Meeting – Monday 5 September 2011, 1.00 PM
Edinburgh Room, Municipal Chambers
Agenda – FSD – 05/09/2011 (PDF, 61.3 KB)
Report – FSD – 05/09/2011 (PDF, 172.3 KB)
Business Support Funding – Summary up to Period Ending June 2011
Report – FSD – 05/09/2011 (PDF, 175.5 KB)
Dunedin Visitor Economy Strategy Group
• Report – FSD – 05/09/2011 (PDF, 105.0 KB)
Forsyth Barr Stadium Debt Servicing Plan
Report – FSD – 05/09/2011 (PDF, 2.3 MB)
Stadium Precinct Executive Summary
Report – FSD – 05/09/2011 (PDF, 78.4 KB)
Filming Location Fee Policy
Report – FSD – 05/09/2011 (PDF, 562.8 KB)
Financial Result – 1 Month to 31 July 2011
Report – FSD – 05/09/2011 (PDF, 134.0 KB)
Funding to City Funding Safety Programme
Report – FSD – 05/09/2011 (PDF, 144.8 KB)
Targeted Rate for Earthquake Strengthening
Report – FSD – 05/09/2011 (PDF, 254.3 KB)
Octagon Free Wireless
Report – FSD – 05/09/2011 (PDF, 546.7 KB)
Dunedin Healthy Homes Initiative
Report – FSD – 05/09/2011 (PDF, 45.8 KB)
Waipori Fund – Report for Quarter Ending June 2011
• Report – FSD – 05/09/2011 (PDF, 340.5 KB)
Increased Capital in Dunedin Venues Management Limited and Dunedin Venues Limited
[DCC Link]
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Posted by Elizabeth Kerr
What if? Dunedin... 
Wow – they’re going to push the stadium payments out to 40 years – that means they’ll save $2.1m/year over those first 20 years by reducing the annual interest payment from $10.1m to $8m – but at the cost of 20 extra years of interest payments – at a grand cost of $115m …… fail!
And an issue of unpaid shares, essentially a guarantee of debts:
DVL $160 million
DVML $10 million
Has the release of this bad news been timed to be drowned out by World Cup hype?
And the reduction in building fees is going to be paid for by increasing rates.
The Council’s financial problems are due to reckless spending.
The only solution is to cut spending.
I love it, the council is embracing “intergenerational equity” (more than one mention, written like it’s the fresh new jargon we’ll fall for), in the report ‘Forsyth Barr Stadium Debt Servicing Plan‘. Ex councillor Richard Walls will be laughing in his grave. Oh what, he’s not pushing up the daisies quite yet. Hmmm.
Intergenerational DEBT is the proper term. Typically, Athol Stephens – surely not Ms Howard – will have dreamed up this latest abomination of figures and recommendations – following on from all the other crap he has espoused to see the stadium built at the politicians’ behest. I serious think Athol is out of his league in attempting to get council debt sorted. Time for his good-bye.
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But Athol, you’re not to leave New Zealand and you must surrender your passport.
Item #1: Dunedin is f*cked.
http://www.stuff.co.nz/national/5550946/Stadium-strains-Dunedin-councils-budget
Indictments to follow.
And, of course, it’s only going to get worse for the stadium itself. From memory I think Mr Davies said it cost about $100,000 just to open it up every time. It’s accepted that it will never generate enough income to cover its operational costs and I don’t think there’s anyone left out there who will argue that point. So the target became to reduce the size of the loss so that they will need to take less money out of the city purse every time they update their Facebook site. They are helped at the moment by having a monopoly on the type of facility. But the Christchurch earthquakes coud have put an unexpected final nail into the stadium coffin. What do you think the Canterbury rugby union is going to do with the fat big insurance cheque from Jade stadium ? They will have a flash new stadium with at least the same features as the Dunedin stadium only located on an established international route and slap in the middle of a population base more than 3 times larger. And they won’t have to borrow in order to do it.
This is the final indictiment that the stadium has bankrupted our City. Meanwhile those that should be ensuring that amateurs are not in charge of the public purse are running for the hills. Dunedin is, I’m so sad to say, completely stuffed. Anyone, apart from Ian Taylor, got anything positive to suggest be done?
