DCC Annual Plan dilemmas

### ODT Online Fri, 22 Jan 2010
Plea to defer city projects
By Chris Morris
Three of the most expensive capital projects planned by the Dunedin City Council, together costing tens of millions of dollars, could be temporarily shelved in an effort to ease the burden on ratepayers. The idea to defer planned work on the Otago Settlers Museum, the Town Hall-Dunedin Centre and the Regent Theatre was raised by deputy mayor Syd Brown during yesterday’s pre-draft annual plan meeting.

A report on changes to stadium funding for the Forsyth Barr Stadium and Dunedin Venues Management Ltd, the company tasked with running the venue, would also be presented to the [council's February 1] meeting, Mayor Peter Chin confirmed.

Read more

****

### ODT Online Fri, 22 Jan 2010
Lovelock Ave realignment plan queried
By Chris Morris
The future of Dunedin’s Lovelock Ave realignment appears to have been thrown wide open, after serious doubts emerged among some councillors at yesterday’s annual plan meeting.

Cr Bezett said if residents got organised the way Judith Medlicott and Harrop St extension opponents had, they might be able to stop the [realignment] plan.

Read more

Other stories:
Lower Octagon initiative fails to impress council
Request for fairer rent rise
Waste money back
City CCTV network still some time away
Redevelopment still being planned
Approval to consult on changes

Post by Elizabeth Kerr

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27 Comments

Filed under Architecture, Construction, Economics, Politics, Project management, Stadiums, Urban design

27 responses to “DCC Annual Plan dilemmas

  1. Elizabeth

    The ODT article discussing progress on the Logan Park Redevelopment includes the comment from Cr Paul Hudson that the council had already received confirmation Unipol – the University of Otago-owned gym – would be based at the Stadium, not Logan Park.

  2. Richard

    This is old news though. The decision by OU to put Unipol into their new building on the ‘Plaza’ immediately adjoining the stadium was announced some time ago and signalled even further back than that.

    The change for the Logan Park Redevelopment simply means there is now no need for the extension or new building that was proposed adjoining – or near to – The Caledonian Stand.

    • Elizabeth

      Yes, old news re Unipol. Council, ODT and What if? (plus others) covered it a while back.
      I repeated it here in case anyone missed it.

      But note, I didn’t publish ALL stadium mentions from the Council’s Annual Plan discussion yesterday – I was showing some discretion!!??

      @ForBarrStadium (with an RT by @five15design) gave an exclamation to the Unipol mention on Twitter today.

  3. Peter B

    Richard, where does the proposed funding identified in the Logan Park paper for facilities for the Highlanders and NZ Academy of Sport fit into the mix? I would have thought both groups would be considered for space within the South Stand of the new stadium.

  4. Richard

    The Highlanders do not (per se) have “facilities” at Logan Park. They use those within the Academy of Sport presently located in the former Art Gallery Building. The future use of that – and other options – is under current consideration.

    As most of you who follow my posts would know, I am a bit of a stickler for accuracy (not that I want to be pedantic) and I requested on several occasions yesterday, that these textual inaccuracies be corrected. Not to do that leads to too much ‘mischief’.

    • Elizabeth

      Richard, just checking… did you ask What if? for text corrections yesterday?
      Or, of Council, ODT, whomever? I assume you mean the other parties since we’re very obliging here, and often you don’t even have to ask. {your posts} Cheers!

  5. Richard

    Thanks, Elizabeth.

    Yes you are most obliging (always appreciated) and No, the request was not made of you or the ODT but of council staff in reference to the papers we had before us at the meeting on Thursday.

    I shudder when I make spelling errors, thanks for picking them up.

  6. David

    James says “Are the increases really going on so-called ‘vanity projects’? My impression, certainly reinforced by the rates breakdown, is that the rates are still largely core council business…” {Link to comment}

    With $200m plus for non essential projects like the stadium, Dunedin Centre, Settlers Museum (PLUS shifting the library?, moving Lovelock Ave, etc), and just over 40,000 residential ratepayers, that’s the equivalent of around $5,000 additional per house for non-core projects. Interest could add up to a similar amount again.

