Stadium Lift Three Months Behind Schedule

The ODT reports that the lift of the first of the Stadium's five roof trusses was expected to be done next week.

That would make the lift nearly three months behind schedule, when compared with a stadium construction programme presented to the Dunedin City Council by CST staff last October.

Mr Farry is still saying that the Stadium can be built on budget and in time for next year's World Cup. It will interesting to see to see what comes out of the woodwork once this year's Council elections are over.

$9 Million Blowout In Cost Of Stadium Bypass

The cost to move the highway around the new Stadium has increased by over $9 million, to almost $25 million. This includes increases in the cost of both construction and land. Taking into account a previous increase, the cost of land for the Stadium is $10 million over budget. It is some consolation to the City, that 2/3 of the cost will be paid by the New Zealand Transport Agency.

Dunedin city councillor Andrew Noone yesterday said the change to the district plan that turned land at the area from an industrial to a stadium/campus zone had an effect on negotiations, and an impact on the value of land.

Duh! The Council rezoned the area to benefit property speculators, and it ends up costing ratepayers millions more dollars?

Using the Public Works Act to require land owners to sell would have been the ideal situation, he said, but the timing of the stadium and realignment meant that had not been possible.

This is just bad planning, due to the rush to build the Stadium.

ODT Blocks Access To CST Criticism

Yesterday's front-page lead story in the Otago Daily Times, "Further $1.8m for stadium", is no longer available on the ODT web-site, with "Access Denied" displayed instead:
http://www.odt.co.nz/news/dunedin/91669/further-18-million-stadium
If this block is due to lawyers trying to stop criticism of the Carisbrook Stadium Trust, then that will become a story in itself.
UPDATED
I emailed the ODT and asked for an explanation for the "Access Denied", but I have not had a reply.
The story is back on-line with "a clarification" that the actual extra amount is $1.639. This small error does seem to be enough to explain the "Access Denied".
In a related story, it is claimed that the oversight was not the responsibility of the Carisbrook Stadium Trust, but of the Dunedin City Council.

"It was never the responsibility of the trust," [CST chairman, Malcom Farry] said. The trust had been asked to plan and build the stadium, but not to run it once that was done.

This is nonsense: the CST was responsible for projections of income and expenditure for the Stadium, which were produced at considerable expense to Dunedin rate-payers. Opponents of the Stadium claimed that costing were being kept unrealistically low to boost the case to go ahead. It is now clear that they were correct.

Another Million Added To The Stadium Bill

The new chief executive of the Stadium (DVML) company, David Davies, has wasted no time in putting his hand out for more money from the Dunedin City Council.
In a report (pdf) to the Council, it is revealed that Dunedin Venues Management Limited is expecting $2.4 million to cover spending before the Stadium receives income. $1.5 million of this is for staff expenses. About $1.4 million of this is already budgeted for, from rates and Carisbrook Stadium Trust appropriations. About $1 million is not currently budgeted for.
DCC Finance Manager, Athol Stephens claims that not extra contribution is required from rates because the money can be found from:

• a "subvention receipt" from Aurora Energy Limited of $0.672 million
• a one-off dividend of $0.264 million to be transferred through DCHL

Taking this extra money from Dunedin City Holdings just means that DCHL debt will be $1 million higher than it otherwise would have been. Athol Stephens can play a shell game, and move money around between different places all he likes. But in the end, it is all ratepayers funds and affects rates.
And this extra payment raises the question:
If this extra $1 million is required for the Stadium, then why was it not included in the Carisbrook Stadium Trust projections?

Auckland Events Lose Millions

The Dunedin City Council has appointed directors for Dunedin Venues Management Limited, the company which will manage the Stadium. The board will be chaired by Sir John Hansen, a former Judge, who has little business experience and seems to have been appointed to give a respectable facade. Many of the finance companies which have failed in recent times, have had this type of appointment on their board.
The deputy-chairman of DVML will be Peter Stubbs, who is chairman of The Edge, which manages the venues of the Auckland City Council. He certainly knows about the risks of event management: The Edge lost $1.9 million promoting My Fair Lady in August. This is even more than the $1.8 million Auckland Regional Council lost on David Beckham.
The other DVML directors are Stewart Barnett, Bill Baylis, Peter Brown, Malcolm Farry, Peter Hutchison, Jennifer Rolfe and Kereyn Smith. There can be little complaint about the calibre of those chosen.
But event promotion is a risky business, particularly in cities with a low population base such as Dunedin. I think that there should be a public debate on whether DVML should take the risk of event promotion, or it should just hire the venue. I seem to recall Euan Soper, of the Carisbrook Stadium Trust, saying it would just be venue hire.
The ODT story is here.

More On Otago Rugby's Bailout

Following on from the letter from Calvin Oaten last week, this week's Dscene has a story saying Carisbrook will be sold to the Dunedin City Council for $7 million.