Remove councillors Brown, Noone, Hudson et al from council due to gross incompetence.
I’d really prefer there were tickets to jail in it.
(LOL you thought I was talking about the miscreant councillors – yeah nah, then I could comfortably live off the state in my retirement, without the need to pay DCC rates)
This is just so sickening to see – and so predictable. This will damage Dunedin for a generation or two to come. Not a good place for new people to invest in with this kind of scary financial scenario. Makes you think of enacting Plan B. Get out before it’s too late and you get stuck. So sad for Dunedin.
Council has to be very careful here.
Representatives made sworn statements to the High Court with respect to the Stop the Stadium action. The presentation of figures was what led to the judgement in favour of the stadium going ahead.
There have been no unforeseen circumstances or events that have directly affected DCC finances – there have been no budget blowouts (other than the normal ones), no unexpected maintenance, no natural disaster. In fact, one might argue that economic conditions are now more favourable than predicted.
If there has been nothing untoward and the financial outcome is as bad as it is currently painted, then if the figures presented were correct, then council was imprudent and should be held to account. If the figures were fabricated to justify the decision to go ahead, then someone goes to jail.
As many said at the time of the judgement, “time will tell”. Well, it hasn’t exactly taken a long time, has it?
Remind me again why Jim Harland fled the sinking ship (rhetorical).
Timing is sometimes exquisite.
From Harland’s affidavit in the STS appeal, it would have cost $2 million to terminate the contract. Absolute bargain, that looks like now.
Ain’t that the truth, Anonymous. I feel suddenly frail with so much thinking :/
Once again it’s going to take national/international media exposure before the ODT has the nerve to dare bite the hand that feeds.
Anonymous – you are perfectly correct in what you say about evidence. If the evidence given in the High Court was fabricated in order to support the political decisions that were made then people should go to jail. But here is the question.
Who can instigate the sort of action necessary to firstly determine whether the evidence suggests this, and secondly who can pursue this type of action under which particular statute?
I would have thought that the Minister of Local Government was a good starting point but the Hon Rodney Hide has proven himself to be worse than milking appendages on a male member of the cattle species. Who wants to own up to being either stupid, incompetent, or part of a community fraud?
What this whole story needs is a really competent, fully professional investigative reporter whose publisher is willing to spend some money in order to get this whole story out. Can anyone see such a person and such a publisher?
Most usually, a strong residents and ratepayers association, a collective of business leaders, or an individual(s) would initiate a legal action against a local authority. Somebody has to pay for the legal privilege.
In the current situation with Dunedin City Council there’s a complicated and expensive unearthing project ahead. Any scoping for action will require a frightful amount of tireless research, an astute fully independent legal team, and a forensic auditing team. And more besides.
There is capacity to refer the High Court and Court of Appeal decisions (STS v DCC) to a higher court.
Money.
It was established in the Court of Appeal that the High Court was misled.
I find all the proclamations of shock and horror over this latest development a matter of human interest. Why has it taken till now for the big wake up? Apart from a few names that one can recognise, the great masses have watched impassively from the sidelines while this travesty has unfolded. Indeed, many (like Ian Taylor and the attendees at the celebratory dinner) are applauding the stadium as we speak. It is in what I term the “euphoric” period, just like the Chinese Garden went through post opening. Even now that the economic truths are starting to dawn on the elected council and staff, they are still in denial and searching for answers.
For God’s sake, this whole disaster was predictable right from the 2004 meeting in which the MWH report into the health of the ORFU was tabled. It was obvious right there that Harland and Chin were embracing the idea of the citizens coming to the rescue of what was shown to be a bankrupt organisation. Even they didn’t realise what a destructive train they would soon unleash in the hands of the CST, headed by Malcolm Farry, aided and abetted by a cohort of people who could only see the opportunity of seriously enriching themselves. And it has happened, thanks to a witless succession of mayors and councillors, dopey CEO and spineless executives.