    With council and council owned company debt about to total $600-$700 million, that’s way over $10,000 debt per house.

    It just seems financial lunacy to take on so many unnecessary projects, all at the same time, when there is less ability than ever before to pay for them.

  7. Richard

    David:

    A question. It’s not a ‘trick one’ – just something I would like a response to.

    Your full property rates for the current year are $1,773.95. You only pay $1,430.95.

    Given some of the comments you make in response to James, I have the impression that you would be prepared to pay the full rates?

  8. Richard

    Understand that Elizabeth, but does not need ‘refereeing’ as I am not challenging or seeking to debate David’s opinion (one way or the other), just establish something which, I believe, ‘escapes’ many in regard to rating.

  9. James

    (Elizabeth — thanks for moving this comment on the sabbath)

    David — without quibbling over specific projects, I’ll accept your figure of $200 million, $5000 per household, and we’ll double interest in round figures. Paid back over twenty years, that is $500 a year per household, or around $10 a week. It’s enough to hurt a person on a fixed income (although I’d assume they’d be paying somewhat less than the average), but I think it’s an unacceptable price for progress. I don’t agree with all of the decisions: I’d be very happy to see Lovelock Ave scrapped; my ‘support’ for the stadium is largely charitable (I dislike rugby and rather hope for the odd concert; but see it as a quid pro quo for other projects that others might be less interested in).

    There are all sorts of arguments about why solely focussing on debt misses the point (as I think Richard is alluding to), but in principle I support spending on projects for the city. Debate on what those projects should be, and how much we should spend is fine, but I strongly believe there should be some. And the idea that now is a bad time to spend; isn’t that the kind of thinking that turns a recession into a depression?

    • Elizabeth

      ### ODT Online Mon, 25 Jan 2010
      Dismay as museum faces cuts
      By David Loughrey
      Core services at the Otago Museum will suffer if proposed cuts to funding go ahead, the organisation says. Its ability to deal with what it described as “staffing remuneration” issues will also be compromised, it says.
      Read more

      ****

      ### ODT Online on Mon, 25/01/2010 – 8:30am.
      Comment by Kiwi Pom on Museum funding
      Is this same museum that turned its back on a guaranteed $80,000 (from memory) rent that the cafe paid each year (with no effort or staffing issues on the museum’s part) plus any rent increase that might have been added when the lease was up for review?

  10. David

    James – I agree we should be spending some money on new projects – particularly ones that will have a large economic benefit (instead of ongoing costs), and ones that add something new to the city (instead of duplicating something we already have).

    Richard – I assume you are alluding to the rates subsidy from dividends from city owned companies?

    These sometimes seem to be talked about as if they are some sort of generous gift from council to ratepayers. If my past rates and my forebears past rates have paid for these companies, why shouldn’t we be entitled to dividends from these companies?

  11. Richard

    Thanks for the response. Yes that is what I was referring to.

  12. David

    Of course the subsidy to our rates won’t be as large as it would have been, since the stadium is gobbling up some of that as well as what will be added to our rates (which enables much of the real cost of the stadium to be hidden).

  13. Richard

    No. It will effectively be cost neutral when the changeover occurs from rates.

  14. Elizabeth

    However, Dunedin City Council will still be carrying excessive debt when that changeover occurs; this will itself impact on ratepayers in all sorts of ways. If you accept the party line, it’s almost like the stadium hasn’t happened! That ‘superior’ (let the inverted commas stand for an inversion of truth) accountancy will make the overspend disappear and the city (meaning ratepayers) won’t have to subsidise a failing sport and other events to fill the concrete edifice.

  15. David

    Well put Elizabeth. The whole project has the air of “the emperors new clothes”.

    We’ve been told – it won’t cost much, no impact on rates, no pressure on other projects, strict conditions have to be met before the contract is signed, it will be largely paid for with private money, not a dollar over $89/91/103m (take your pick) of ratepayers’ money going in, $20m of savings to ratepayers’ funding will be found etc etc.

    It looks like it’s been a con job right from the outset.

