Lessons learned from stadium project

Pink’s popular show at the Forsyth Barr stadium in September last year.PHOTO: STEPHEN JAQUIERY
Pink’s popular show at the Forsyth Barr stadium in September last year.PHOTO: STEPHEN JAQUIERY
A scathing report on the funding mechanisms of Dunedin’s controversial covered sports stadium has been delivered in a University of Otago study. For many, it will be vindication of a sometimes  bitter battle with Town Hall and some individuals. Simon Hartley talks to Associate Prof Mike Sam, who described the funding process as "shady local-government structures", the obfuscating of costs and muting of public opposition through an "impenetrable" and complex funding scheme.

The original vision to fund construction of Dunedin's covered stadium quickly became a flashpoint for ratepayer dissent, dividing communities and families as the costs rose and explanations became complex beyond belief.

For many, that dissent over the contentious project, long completed and opened in mid-2011, still rankles.

The report covers the subsequent dire financial impact on Aurora Energy and also the Dunedin City Council's sacking of the board of the Dunedin City Holdings Ltd.

Associate Prof Mike Sam, for Otago university's School of Physical Education, Sport and Exercise Sciences, has just published his study "Big Stadium, Small City: A Catalyst for Turbulence and Governance Reforms" in the journal Urban Policy and Research.

Prof Sam said the study focused on the decisions by local government officials in Dunedin to approve and finance the city's covered stadium.

Protesters at a Stop the Stadium meeting in the Octagon in 2009. PHOTO: PETER MCINTOSH
Protesters at a Stop the Stadium meeting in the Octagon in 2009. PHOTO: PETER MCINTOSH
The study drew on Dunedin's case to investigate the "turbulence" which arose for a small city, with a population of 130,000, from the public-private arrangements used to establish the project's feasibility and financing.

The arrangements scrutinised particularly referred to "the outsourcing of advice, communication and fundraising to a charitable trust; the Carisbrook Stadium Trust, and the formation of council-owned companies into a complex financing apparatus to place liabilities off balance sheets and obfuscate costs," he said.

The "small city" definition was "key" to the study as the stadium cost $1540 for every urban resident, he said.

Had it proportionally been a city of 1 million people, it would have equated to $1.5billion in spending on a sport and entertainment facility, he said.

Prof Sam hopes the lessons learned from Dunedin's case would help inform other centres, such as Christchurch, that are looking at building new stadiums.

"Other small centres should take note of what happened in Dunedin, and pay particularly close attention to private-public partnerships and the outsourcing of key planning work to consultants."

Dunedin's stadium cost $224million, with $163 million coming from the Dunedin City Council, $38 million from the Otago Regional Council and $15 million from central government.

"Getting this approved was a difficult sell for the local government officials of the day.

"While the financial mechanisms were not corrupt, my research found the funding schemes effectively muted public opposition by way of being so complex and impenetrable," Prof Sam said.

He highlights that along with the general public, few of Dunedin's city councillors fully understood the relationships between the council-controlled trade organisations (CCTOs) and the city's finances.

One interview with the study revealed a DCC manager saying "there are only three or four of us who actually understand it," the study researchers were told.

"There was a city councillor supporting the stadium to go ahead who also sat on the boards of a number of council-owned companies through which stadium debt was spread.

"This prompted the eventual expelling of the councillor from his role as chairman of Dunedin City Holdings Limited, and a much-needed review of the policies around governance of council-owned companies," Prof Sam said.

A report released in August 2011 from independent reviewer Warren Larsen said there was a high level of dysfunction in the organisation and financial problems with the potential to become serious, the ODT reported at the time.

The covered stadium’s roof takes shape in late 2010. PHOTO:GERARD O’BRIEN
The covered stadium’s roof takes shape in late 2010. PHOTO:GERARD O’BRIEN
In September 2011, Mayor Dave Cull said the Larsen report had recommended councillors should not also be directors on a council-owned companies, and "the council has accepted the recommendation".