Sadly, I suspect, the horse has well and truly bolted with the chances of salvaging the city’s finances from ruin well nigh gone. So watch out now for the blame game to intensify. We have already seen the start with Cr Hudson first in the firing line. Well deserved too I might say, but that is only the start. As Elizabeth has already alluded, Harland has deserted the ship, then Chin, Walls and Guest have been dumped. It leaves all the others besides Thomson, MacTavish and Vandervis as the only untainted. We won’t even talk about the other “hangers on” such as the “Stakeholders reps”, the DVML board, including retired judiciary people proving again that they are not above enjoying a few monetary rewards at the citizens’ expense. The land sellers upping the ante from $15 million to some $36 odd million. Then there is the dubious financing by way of $40 million in preferential bonds carrying an interest rate of 8.9%!! The blatant bailout of the ORFU by paying $7 million to take Carisbrook off their hands.
And guess what? There is not a single dollar of equity in the whole $250 odd million exercise. Totally debt funded by guess who? The poor old ratepayer. Who else? Nobody. Even the much vaunted ‘private funding’ has proven to be a figment of the CST’s imagination, leaving an additional amount to be funded by the ratepayer.
Will anybody or bodies be brought to account for this unmitigated disaster? You would have to be joking. The same fat legal eagles who have been part and parcel to the fiasco would feast large and long for many a year defending all and sundry from blame, and who would pick up the legal costs? Why the poor bloody ratepayer again. The Arab Spring events are looking more and more attractive by the day.
Too right, Calvin and Elizabeth. If only there were some bright, young gun lawyers out there, with a passion for justice and wanting to make a name for themselves. Also with the financial backing of wealthy people in our community, who are disgusted with this whole scandal, will there be any hope the perpetrators of this civic crime are brought to trial.
There have in fact been a handful of sizable private donations, the thousands at present residing in one of Mal E Factor’s holding accounts according to my informant. Where is the interest going, that’s another thing to ponder on. I expect one of these days the donors will be asking questions. Up till now they’ve only had a little chat with Mal
the way you do with mates, people in your own circle…….
Well that’s how I heard it, Calvin or others may have heard something else.
Dunedin City Councillors must put a specific question to Malcolm Farry, chair of the Carisbrook Stadium Charitable Trust, on the existence or not of private donations ASAP. No better day for it than 5 September 2011, at the meeting of the Finance, Strategy and Development Committee.
Elizabeth, they could follow it up with a specific question to the ORFU about whether they intend to cough up anything, or do they intend to continue freeloading.
Valid question, Lindsay – DCC is owed a full refund there!
Less than 20 people have bought what was once a prosperous City to its knees. They have done so through deception and greed. The accomplices to their deeds have been incompetent.
Yes, quite a few of us have been warning for years that this position would be reached, but it is of no comfort to say “We told you so”. Surely it is time that all of the truths are now revealed in a forum designed to expressly reveal and discuss the reality. No more lies and spin. No more subterfuge. No more. No more.
Time for a public meeting, to be held at the Town Hall, chaired by an independent person, and fronted by the DCC, the ORC, DVML, and the CST. It is time that the ratepayers had their chance to hear the unguilded truth, and time for them to convey their thoughts to those that have been placed in a position of trust.
Came across this comment on the Western Force Supporters website from June this year. Unsure if has been mentioned here previously.
”There’s no way our Trust would have considered building this for rugby and rugby spectators, no way in the world. I’d be against it as well,” Farry said.
”Anyone who tries to do something like this and base it on sport alone will have a tough job and I’d find it hard to see how they could possibly justify it.”
Oh really! Perhaps I have misjudged Mr Farry all along.
Does anyone have any figures for the cost of replacing the roof in 25 years time, the cost of repainting the steelwork or the cost of replacing that nasty looking cladding around the outside.
I really hope those materials last at least as long as promised, but most people can think of some product which didn’t last as long as they were told. Remember Coloursteel, it was guaranteed for 30 years – as long as it was not installed within something like 50 km of the coast. Which is handy when you live on a long thin island! The St Clair wall and handrails come to mind.
Then there is the inevitable hand-wringing and “Well it was based on the best information we had at the time” and “It hasn’t lived up to expectations in terms of longevity” comments, while contractors, suppliers and designers duck for cover and leave the council with no option but to spend ratepayers money to get it fixed.
