Stadium debt shackles tighten on ratepayers

Dunedin's $3 million annual Forsyth Barr Stadium debt repayment shortfall could cost the city an extra $115 million in interest, if the period taken to pay off loans is doubled from 20 to 40 years.

The city's ratepayers may also be asked if they want to add about $13 a year to the average rates bill, an amount that could help pay off an extra $1 million a year of debt, but mark an end to the assurance the stadium would cost the average ratepayer no more than $66 a year.

The idea of an increase in rates would require public consultation, but Mayor Dave Cull said yesterday the money had to be paid, and he would not preclude any option.

The options, and a recommendation to defer a proposed $6.3 million capital maintenance fund, suggested as a way to pay for work such as replacing the stadium's roof in the future, will go before the Dunedin City Council finance, strategy and development committee on Monday.

Acting chief executive Athol Stephens yesterday said the extension of the loan period would mean the city could find itself "constrained" in future if it wanted to develop "love to do" projects like cycleways.

But the length of the repayment schedule was not set in stone.

Council financial planner Carolyn Howard said the matter should be revisited in 10 years, once private sector debt for the stadium was paid off.

"When that's gone, we will have a different situation," she said.

The length of the loan could then be brought back to something like 30 years.

In late July, it was revealed council companies would not be able to come up with $8 million of dividends to help pay for multimillion-dollar spending.

Part of that was $3 million the companies were required to come up with for the stadium.

A report on the issue from Ms Howard said it had been assumed public sector debt would be paid back over 20 years.

"This is no longer possible."

Ms Howard said the use of loan financing "supports the principle of intergenerational equity" and was appropriate for long-lived assets.

Asked yesterday if a 40-year loan was unusual in New Zealand local government, Mr Stephens said it was something that had become more common recently.

Nelson and the western Bay of Plenty were areas where local governments used 40-year loan repayment periods.

On the loss of money to the city from paying the interest, Mr Stephens said the next generation might find paying for new projects more difficult, unless income was raised.

On the recommendation to defer borrowing money for the capital maintenance fund for five years, Ms Howard's report said in five years the loan would be reduced, actual financial results for the venues management companies would be known, as would asset management and maintenance requirements.

The idea of asking the community to add money through rates was not a recommendation, Mr Stephens said, but a suggestion for councillors to consider.

Mr Cull said he had long had concerns about the financial projections for the stadium, including the $66 a year figure.

"My concerns have turned out to be justified; now we have to deal with it."


REPAYMENT OPTIONS

• Stadium public sector debt be paid over 40 years, rather than 20 years.
• $6.3 million loan for a capital maintenance fund for stadium be deferred for five years.
• Council consider adding $1 million a year to general rates to reduce debt faster than 40-year plan.
• Excess cash from Dunedin City Holdings Ltd (DCHL) or venues group go to reducing debt.
• After repayment of private sector debt in 10 years, full review of debt servicing be carried out.


- david.loughrey@odt.co.nz

 

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