The issue came to a head in November that year when the Dunedin City Council sacked the entire board of the Dunedin City Holdings Ltd company, with two directors opting to resign, and brought in consultants to institute a major restructure of the council's group of companies.

Prof Sam said the council also had to change "the often brick-wall approach" to requests from opponents for access to information held by the Carisbrook Stadium Trust, which essentially built the business case for the stadium which was approved by the council.

The study outlined how, when responding to public opposition, the High Court could not make sense of the financing scheme either, ultimately agreeing with the council's lawyers that taxpayer contributions, and not the total debt, were the yardstick for evaluating the project.

"The consequences of this debt would include stadium bailouts, the deferment of community projects such as playgrounds and walkways, and selling-off of assets such as Citibus", he said.

One of the most high-profile consequences was council-owned utility company Aurora Energy being found negligent in upgrading its electricity network.

Prof Sam said it was a potentially dangerous result of what the company's chief executive at the time had explained came from the need to pay $30million towards the stadium.

He said the study ultimately showed public-private partnerships were not inherently good or cost-effective.

"They need citizen and local government literacy and oversight to make them so - small cities can learn from each other and perhaps be better at this than larger urban centres."

-The study began in 2006, when Carisbrook was still being considered for redevelopment, with several subsequent reports written by Prof Sam and associates.

Comments

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Prof Sam has done a good job on summarising the 'official' costs per the PWC 2012 report. What is missing are the additional costs; those paid directly from the DCC own budget, extra land purchases for parking, etc raised the cost to approx $300m +/- $20m. No one on the outside precisely know what happen because of all the inter-company relationships.

What we do know; ratepayers are paying approx $15m p.a in interest every year on funds borrowed or own DCC funds used/forgone. Depreciation is another $10-12m pa on the facility. Losses at DVML are continuous and will NEVER go away as the white elephant can NEVER make a profit in a big city let alone a small one.

Prof Same says no corruption. I say have a look at who made the decisions, where did they go after their time at the DCC or council and who got contracts. Then the answer may be different.

$1,540 per "urban resident" and not a free ticket in sight. Nor do residents see any income from the constantly reported millions of dollars being spent by event visitors.
Socialise the cost and privatise the profit, yet again...

Thanks Prof Swan. It can't have been an easy ask getting to the bigger picture about the financial and other costs to the City when there was a 'brick wall' put in place by interested parties to stop citizens and others getting to the truth. I wish the ODT would point this out every time the stadium reports having made a 'profit'.

Local government law needs to be amended to make conflicts of interest absolutely clear to identify so they can be prohibited. IMO virtually all of the movers and shakers behind the Stadium project had serious conflicts of interest, including former Dunedin City Council Chief Executive, Jim Harland, who was Chair of the Carisbrook Stadium Working Party at the same time as being CE. The Carisbrook Stadium Working Party was not a politically neutral or impartial group. It totally dismissed the upgrading of the former South Dunedin Carisbrook site and gave no realistic alternative new locations to the current site. The Working Party was a ‘closed shop’.

Yes, thanks Prof. Swan. In hindsight, and its always better to judge things from that perspective. The STOP THE STADIUM people were right. The Prof. said even some DCC council members did not understand what was going down and nor did some of the executive! That's SO embarrassing for the then mayor and the new one should have held a public enquiry as to why all this behind the scenes and biassed financing happened and could have corrected it.

Maybe I've missed it, but I cannot see where it says "lessons learnt". No lessons will be learnt of this. The ends apparently justified the means. The object was a stadium. How to get it was irrelevant. Will the same thing happen again? Of course.

Perhaps the Local Government laws should be changed so that Council members including the Mayor can be held financially accountable in law. At present they are protected and cannot be sued.Local Body Councillors should be seen as company directors who can be held responsible in law for their actions.

So that Christchurch doesn't do the same.

Fancy waterfront development anyone?

How can we read a free copy of this document online? I assume the author was publicly funded?

A full copy of the paper can be accessed from this link:
https://www.tandfonline.com/eprint/mQHfaTvIArRARGxUafrK/full?target=10.1...

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