The replacement costs for the three items above will be substantial and there has been some discussion over what is maintenance and what is capital expenditure and what if anything has been allowed for each. I read a comment this morning where someone naively suggested that these things are always allowed for and the council will have a budget in place for that. If only that were so. I am not so confident.
The reality is that we will have no ability to put any money aside for this when we have such a massive debt to service and will most likely have to borrow to pay for this when the time comes. Oh well, what’s another few million.
### ODT Online Sat, 3 Sep 2011
Stadium debt shackles tighten on ratepayers
By David Loughrey
Dunedin’s $3 million annual Forsyth Barr Stadium debt repayment shortfall could cost the city an extra $115 million in interest, if the period taken to pay off loans is doubled from 20 to 40 years. The city’s ratepayers may also be asked if they want to add about $13 a year to the average rates bill, an amount that could help pay off an extra $1 million a year of debt, but mark an end to the assurance the stadium would cost the average ratepayer no more than $66 a year.
Read more
RWC fluff in the ODT editorial. The same day ODT half-heartedly covers the parlous state of financial affairs at DCC. God forbid the two might be connected. Or that the owners of the newspaper are pro-stadium pushers.
### ODT Online Sat, 3 Sep 2011
Editorial: RWC 2011: game on!
It has arrived. Envisaged for years, planned, lobbied over, acquired, promoted, publicised and talked about until even talkback radio was blue in the face, the Rugby World Cup 2011 is here. On Thursday, the Pumas from Argentina touched down at Dunedin airport. A few hours earlier Ireland had arrived in Queenstown. Today, England flies into Momona. There should be no doubt about the magnitude of the occasion.
Read more
Mike Lord replies to ‘Stadium debt shackles tighten on ratepayers‘ (ODT 3/9/11):
### ODT Online Mon, 19 Sep 2011
Opinion: Stadium and its bill leave impression
Farmers are not average, especially when it comes to paying for the stadium, writes Mike Lord, Federated Farmers Otago provincial president. You’d have to agree, wouldn’t you, that what ever you think of the toast rack, as far as stadiums go, it’s pretty impressive. But when a farmer, and any ratepayer for that matter, reads the words “the average cost to the ratepayer” of our brand new facility they should take the figure that follows with a large dose of salt.
Read more
THERE SHOULD BE PUBLIC RIOTS PLURAL
SACK THE ELECTED DUNEDIN CITY COUNCIL
### ch9.co.nz September 19, 2011 – 6:35pm
Funding approved
When the City Council got down to business, following the niceties of welcoming its new Chief Executive, verbal sparks flew as councillors discussed the Stadium debt plan. Councillors Lee Vandervis and Teresa Stevenson argued against further council spending on Forsyth Barr Stadium. Speaking in favour of the motion, Syd Brown argued the plan discussed by committee last week would benefit the city. Both Vandervis and Stevenson called for votes to be read out, which showed although they weren’t alone in opposition, the motion still carried.
Video
Unfortunately, Ch9 is fully incapable of providing analysis of what went down today (the worst news clip in the history of the channel possibly? video adds nothing to the online text) – you’ll have to wait for the good news story in tomorrow’s ODT.
Greater Dunedin have sold us out. They’ve used Syd Brown to do it.
(I say this having voted for only a miniscule few in their camp)
Greater Dunedin + Pro-stadia Councillors: LET’S PUSH THE STADIUM DEBT PLAN THROUGH WHILE EVERYBODY’S CAUGHT UP IN RWC2011 CELEBRATIONS. HAHAHA, THEY WON’T KNOW WHAT’S HIT THEM UNTIL IT’S TOO LATE.
I see cockrobin Walls was still talking BS at ODT Online (6.38pm)
Letter to Ed from daughter of disabled woman re difficulties was essentially – sweetly – rubbished by Davies, who flatly contradicted her experience of not being able to find their way to disabled access, lift, etc., being labelled in such a way that it did not appear to be available to people with mobility issues. The tone of his reply struck me as “We’ve provided excellent facilities for people with disabilities, you’re just too thick to use them”. If I’d been the letter writer or her mother I’d have been gigantically p’d off.
