$1.2b spent on Cup, $700m return - survey

New Zealand will spend more than $1.2 billion in investments backing the Rugby World Cup - against $700 million in direct economic returns.

A wide-ranging New Zealand Herald investigation asked tournament organisers, local authorities, government departments, public bodies, transport hubs and key sponsors what they had prepared for the World Cup and how much they would spend.

"The important thing is to understand the scale of this thing from New Zealand's point of view," Rugby World Cup Minister Murray McCully said.

"It's way bigger than anything we've ever done before."

Included in the survey are projects that will remain useful beyond the World Cup - such as improvements to signage - and spending that has come out of existing budgets.

Some expenses, including turf upgrades, might have become necessary regardless of the tournament, he said.

Other projects have a more limited relevance - such as the $12 million rugby ball monument and $150 million in hosting fees paid to the International Rugby Board.

Put together, stadium upgrades at $555 million account for almost half the investments.

Auckland's Eden Park upgrade is the most costly at $256 million, followed by Dunedin's new Forsyth Barr Stadium at $198 million - though World Cup organisers emphasised the stadium was not built solely for the tournament.

The Herald claims ratepayers around the country will have provided $288 million of the total funding.

Taxpayers will have provided $266 million in direct funding for tournament structures and at least $53 million more for Cup-related activities by police, Tourism NZ, the New Zealand Transport Authority, New Zealand Trade and Enterprise and government departments.

In 2005, when New Zealand won the rights to host the Cup, a Treasury worst-case scenario suggested $70 million of public money could be needed over six years.

Mr McCully said the World Cup would have lasting economic value for New Zealand, but arguably more important was New Zealand building its brand on the international stage.

"We convince more tourists to come here, we convince more businesses to do business here with New Zealand companies and enter partnerships with them. So those legacy values are arguably the greatest, and that's why we're determined to do it properly."

Reserve Bank governor Alan Bollard forecast in January the World Cup could add about $700 million to the New Zealand economy.

Mr McCully said there was real value in an event like the World Cup.

"We'll get about $700 million or so of income as a country from people coming to visit, and there's the fact that we also will be investing in assets that will provide a return for many years ahead."

However, a senior economist predicted the dollar input to the economy would be far less.

University of Auckland economics professor Tim Hazledine said the official estimates were overblown.

To get the actual benefits, it was necessary to take out the tourism dollars that would have been spent in New Zealand anyway and account for profit margins, Dr Hazledine said.

"In total, you can find about $150 million actual money-in-the-pocket benefits to New Zealand."

The economic case for hosting the World Cup was weak, he said.

The tournament will be run at a loss, and the expected deficit has grown by 30% to $39 million. Two-thirds - $26 million - will be covered by taxpayers, while the New Zealand Rugby Union will pay for the remainder.

Mr McCully said ticket revenues were projected to total $268 million - down $12 million from original estimates of $280 million.

About $310 million will be spent on the tournament's operational costs and fees, $130 million on upgrades to ports and airports, $107 million on local expenditures, $41 million on the activities of public agencies, $40.3 million on World Cup monuments and $9.5 million on events.

Still, the chief executive of Rugby New Zealand 2011, Martin Snedden, said there were many intangible benefits to holding the tournament in New Zealand.

"I'm sure one of the reasons that must have been behind the Government's decision to partner with New Zealand rugby to invest in this is the profile and opportunity in terms of New Zealand on the international stage," he said.

"It's not easy to measure in hard dollar terms but you can understand, if you are aware of these events, the really extensive worldwide media coverage and television coverage it gets and just how much opportunity it has on the world stage - it goes to so many different countries."

Excluded from the survey total is KiwiRail's response that it will make a $1.1 billion investment in rail and ferries crucial to shuttling around spectators, an expenditure considered to have benefits too broad to count as a World Cup expense.

 

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