Dscene asked an experienced property valuer for an estimate of Carisbrook's worth and was given an off-the-cuff figure of "ballpark $4 million".

But $7 million will enable Otago Rugby to pay off it's debts. DCC chief executive , Jim Harland, has said:

The council’s concern is to ensure the ORFU is in a viable financial position looking into the future.

If Dscene's $4 million is correct, then Dunedin rate-payers are bailing out Otago Rugby to the tune of $3 million.
Today the ODT, also has a story: "Carisbrook Deal believed to be $7 m" (but does not acknowledge Dscene's scoop).

Mr Harland said the sale price was not included in the $198 million cost of the new Forsyth Barr Stadium, and was "based on" a market value agreed after the council sought "valuation advice".
Mr Harland would not say whether the price was inflated beyond market value to help the ORFU clear its debts. "I can't comment on that question. I'm not saying no, and I'm not saying yes."

Note that it is "valuation advice", not a valuation.
Factors which have reduced the market value of Carisbrook include:

• The currently depressed property market, particularly for development land
• The difficulty of obtaining finance
• Rising interest rates due to world-wide Government deficits
  
• The cost of demolishing the existing structures
• The involvement of the Historic Places Trust
• The industrial zoning of the site
• The two-year wait for Otago Rugby to vacate the site

There are still many questions to be answered:

• How will the Council fund the purchase?
• Will the rent paid by Otago Rugby cover the operating and holding costs?

Watch this space.

DCC Bails Out Otago Rugby

The Dunedin City Council has admitted that a reason that the DCC is buying Carisbrook is to resolve Otago Rugby's financial situation.

Calvin Oaten's letter to the ODT:

In all the triumphal utterances of the Carisbrook Stadium Trust, the Dunedin City Council and general supporters of the proposed stadium, one important matter seems to have slipped under the radar. Neither the DCC nor the plentiful opponents have made much of the fact that the DCC has purchased Carisbrook from the Otago Rugby Football Union. Why? Is it not a very pertinent point of the whole debate?
Indeed, why did the DCC need to purchase it at all? Surely, if the ORFU needed to sell it, why did it not simply go on the open market? I fail to see what value there is for the citizens intaking ownership of a stadium about to be made redundant by the very same representatives of those citizens.
Some serious questions need to be answered by the DCC chief executive is Jim Harland:
• Why did the DCC buy Carisbrook?
• What price did the DCC pay?
• Did the price agreed take into consideration the $2 million debt that the ORFU owes the DCC?
• Was the purchase-price factored in as part of the budgeted $198 million cost ofthe Awatea St stadium? If not; why not?
• What use does the DCC see for the purchase and what costs are budgeted for in order to demolish existing improvements, thus making way for reuse or sale of the site?
• Did the purchase include the ORFU’s other properties on Burns St and parking areas on Neville St?
These questions are essential details which the public are entitled to know if they are to be able to assess the value of the council’s decision to make the purchase. After all, we have just seen where the relative land purchases at the Awatea St site cost $35.6 million, up from an original estimate of $15 million. A full explanation of the above points at the earliest convenience would be appreciated.

Jim Harland, chief executive, Dunedin City Council, replies:

Why did the DCC buy Carisbrook?
To assist the ORFU as anchor tenant in the new stadium and to secure a piece of industrial land for the future of the city.
What price did the DCC pay?
This information is confidential until negotiations have been concluded.
Was the purchase price factored in as part ofthe budgeted $198 million cost ofthe Awatea St stadium?
No. The council’s concern is to ensure the ORFU is in a viable financial position looking into the future.
What use does the DCC see for the purchase and what costs are budgeted for in order to demolish existing improvements, thus making way for reuse or sale of the site?
No decisions have been made on the future use ofCarisbrook. The modelling prior to purchase took into account likely demolition costs.
Did the purchase include the ORFU’s other properties on Burns St, and parking areas on Neville St?
Yes.

Calvin's Analysis of Stadium Finances

Calvin Oaten has written a letter to the ODT, analysing Stadium finances. It will be very interesting to see the Council's response to Stadium submissions, when it comes out.
There is a thread on this topic on the ODT site.