Otago Bludgers’ Football Union, motto “Take till it hurts [other people]”.
Which reminds me, there are innumerable restrictions about who can use Rugby World Cup in signs etc, I wonder if they thought ahead and also registered rights to “Bludgers’ World Cup”?
Yes, Russell. I hope that happens. Mayor Cull thinks he can just say ‘we have to deal’ with the stadiuim debt, but this is not enough. It is crucial that those who caused this economic meltdown are removed from positions of influence, otherwise people and businesses will flee the city in droves. If the purse strings continue to be pulled by ‘stakeholders’ in this town who would want to start a busines here?
The death of Alan Hubbard made me think of how assiduously his companies were investigated by our official guardians of financial rectitude, compared with the reception concerned Dunedin people got when we tried, tried, and tried again to interest ANYONE with influence to stop the madness/rorting. Mr and Mrs Hubbard were easy targets though, courteous, with old-fashioned attitudes to the importance of behaving decently towards others… it’s like the reason nice old lame spaniels belonging to mild-mannered owners get grabbed by dog control when they take advantage of a gate left open to go see the end of the block, while the threatening dogs and their vicious owners get the “Dog? What dog? I see no dog” treatment.
We have seen that ol’ Hudson can play very hard indeed alright. He will not go without one heck of a fight. Stadium debt? What stadium debt? Me? Nothing to do with me! Wasn’t it you Mayor Cull…? was his last little gambit. Cull is perhaps not willing to prod that particular ‘dog’. Too hard for him, but the rest of us have the very real imperative that we want to survive in this city to try and get rid of them!
Wasn’t Paul (“Slimy”) Hudson threatening to release some papers that would prove his case? I don’t recall him doing that and so it looks like Dave Cull and Hudson have quietly reached an agreement. I think that slimy Paul will keep most of his directorships and won’t have to reduce his standard of living.
Dave Cull keeps trying to distance himself from the secrecy, lies and deceit, but he is on the team that maintains the information firewall. When he became Mayor he had the choice of having a witch-hunt (open-the-books revelation) or of joining the team and hiding the financial data so as to protect the project and the team members. I think he made the wrong choice.
Dave Cull could redeem himself by releasing ALL the information and by having processes that prevent the re-occurrence of the gigantically stupid decision-making that will afflict our city for decades.
Jimmy Jones, I doubt very much that Dave Cull and Hudson would have reached an agreement. The only person to benefit from such a scenario would be Hudson who has well over 200,000 reasons to resist doing the decent thing. He will, as many have pointed out, resist to the nth degree and when you think about it, what will actually force him to resign? Public pressure? Forget that – he couldn’t give a stuff about the public. Legal moves by the Council? Hopefully there are enough skeletons and other smelly stuff in the cupboard that will make a difference. Hudson is the consumate fence sitter and is now seen by all as one of the key people to have got us into the mess we are in.
As readers of this site, the ODT and DScene know, I have publicly called on Hudson to go and take his whole DCHL Board with him. What have I heard? Not a pip. Apart from anything, I think he is a coward for not tendering his immediate resignations. Go on Hudson, do the decent thing and GO.
Russell. Paul Hudson and the rest of the DCHL directors will not go until he is forced to and only Dave Cull and the council can insist on it. The public do not feature with this council – as they didn’t with the previous one. They know the public at large is docile and will vote most of them back in – minus, maybe, a few of them like last time. Change is incremental in Dunedin.
Russell, the description “fence sitter” is being way too generous to Cr Hudson, I think Jeckle and Hyde is more appropriate. Most of us will remember him pretending to be neutral and telling us to put in our annual plan submissions so that the consultation process could work etc. Only a few saw the other side, the real side, which was determined and fanatical. At one council meeting when the large funding shortfall had been discovered, but not resolved, I recall Paul Hudson becoming angry and emotional because Athol had not given him the opportunity to fix the problem by extracting even more money out of his company, DCHL. He was desperate for their stadium to proceed and sacrificing the financial viability of DCHL seemed to be no bother to him. Fortunately Athol knew better and Hudson wasn’t successful. We now know that Athol’s more modest draining of DCHL’s profits was still not viable, hence the $8m per year shortfall. These are the two faces of Paul Hudson.
