Ratepayers paying for failure of stadium's private funding model

The interests of professional rugby rode roughshod over those of city ratepayers during the Dunedin stadium project, Russell Garbutt claims.

I must thank Malcolm Farry (chairman of the Carisbrook Stadium Trust) for his response to my letter to the Editor, published on Monday, in relation to four questions around responsibility and accountability for some of the processes regarding the stadium project:

• Who was responsible for setting up the seating and other contracts at the stadium without ensuring that there was a similar contract to supply games at the stadium from the professional rugby sector?

• Who was responsible within the Dunedin City Council to check these contracts?

• Who was responsible for setting up the so-called "private funding" for construction of the stadium?

• Who was responsible for not disclosing, or acting on the knowledge that the close business partner of the trust and the Dunedin City Council, being professional rugby, was in dire financial straits?

I am perfectly happy being acknowledged as a vigorous opponent of the stadium in Mr Farry's response to me, and I can assure him that the quotes I stated in my letter from Mayor Cull that the private sector funding model followed by the CST was "imprudent, highly risky and, frankly, stupid" were accurate. Mr Farry at least acknowledges that it was him and his private trust that came up with, and promoted this model thus described. I can assure Mr Farry that my own views of his "private funding model" are a great more critical than those espoused by mayor Cull.

Advance operational funding - and this is all that it is - can only be successful if the annual operational income returns a level of profit that not only can cover all operating expenses but also actually pay all costs of the necessary bridging borrowing to pay for construction. That is, as most of us knew from the start, not only an unrealistic expectation, but as described by Mr Cull, is "stupid". The instant the CST and the council started believing in their own hype and spin about Dalai Lama visits, world swimming championships and Royal tours was the moment that this city's ratepayers were doomed to have to meet all of the "private funding".

The private funding was a myth then, it is a myth now, and I suggest that Mr Farry and those who accepted the model pursued with such vigour, were so intent on building a new rugby stadium for professional rugby that all sound business sense, prudence and manageable risk simply went out the window - along with sound governance from the Chin council.

It is clear from Mr Farry's response that he holds ex-DCC chief executive Jim Harland responsible for any checking of CST activities and he is also highly critical of the decision taken to put Mr Harland in charge of most, if not all, of all of the activities previously undertaken or assumed by Mr Farry's trust. I can merely point out that these decisions were taken by the stadium councillors - the majority of whom are still sitting round the council table.

But these things only cover some of the shambles over what happened during the activities of the CST until it was effectively removed from the equation. What is totally ignored by Mr Farry in his response was the key information he held regarding professional rugby. While ratepayers are still grappling with the realisation that not only are they responsible for all of the construction costs, they are just realising that they have no hope of avoiding meeting all of the costs supposedly raised by "private funding". What ratepayers don't yet fully realise is that they will also be responsible for the annual operating losses of running the stadium.

It is revealing that the financial returns of DVML are still not available for public scrutiny We were all told that it was vital for the city that the ORFU was in a strong financial position so that it could be an anchor tenant of the stadium thus strongly contributing to what was forecast as annual operating profits.

Operating profits are just as much a myth as private funding for construction. According to Mr Farry, the purpose of the CST was to build and then operate the stadium.

Indeed the wording of his private trust deed sets this out quite plainly. Mr Farry suggests very strongly that if he and his private trust were responsible for operating the stadium then all would be well. His thoughts about the people now running it seem to indicate that he has little faith that the stadium can ever run successfully.

But it is Mr Farry's lack of response to the remaining question which raises a number of other questions that deserve answers. Readers may have forgotten that Mr Farry has had very close connections with professional rugby in this town and, most importantly, at a time that the ORFU operated the Highlanders franchise. Indeed Mr Farry was a director of the franchise from June, 2006 until April 2009, when Stuart McLauchlan took over the role of chairman.

Just two months after Mr Farry was appointed to the Highlanders board, he registered the Carisbrook Stadium Trust. It is incomprehensible if Mr Farry did not have direct knowledge of the financial state of the ORFU in this period. Not only did Mr Farry actively mix in those rugby governance circles, but from personal knowledge he was very aware of the debts owed to the city.

I, too, have clear memory of a discussion I had with Mr Farry on July 13, 2006, about 3pm, when he assured me that the $2 million debt owed to the city and its ratepayers would "be written off". That moment was a turning point for me personally, when I realised that the interests of professional rugby were running roughshod over the interests of the city's ratepayers.

What is abundantly clear is that Mr Farry, members of his trust and others closely associated with this project including council staff and councillors, despite knowing of the dire financial position of the ORFU over a great number of years, continued to provide resources, cash and services to an organisation that they knew was living beyond its means. It was, at best, technically insolvent.

This was the organisation that Mr Farry and his close rugby colleagues knew was in such dire financial straits. And yet they chose toto effectively supply it with ratepayer resources. I would strongly suggest that these actions taken at this time and since were contrary to the best interests of the city and had much more to do with the interests of professional rugby.

Mr Farry seems to think that everyone, including opponents of the stadium project, will eventually come round to his thinking. Mr Farry is dreaming if he believes it.

Long after he is dead and gone the ratepayers of this city will still be paying for what is nothing more than a flash toy for a small group of very highly paid professional rugby players who may or may not still be playing in Dunedin. The ratepayers, and their descendants, will long remember the actions of the few that caused this financial disaster to occur.

- Russell Garbutt

Editor A correction supplied by Russell Garbutt was originally omitted from the above article. One sentence should have read: "Just two months after Mr Farry was appointed to the Highlanders board, he registered the Carisbrook Stadium Trust,'' with the word appointed replacing the word resigned.

Since the article was published two errors have been pointed out. The article said the ORFU "owned'' the Highlanders franchise. The ORFU "operated'' the franchise, it always being wholly owned by the New Zealand Rugby Union. This error has now been corrected.

Also, Sir Eion Edgar was referred to as president of the ORFU when the Carisbrook Stadium Trust signed an agreement with the ORFU and the Highlanders in 2009. Sir Eion was not on the board at that time.  This portion of the article no longer appaers.

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