Dunedin City Council CEO Jim Harland is working very hard on a standard but "very detailed response" to stadium submissions, including the history of the project, that councillors would be able to debate before sending it to all submitters in an attempt to "de-confuse them". That should be an interesting exercise, which I hope the recipients appreciate. After all, we have spent over $20 million endeavouring to get the council to
understand it and, by all accounts, it is not even certain that they do yet.
It really is quite simple. The plan is to build a stadium at a cost of some $200 million. The DCC is to contribute $85 million, the Otago Regional Council $37.5 million, the Otago Community Trust $7 million, the University of Otago $10 million and the private sector $45.5 million. The Government contributes $15 million, making a total of $200 million. The DCC is to put up an additional $6.4 million, set aside as a capital maintenance fund. The $91.4 million DCC portion is to be paid off by the council-owned company DCHL at the rate of $5 million per annum over 20 years. This means that DCHL’s dividend to the DCC over that period will be reduced by $5 million per annum. This will be made up by the ratepayers at an average cost of $66 per annum on their rates. This leaves a conundrum or two to be considered.
The $100 million of DCHL’s debt at 7% interest over 20 years will cost $70 million, or $3.5 million per annum. Then there is the fact that the private funding has not eventuated in time for the construction period. In fact, there will only be $2.9 million available with the balance of $42.6 million required to be bridged by the DCC. The balance is is now projected to come in progressively through to 2021. Assuming it is equally spread through to 2021, this could mean an interest charge of $1.5 million per annum for 10 years. So, we have an additional $5 million per annum to be found.
Mr Harland will tell us that this will be paid by the venues management company (DCVL) out of its operational revenue. That’s right — a profit of not less than $5 million a year, over and above all expenditure, maintenance and depreciation etc. Of course, with 10-12 rugby matches a year that should be a breeze. But if this does not eventuate then guess who pays?
If the $5 million dividend loss is to cost us $66, then it is reasonable to assume that the $5 million interest costs would also cost us $66 if DCVL does not achieve its projected returns. This means an average total of $132 per ratepayer. Oh yes, I almost forgot - we will all also be paying the ORC for its
contribution, which could easily be an average of $45 per ratepayer. Total now $177.
Then, of course, we should take into account the lost opportunity of the dividend. By this I mean if the stadium was not happening, we would save $66
and get the dividend. This means we in effect pay twice. So, in real terms, the deal could cost the average ratepayer $243 per annum. I will bet dollars to
doughnuts that Mr Harland’s explanation will not tell us that. After all, when he and his counsel were asked by Justice Chisholm to explain how the $66 per ratepayer was arrived at, they admitted that they could not.
Whom to believe? It is your choice.

Calvin Oaten
Pine Hill

Stadium Contract Signed

The contract has now been signed: Dunedin is now committed to a new Stadium. For the sake of Dunedin ratepayers, I hope it is a success, and earns enough revenue to pay it's way. The Councillors who voted for the Stadium deserve credit if it goes well and will be held to account if it does not.

Broken Assurances And Evaded Truth

Dunedin City Councillor, Dave Cull, gives an excellent opinion piece in the ODT on the Stadium issue, before next Monday's DCC meeting when approval may be given to sign the contract.

Highlanders at Risk

The ODT reports:

Highlanders chief executive Richard Reid says people in the South need to realise there is a risk they may lose the Highlanders.

If there is a risk that Dunedin may lose the Highlanders, then it is too risky to build the new Stadium. The financialHighlanders chief executive Richard Reid says people in the South need to realise there is a risk they may lose the Highlanders. viability of the Stadium relies on large crowds at rugby. But projected crowds are based on those during the golden years of Otago Rugby in the 1990's. Otago Rugby has now lost its fan base. The fundamental problem expressed by Richard Reid is the same as that expressed by opponents of the Stadium: Dunedin just does not have a big enough population base to support it. It is notable that Richard Reid has waited until the decision has been made to proceed with the Stadium, before expressing these views. Over the last couple of years, Otago Rugby has been very quiet about the crowd numbers at Carisbrook.

But once Dunedin is commited to the Stadium and needing rugby to maintain cashflow, then we can be held to ransom by Otago Rugby: "subsidise us or lose the franchise".

The Stadium Will Be Built

Following the decision of the Government to underwrite Stadium funding with $15 million from the Rugby World Cup budget, the Stadium will be built.
But can it be built in time for the World Cup?
This is related to price. It may cost more if there is a deadline, so will the Dunedin City Council be faced with an extra bill if, as a condition of the underwriting, the Government requires the Stadium to be finished in time for World Cup Rugby.

Reponse From Rodney Hide

I have had a response from Minister of Local Government, Rodney Hide to my email opposing Government funding for the Stadium.
It includes this : "We have deliberately set a very high threshold for publicly funded infrastructure projects. We will not commit public funds to projects that do not make an enduring contribution to the economy and our national productivity".
Rodney cannot be suggesting that the Stadium would pass this test, can he?
It almost implies that the Government is going to refuse to contribute to the Stadium.

National Business Review Gives Stadium Figures

Today's National Business Review has an article on the Stadium with information that I have not seen published elsewhere. Unfortunately, it is not on-line, but here is a portion:

Athol Stephens said that the effect on forecast dividends to the Council remained the same as forecast in March last year - a reduction of $5 million.
This was achieved because while the amount of debt taken on by the council-owned companies to help fund the project had increased from $92.3 million to $108.8 million, the 2% cut in interest (from 9% to 7%) would make a "material difference" to their ability to service it.
Mainly because of the reduction in interest rates, the average residential property in Dunedin would pay no more than the originally anticipated $66 a year in general rates to fund the stadium, Mr Stephens said.

