Report to DCC FSD: CST/PDT

The Dunedin City Council Finance Strategy and Development Committee meets on 07 February 2011

Agenda – FSD – 07/02/2011 (PDF, 32.3 KB, new window) [other reports]

Report – FSD – 07/02/2011 (PDF, 947.5 KB, new window)
Stadium Precinct Executive Summary 12

The average daily workforce at the site had dropped to about 150.

****

Subtitled at ODT Online as ‘Behind the scenes at the stadium’ . . .

### ODT Online Sat, 5 Feb 2011
Private sector funding tops $38 million
By David Loughrey
Private sector funding for the Forsyth Barr Stadium, being raised though the sale of seating packages and sponsorship, reached $38.1 million by the end of last year, the latest report on the project says.
Read more + Photos

Posted by Elizabeth Kerr

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22 Comments

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

22 responses to “Report to DCC FSD: CST/PDT

  1. Elizabeth

    As the Report’s photographs show, a very bland if not deathly facade to the Leith.

  2. Elizabeth

    ### ODT Online Tue, 8 Feb 2011
    Vandervis, Farry clash over donation query
    By David Loughrey
    Personality clashes and allegations of “libellous emails”, sparked by the latest report on the Forsyth Barr Stadium, marked a Dunedin City Council committee meeting yesterday. The report, from the Carisbrook Stadium Trust (CST) and the project delivery team, led to a variety of discussions about the controversial project.
    Read more

  3. peter

    In the 28 February 2007 edition of the ODT Farry explicitly states that there has been a $1m donation with two other $1m donations in the wings. NBR also reported this. Farry knows what donations mean. Remember this took place at the same time as the DCC and CTO took a vote to proceed with the stadium proposal. (The Community Trust, under the Chairmanship of John Farry, actually voted ‘in principle’ before the DCC. What a coincidence!) Now we can guess what was intended by this fortuitous announcement, can’t we people. Still, it caught a fair number of suckers in this city.
    His later fudging on the definition of ‘donation’ is cute. So is his ‘libellous emails’ comment here – all designed, I suspect, to shut the whole thing down with a bit of heavy handed pressure.

  4. Bluebottle

    While Lee Vandervis was questioning Malcom Farry at the FSD 7/2/11 he revealed that the councillors had been told earlier in the day that the total actual donations were only $300,000. It is odd that the ODT didn’t mention that.
    I calculate that the total private sector funding is therefore $300,000, with a central government bailout of $15 million and the rest of what Farry, Davies & Cull calls private sector funding will be in fact DCC debt.
    Also at the meeting councillors approved the setting aside of part of DCHL’s dividend for the stadium. There were two amounts: $5m per annum which we have been told about, and also $3m per annum “for servicing the debt of DVL”. This is new to me. Perhaps there is a good explanation for this.

  5. James

    Is the $3 million the saved tax from not paying the dividend?

  6. JimmyJones

    James, I think DCHL will try to pay its normal dividend, and some (or maybe all) of it will then be fed to the big money-gobblers, DVL and DVML; it is hard to be sure. Remember that DVL & DVML are not part of DCHL.

    $3 million is similar to the yearly interest and capital payments of DVL’s internal 10 year loan ($4·2 million/yr decreasing to $3·2 million/yr, Dec 2008 forecast). This ratepayer guaranteed 10 year loan of $28 million was meant to be paid back entirely from product sales and the $15 million government payment, and not by bleeding the last drops of cash from the City’s renters and ratepayers. The other stadium (external) debt payments will have done that already.

    Unlike Aucklanders, Dunediners seem quite apathetic about paying another $3 million/yr (only $40 per average ratepayer). Is it apathy or ignorance, I wonder.

  7. James

    James, I think DCHL will try to pay its normal dividend, and some (or maybe all) of it will then be fed to the big money-gobblers, DVL and DVML; it is hard to be sure. Remember that DVL & DVML are not part of DCHL.

