the stadium spending - after all if you think it's OK to apply those numbers to the Dunedin economy you have to apply these ones too in the other direction, if you don't then we know you're just making it up to justify your white elephant.

Look out everybody

Mike has got a new number to play with. 20 billion! Sheesh.

Rate the beneficiaries more

Whatever the so-called multiplier (always exaggerated, of course), the same business people are benefitting, time and time again. That's why we need to rate them more and get them to stump up cash for any events fund being considered.

Mythical multipliers for all

Ro: It's not just the several hundred dollars per ratepayer ($120 is way too small if you include the loss of rebate). It's also the money that's not being invested in the city's companies, money that won't come back to us multiplied as profits in future years. All those 'subvention payments' that are paying the interest on the rugby stadium don't just appear out of nowhere. They are being borrowed from our future, and our kids' future.

If you apply the same mythical magic multiplier we see used for rugby games to the half a billion dollars we've been forced to spend on the stadium over the next 20 years the true number is extremely scary - maybe $20 billion dollars in opportunity cost lost to rugby greed and the stadium.

It's the negative multiplier

It's the negative multiplier effect of that $120 of unbought coffees that I was talking about, Autonomouse. That $120 is now being directed to overseas creditors and so no longer creates a spin-off in Dunedin via the multiplier effect. The reason I mentioned it is not only Michael Guest's disparaging remark that the stadium would cost each ratepayer a cup of coffee a week, but also Max Power's assertion that a match recently brought $7m to Dunedin - this figure is of course an estimate based on an estimated multiplier effect but is being quoted as the actual number of dollars, over and above all costs, brought in to Dunedin by the match from outsiders. [Abridged]

Contributing to the local economy

If an additional $120 a year in rating contributions (won't bother spouting the $66 figure of old) has resulted in local residents being unable to enjoy enough discretionary spending for a cup of coffee, then it's fair to say that their contribution to the local economy must have been pretty negligible at best, even before the stadium was constructed.  
There's also been some very odd comments from contributors that they're moving elsewhere as they can't afford the rate increases. That is interesting in that they appear to be suggesting that they'll be saving money by selling their houses in what is one of the cheapest cities in NZ, and instead moving to an alternate location where a house will likely cost well in excess of $100k+ more.  That's some interesting economics.  
Is it little wonder that we have to look to these big events to draw people too our city for which to make it prosper.
Speaking of which, having tried to source accommodation (hotels, motels, apartments, holiday houses etc)  for friends attending the October Bledisloe, it appears the entire city is pretty much already booked out.  Great to see another financial windfall coming our way, and no doubt the many thousands of out of towners will more than compensate for the $120 of coffee that the apparently poor and improverished locals can no longer afford.