  16. Not ‘looks like a con job from the start’ but IS a con job from the start. The trick is to make a categorical statement – and then do the opposite. Decent people like to take one’s word for things and the job of con men is to take advantage of this goodwill. Trouble is this tactic only works for so long. It becomes increasingly difficult to manage lies.

  17. I don’t see how Richard can say “It will effectively be cost neutral”.
    The Stadium will cost the DCC $200 million in repayments and interest over 20 years. This is $10 million a year. $5 million a year will come directly from rates (“$66 a year for the average ratepayer”).
    The other $5 million a year will come from the Council companies, which will reduce their payment to the Council to offset rates by $5 million a year to compensate.
    This is what David means by:
    “Of course the subsidy to our rates won’t be as large as it would have been, since the stadium is gobbling up some of that as well as what will be added to our rates (which enables much of the real cost of the stadium to be hidden).”

    • Elizabeth

      Whatever sick little educational troll “Calc” is (resident at ODT Online), it deserves to be led out at dawn for slow dispatching.

  18. David; I don’t think anyone would disagree with you when you say dividends from DCHL are not a subsidy but a return on the investment in these companies by our predecessors. However, these dividends rightly should only come out of earned profits after provision has been made to preserve sufficient capital to fund the companies undertakings. They should not be available if it is at the expense of the companies increasing their borrowings in order to do so. And that David, is exactly what has been happening over recent years. There can be only one end to this policy. The DCHL equity position has been deteriorating consistently for years and the burden of accepting the $109 million plus for the stadium will further erode the position. For Richard to go on about ‘neutral’ positions with regard to debt is pure nonsense. A debt is a debt, who or what is carrying it doesn’t change that fact. Playing pass the parcel doesn’t either.

  19. It’s a bit of a worry when the Chairman of the Finance and Strategy buys into this delusion of ‘neutralising’ debt. It’s a bit like borrowing money from a finance company to pay your bank mortgage and then to say you have neutralised your debt position.

    • Elizabeth

      ### ODT Online Mon, 25/01/2010 – 4:20pm.
      Comment by digger on Core services scrapped
      It has always been alleged core council services would not be touched by the council’s new capital expenditure projects. Cr Richard Walls, head of the finance and strategy committee, accused former STS president, Bev Butler, over a year ago, of ‘deplorable lies’ for saying this would happen. This was reported in the ODT. [Abridged by ODT Online editors]

  20. Richard

    Peter, I missed your last post. I never said anything about ‘neutralising DEBT’.

    But the stadium levy is COST neutral when the changeover occurs from rating to deducting from the returns from investment.

    That is very clearly documented.

    And don’t overlook the increase in investment income that has been applied in this current financial year.

  21. Elizabeth

    {Originally posted at ‘Dunedin Tweetup’, this comment has been moved here on account of relevance -Eds}

    Calvin Oaten 2010/03/15 at 3:32pm

    There is considerable talk from some councillors expressing concern at the direction of rates and the capital expenditure. Why? Is it because of genuine concern, or simply because it is election year? Cr Syd Brown has even suggested deferring some major projects, such as the Town Hall upgrade and the Settlers Museum. Cr Butcher says she doesn’t want to see the Town Hall deferred. She says it is necessary for the city. When the latest version at $45.14 million went into the 2008/09 Plan Cr Guest said “Let’s bite the bullet and build it.”

    So what is the position with this project? Well, it was first mooted by staff in a 2000 report to council, at a figure of $14.5 million for a recommended upgrade. In 2004 it showed for the first time the controversial “glass clip-on”. This was then costed at $18.5 million, supported by a consultants economic benefit report showing a return to the city of some $3.5 million. This was based on an additional eight conferences per year, attracting 2,970 delegates, spending an average of $400 per day, with an average stay of three days and two nights. However, a survey conducted of the 2006 NZ Federation of Women’s January conference, revealed that the daily spend was just $175 per day – less than half.

    In November 2006, it was announced that the project cost had increased to $29.32 million. In support of this increase, a new model was presented showing that the project would now result in an additional 16.2 conferences of various sizes, bringing an extra 4,400 delegates to Dunedin. These delegates would be divided into two categories, normal and high yield. Overall, there would be 5,600 normal, each spending $857 during their stay, while 2,800 high yield folk would spend $999 for their stay. The result would be a total expenditure of $17,028,303. This was in a report prepared by Debra Simes and approved by Kate Styles.