    Pretty sure that’s almost completely wrong. DHCL will reduce its normal dividend by $5m which would require a pre-tax profit of $7-8m, which will be directed to your so-called money gobblers. To do this, I think, requires one or other of DVL or DVML to be held within DHCL (according to most recent ODT report, both).

  8. JimmyJones

    Yes James, you must be looking at this DVML prepared for declining interest in rugby, a feeble attempt at journalism. David Loughrey says: “Both companies would operate within the council’s Dunedin City Holdings Ltd (DCHL) group of companies.” This is 100% wrong. Both DVL and DVML are directly owned by the DCC. In other words DCHL, DVL and DVML are all sister companies. I know this from DVML’s Statement Of Intent and the NZ Companies Office (for DVL and DVML).

    I am keen to discover how the money for the eternal NPAT losses of DVL + DVML will be transferred. Will it be a yearly donation? or maybe like VBase in Christchurch, where it looks like the council will lend them big chunks of money every few years?

  9. James

    I thought that seemed wrong (although I had thought one of the two was within DHCL; information on DVL is a little hard to come by).
    In answer to your other question, by ‘subvention’.

    • Elizabeth

      ### ODT Online Thu, 17 Feb 2011
      How the stadium debt will be paid
      By David Loughrey
      Dunedin City Council acting chief executive Athol Stephens has reiterated his response to concerns about the amount of money council-owned companies will have to pay towards Forsyth Barr Stadium debt, an issue he said had been clear for three years. Mr Stephens has also explained where the money to pay the stadium debt is coming from.
      Read more

  10. James

    Strangely, after years of struggling to get a clear answer, Athol Stephens announces today that the cost per ratepayer is ~$100, not $66.

    As well, the companies would be required to pay another $3 million towards the debt…. Mr Stephens said the $3 million requirement had been there “right from the start”, as far back as March 2008. Where the companies got that money – whether from profits, debt or a percentage of both – was up to them.

    While it is true that the $3m has been there from the start, it’s always been described as from operating cashflow, as if it isn’t somehow from profits or debt. Nice to have a straight answer, finally.

  11. JimmyJones

    James said this morning that “Athol Stephens announces today that the cost per ratepayer is ~$100, not $66″. I am sure this is clear for most readers, but for the benefit of small children, DCC councillors and average and below average press journalists, I will explain that the $66/yr total stadium cost per average ratepayer corresponds exactly to a cost of $5 million/yr. The removal of an additional $3 million from the dividends of DCHL, means that rates will increase by $39·60 (3m x $66 ÷ 5m). Total = $66 + $40 = $106. This is not the full amount however.

  12. James

    That is the rough calculation on which I was relying Jimmy, however, I think that the $66 already exhausts the tax savings, so it will actually be higher than $106. In fact, I’m sure I’ve posted here that I expect the cost of repaying the loan to be closer to $130-150 for the average value property.

    This doesn’t, however, mean that rates will rise by the difference, but that somehow the city will be poorer. So for example the city could raise rates, but equally the city could have Delta hike its prices, sell Citibus Newton, take on more debt, not replace plant. But somehow or other, we are short the money.

  13. JimmyJones

    I agree James. We can see that the $66/yr was one of their BIG FAT LIES, not just because the number was wrong, but because it was, and is, generally described as the yearly total ratepayer cost for ratepayers with average valued houses. It was never made clear that $66/yr was only the financing cost of some of the stadium debt and didn’t cover a bunch of other costs which together with interest, comprise the stadium’s large net loss (negative Net Profit After Tax). I think that most ratepayers were deceived into believing that there were no other costs. If their stadium looses $15 million/yr, that makes the average rate burden $189/yr (this includes some of the $66). Since the $15 million estimate was made, there have been detrimental tax changes, decreased rugby gate takings, undisclosed cost of running DVML ($2·5m/yr) and some other things. If Dave Cull wants us to see an open and honest council, he better start lifting the cone of silence. Also we should expect an apology from the Mayor on behalf of the council for the secrecy and miss-information, and for making the biggest financial cock-up ever inflicted on our great city [tell me if you know one bigger than $1 billion (capital + yearly losses)].