By my calculations:
$92.3 million borrowed for 20 years at 9% means about $10 million a year payment.
$108.8 million borrowed for 20 years at 7% also means about $10 million a year payment.

Because interest rates have dropped, the Council can borrow the increased amount required while still making the same $10 million a year payment on the loan (includes interest and capital repayment).

Note that $5 million of the $10 million is coming from rates, the other $5 million comes from Dunedin City Holdings Ltd. Without the Stadium, the dividend to the Council could be increased by $5 million rather than being reduced by $5 million, and rates decreased by $66 a year rather increased by $66 a year. The effective of this Stadium loan is that rates will be $132 a year more than they would have been without the Stadium.

By the way, why is that the National Business Review's Dunedin correspondent, Mark Pearl, consistently providing better analysis of Dunedin issues than is found in the Otago Daily Times.

Bernard Hickey Down On Stadium

Leading economist, Bernard Hickey, has a scathing article on the Stadium.

The Carisbrook Stadium Trust has failed in it's primary objectives:
To build the Stadium for $188 million, and to raise the required money.

But the Dunedin City Council is carrying on regardless. The $25 million deal with the Government looks as though it is on, to cover the $7 million increase in land cost, the $3 million missing from the Community Trust of Otago, and the $15 million shortfall in private funding. There will be no relief for Dunedin ratepayers.

I expect the Regional Council to rubber-stamp the deal tomorrow.

ODT slags "Blogosphere"

Today's editorial on the Stadium in the Otago Daily Times includes:

During the past two years, some of the letters received by this newspaper, many unsigned, some of the various diatribes published on the "blogosphere", again made with the protection of anonymity, and the utterings of some who have descended to schoolyard behaviour over personalities, have been nothing short of a disgrace.

I am not sure what they mean by the "blogosphere" because there is very little blogging in Dunedin. Perhaps they mean the "Stop The Stadium" web-site. In any case, anonymity in blogging, or issue, sites is unusual. Even if a pseudonym is used, the writer's real name is readily available.

The ODT continues:

We would argue such attacks have been, at least in part, fuelled by a vacuum of forthright leadership from various officials and representatives during the debate.

The accompanying lack of hard facts - even if that is only a perception - in the public arena has resulted in a cacaphony of emotional outbursts both for and against the stadium as predictable as they were, in many cases, objectionable.

Perhaps the ODT would have been fulfilling it's role better if it had done some analysis of the Stadium project rather than just reporting the spin from the Carisbrook Stadium Trust and the Council. Blogs have helped fill the vacuum. And it is notable that some of the best reporting on the Stadium issue has come from the national weekly, the National Business Review. To give the ODT credit, they have printed opinion pieces from writers such as Calvin Oaten and Peter Entwhistle.

Carisbrook Sale Bailout For Otago Rugby

The agreed purchase of Carisbrook by the Dunedin City Council is unnecessary for the new Stadium, but it does get the Otago Rugby Football Union out of a financial bind. Otago Rugby has made substantial losses over recent years and this will enable it to repay it's debts.

But how much will it cost the City Council to cover the loss in operating Carisbrook and renting it to Otago Rugby?

And will the sale go ahead even if the new Stadium is not built?

Calvin Explains Stadium Funding

Calvin Oaten has done an excellent analysis of the Stadium funding.
Proponents claim that the Stadium will not cost more than $66 a year for the average household.
But Calvin shows that the Stadium will also reduce the income the City receives from Dunedin City Holdings by $11 million a year, which will have to be made up for from rates.
The effective cost to the average household is actually over $300 a year.

Government $25 million for Stadium ?

A source in the building industry tells me that the Government is expected to agree to give $25 million towards the new Stadium.
This makes sense : the Government is looking for infra-structure projects which are ready-to-go, to spend money on so it looks as though it is "doing something" about the economic situation.
This Government money will not reduce the burden on Dunedin ratepayers : it will merely fill in the hole left by the failure of private fund-raising.

Only Government Cash Can Save Stadium

The plan for a new Stadium is dead unless the the Government comes up with money to replace the shortfall from other funding sources. The fund-raising from the private sector is well-short of target and the Community Trust of Otago has suffered from the current financial decline and no longer has a spare $10 million. I have no doubt that intense lobbying is going on to try to get cash from the new National Government's "infrastructure" spendup.
But the Government should be aware that giving money which enables the Stadium to go ahead will be controversial and unpopular with a large proportion of Otago people. Locals would be still left with high rates and an enormous debt to repay.
Surveys and submissions to local bodies have consistently shown a significant majority opposed to a new Stadium if it is largely publicly funded.