    When the project arrived at $45.14 million there was no cost benefit information supporting. In the September 2009 issue of ‘City Talk’ Kate Styles said, “The Town Hall Upgrade Ticks All The Boxes.” She said, “The business case showed clearly that conferences and events will bring in the revenue that will support the performance and community side of the venture.” Several times I asked for the business plan, only to be ignored. I finally obtained it by invoking the Local Government Official Information Act. It is a document produced by Horwath HTL, consultants to the hotel, tourism & leisure industries. The same firm who produced the financial feasibility reports for the stadium. So, what did it say? Well, it is eighty-eight pages long including appendices. There were four options considered, but these were distilled down to just two. These were firstly, a regulatory upgrade of the Town Hall only, and secondly, the Alternative Option, consisting of not only the Town Hall but also the remodeling of the Glenroy space, smaller atrium upgrade of the entrance, extended Dunedin Centre foyer/ exhibition space (in the former ‘Hungry Frenchman’ space) two additional ‘heritage’ meeting rooms in existing Municipal Building, improved functionality of the Fullwood Room and a new Dunedin Centre kitchen.

    The First Option would effectively provide no more space than now, and at an estimated capital cost of $22 million. The Alternative Option was $50.6 million, but, by excluding the ’clip on atrium’, reduced to $42.6 million. It should be noted that these estimates won’t necessarily be met by tendered prices. The feasibility of either of these options are evaluated in simple terms and decided on the basis of estimated usage and revenue. It all really boils down to guessing how many conferences will be gained by creating the debt for the city to carry. Then guessing if those conferences will be sufficient to cover the servicing and repaying of that debt.

    The report discloses that:

    For 2008 the actual number of conferences held were: over 500 delegates 1, 250-500 delegates 4, less than 250 delegates 11. Total 16

    In 2016 the estimates for the First Option are: over 500 del. 0, 250-500 del. 1, less than 250 del. 9. Total 10. A reduction on present of 6.

    In 2016 the estimates for the Alternative Option are: over 500 del. 5, 250-500 del. 11, less than 250 del. 20. Total 36. An increase on present of 20.

    Looking at the 2016 cash flow scenarios for the First Option we find the following: with 10 conferences, total revenue $713,333; total operating expenditure (excl. rates, interest, internal DCC charges & depreciation) $997,124. A deficit of ($283,791). We then have the total other charges and depreciation amounting to $883,462 to make the deficit up to ($1,167,253). Add the loan repayment provision of $2,240,749 and the total deficit is ($3,408,002) annually.

    For the preferred Alternative Option: with 36 conferences, total revenue $1,567,805; total operating expenditure (excl. rates, interest, internal DCC charges & depreciation) $1,277,772. A surplus of $290,033. Strangely, for each option, we have the same charges and depreciation of $883,462 to make a deficit of ($593,430). Plus the loan repayment provision of $4,338,904 making a total deficit of ($4,932,334) annually.

    How Kate Styles could say that the Alternative Option can “bring in the revenue that will support the performance and community side of the venture” eludes me. On the face of it, it looks like we will be at best, in the gun for $3.408 million and at worst, $4.932 million per annum. And that is if the 36 conferences eventuate. The question now is, how many councillors read this information? Indeed, how many councillors over the last nine years have read, understood and more importantly, done due diligence on the project before committing? It would seem, in view of the current situation, that few if any have any concept of just how flimsily based the whole supporting arguments are. Nothing more than anecdotally dreamed up scenarios, without a shred of empirical evidence to sustain the proposition that by spending upwards of $50 million, Dunedin would become an internationally recognised conference centre. And now, some councillors are wondering if it should be deferred. Perhaps Cr John Bezett was right when he once described me as “one who knows the cost of everything but the value of nothing”.

    Calvin Oaten
    Pine Hill

    {We understand proposed conference use, by and large, will have regional/national pull; the point of difference has been discussed in earlier posts and comments at What if?. -Eds}

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