  14. Russell Garbutt

    What is now coming out is that there was a mixture of incompetence and something a lot worse at Council level.

    Like any elected body there will be those that sit round the Council table that are incompetent and simply unable to comprehend or understand what they are being asked to endorse. Similarly, there will be those that are willing to go along with the recommendations of the CEO. If the CEO acts in a way that the information is controlled, managed or manipulated, even those with the ability to understand may have vital information withheld and so will have been deceived or manipulated. There will also be those that are fully aware of what is actually going on and are part of the process of ensuring that things progress past Council.

    Harland’s infamous note about the importance of perception and his absolute control of the processes including financial information regarding the stadium reveal his stance and his degree of control over the past Council.

    It is absolutely vital that our Council get rid of grey papers and are totally transparent about what has transpired in the past. If not, they cannot be separated from those that caused this to happen.

    The book will be written on how this happened and who was responsible.

  15. Bluebottle

    Following the FSD committee meeting (7/2/11) David Loughrey wrote this – Stadium debt may constrict DCC companies about the adverse effects of the new stadium debt servicing on Dunedin City Holdings Ltd (DCHL). He says that because of the requirement to service the stadium debt, the DCHL companies might be restricted from pursuing new investments/opportunities for growth. He also said that councillors were concerned that the companies might have to borrow money to pay the dividend required by the DCC.

    The article severely understates the level of concern expressed by the councillors and does not tell us about the serious threat to the financial viability of DCHL. It seems like David Loughrey must have suffered temporary deafness at various times during the meeting. This might explain why there was no mention that Bevan Dodds (CEO of DCHL) confirmed that the level of dividends extracted by the DCC has been so high in recent years that the value of DCHL (shareholders equity) had decreased significantly and was on a downward trend.

    Bevan said that they had no plans for making an additional $3 million annual payment for the stadium, even though they had been asked to do so. The reason for not including the payment in their plans was because it was not financially viable. Loughrey also did not hear Bevan agree with Cr Thomson’s assessment that if the demands for cash from DCHL continue as forecast, then “the receivers would be needed”.

    David Loughrey also can’t have heard Cr Stevenson asking the simple question, “will DCHL remain solvent going forward, with the new level of dividends and payments required by the DCC” (rough quote). Teresa kept getting evasive answers from each person she asked, but kept trying until she was shut down by the chairman. The ODT did not print Mayor Cull’s comment that he was “very uncomfortable” with Council going against the will of the board of DCHL. Richard Thomson was “very very concerned” about the financial projections. Richard also said “if we are heading into a train smash, then I would like to see it coming” (rough quote).

    In spite of the good efforts of Bevan Dodds and Crs Thomson, Stevenson, Vandervis and Cull, the committee voted to impose the additional $3 million obligation on the DCHL. The idea that the DCC has some influence over how the ODT reports events has been suggested before. If Dave Cull is aware of this type of “special relationship”, then he needs to decide if it should continue. If he thinks it should, then he should make sure it works for his benefit and not for a small group of staff. Of course the rest of us would prefer the ODT to be fair, balanced and completely independent of interference from the DCC.

  16. Yes, DCHL will have to borrow to make the payments on the Stadium loan: a sure way to a financial crisis. But the real problem is the failure of the Council’s attempts to make savings: there has been a lot of talk, but in the end the spending juggernaut is continuing almost unchanged, with the addition of new unnecessary items such as hundreds of thousands of dollars on sustainability bureaucracy.
    By the way, did you notice the half-page satiric ad in the ODT last week [18/2/11, page 4].
    At first glance it looks like a DCC job ad for Sustainability Manager, remarkably like the style of the “Insiders” campaign.

    {Link removed. -Eds}

  17. peter

    Very interesting comments, Bluebottle. The ODT, time and again, falls down on its job as a so-called independent paper. From experience, they won’t touch anything really critical of the stadium and those who push it. Blue bottle, I suggest you approach the national media – The Sunday Star Times and NBR – with these observations. It’s the only way to lift the lid on things and the ODT is forced into a catch-up game – which they usually filter in the process anyhow. I don’t know how some of these male journalists in the ODT can live with themselves.

  18. Bluebottle

    Thanks peter. I would like to see some attitude changes at the ODT and the DCC public relations department. The only way the ODT can de-emphasise important news like this is by being the only news outlet at the meeting. DScene needs to pull their finger out. I should add that I can’t prove the existence of the “special relationship” between the ODT and the DCC, but there are questions to be answered about selective reporting and lack of balance.

  19. peter

    It’s difficult to know how much of the ODT’s selective reporting is based on collusion/following orders with those holding power or how much of it is just timidity. Whatever the case the ODT needs to restore its credibility – and readership. Its championing of the neurological surgery cause was a good bit of self promotion, but that was easy pickings for a paper to pick up on.
    The other day I was speaking to someone who used to get the ODT and cancelled it after they went away on holiday. They didn’t bother to renew their subscription when they got back because they were disillusioned with the paper. I was surprised because these people are normally very interested in local affairs and at least you get some inkling of what is going on even if the reporting is biased/selective. I imagine this is a common story for ex subscribers. I can understand the feeling and have been tempted to cancel myself, but it pays to be at least partially informed.
    D Scene does appear to have softened its investigative stance. They have done well with investigating the Museum Board business (with the ODT following, of course) but in the last year or so their emphasis seems to be more on nice community events, sport and that kind of stuff. I think it needs to compete more with The Star, with a meatier mission in mind, as The Star does the same stuff very well, I must admit. I used to eagerly pick up D Scene wondering what they were going to get stuck into for the week, but now I just skim read it. Sometimes I don’t even bother to do that.

  20. Phil

    I would have thought that the former mayor turning up to official DCC functions in the back seat of the ODT editor’s car would have been enough evidence of an inappropriate professional relationship.

  21. Rob Hamlin

    It’s interesting to see how the DCHL situation is maturing. Below is a footnote to my submission to the DCC in 2008 that addressed one aspect of this issue at the time.

    “It is my understanding that Mr Paul Hudson, who is a City Councillor has declined to vote on the Stadium issue, citing conflict of interest due to his position as Chair of DCHL, the major source of funds for it. As DCHL is wholly owned by the DCC which is itself a public body, a conflict of interest cannot actually occur – as Mr Hudson has no interests in either of them – unless he is paid a bonus or other remuneration related to either organisation’s performance or income. However a conflict of legal responsibility may well apply to him in the current circumstances. Mr Hudson’s decision not to vote may be justified, because, as the Chair of the Board of DCHL Ltd, his activities, and any personal liabilities that may arise as a consequence of them, would be dealt with under the Companies Act – which is much more tightly defined than the Local Government Act in these areas. Under the Companies Act his responsibilities to prudently discharge his duties as a director of this registered plc. would almost certainly require him to reject the proposal – or at the very least the proposed funding requirement via DCHL Ltd which is essential to it. The proposed milking of DCHL associated with the funding of the Stadium is so vicious (and so unpredictable in terms of DCHL’s capital expenditure reduction and borrowing requirements over a long period of time) that voting for it would almost certainly lay him open to legal action if DCHL’s sole shareholder (the DCC) suffered harm as a result of it – perverse though this possibility is. Mr Hudson’s decision not to vote on this issue is therefore noteworthy. However, abstention does not get him off the hook vis-a-vis the Local Government Act, which requires a vote contrary to an action as a defence against liability for it. As an abstention is not contrary to anything, Mr Hudson’s situation therefore remains complex – unless of course he votes against the Stadium in the Annual Plan adoption process, in which case all his horrible conundrums promptly go away – I shall observe his decisions with interest!”

    Hudson, as we all know, subsequently voted for it.

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