I didn’t expect the ODT to print this. I was going to put it up here if they didn’t print it.
http://www.odt.co.nz/opinion/your-say/176125/opinion-responsible-plan-pay-stadium-debt
Thanks Mike, as you say:
“It’s time for the Mayor to step in with some tough love, give these guys their marching orders and do something about the debt – instead of borrowing more for longer, let’s do something radical – let’s pay it off faster – remember every dollar we pay off today saves us a dollar’s worth of interest on the current 20 year loan, and two dollars on a 40 year loan.”
Hear hear.
Mike, I agree with your ODT opinion piece when you say that Malcolm Farry and the CST should start to raise genuine private funding (not the fake “Private Sector Funding”, which isn’t private sector and isn’t funding).
I disagree that council-taxes should be increased to avoid “Next-Generational Debt” (we spend, they pay). Next-Generational Debt should be avoided, but I suggest that the cause of our current funding crisis is excessive spending. The remedy therefore is to reduce spending. The concept of spending less so you can afford something else will be completely foreign to most DCC councillors and all the general managers. The problem with council-tax increases is that it retards employment and business activity as well as reducing the already low standard of living of our renters and ratepayers. I agree with Alistair (comment #2) – “The Council’s financial problems are due to reckless spending. The only solution is to cut spending.”
The DCC on Monday will be dealing with only part of the stadium funding shortfall ($2m per year), the rest of the shortfall has been kept hidden. This is only stage one of the process of gradually rolling out the bad news; so far only $5.25m per year of ratepayer cost has been accounted for ($68 each), but we both know that the annual cost will exceed $15m per year (probably closer to $20m). There will be more bad news.
The really really bad news to come, I suspect, will be the private funding – or lack thereof. Early indications is that it is not looking good.
‘Let’s make the stadium fly’. says Dave Cull. Mmmm….
Mike, an excellent piece. No question in terms of total debt that the faster a loan is paid off the better it is. “Intergenerational equity” – that much-loved phrase of the completely unmissed and totally rejected Walls – is largely a nonsense and ignores the big ticket items that are unable to be predicted. Just look at our Town Hall – still being used by the builder’s great grandkids, but opened up debt free. Where does the City and our children get the money from to deal with the incursion of the sea at Middle Beach? No sense looking at the ORC as they are too busy borrowing money to help their rugby mates.
Farry is but one of the group of less than 20 who have committed this programme of deceit, and only now are this group’s lies, deceptions and spin being revealed. The shadowy figures within the ORFU and the NZRU should be forced to pay, but we know that they are already pitifully run and financially in the brown street. They are in that position because they have a huge stable of overpaid “stars”. That is their problem, not ours.
So, I reckon you are right Mike. We know that rugby doesn’t pay the DCC any fee for using the stadium, but only a small percentage of the gate take. We know that the Highlanders don’t hire the stadium from the DCC but instead are a tenant of the Academy of Sport who in turn get a grant from the DCC to pay their lease. Rugby not only has had a new stadium built for them, but is also getting the ratepayers to subsidise their use of it.
So, rip up all of the current agreements drawn up between one group of professional bludgers and the other group who have defrauded the City and set a proper fee for usage. At the same time demand that the $45m of private construction funding be raised by the shadowy backers lurking in the ranks of the Tartan Mafia.
In the first two months since opening, there have been around 50 private functions, at a rental of about $1000 each, which is $50K in income in 2 months or $300K p.a. I disagree with the comment above regarding equity – there is actually $30 of equity in the stadium and this was a private donation to boot.
Jimmy I’m proposing that we pay a lot less tax overall, just a lot more for the next five years
Mostly though I’m trying to seize the narrative here. There is way too much waiting around for someone else to do something. We need at least one plan not made by the people who caused this mess. It’s intended to be a start, feel free to make public suggestions to make it better.
You are on to it Mike. I like Mayor Cull, I think he is a good guy for what its worth, he is not in the same ‘league’ as the stadium debt financial imbeciles that’s for sure, but he is playing a mean game if he thinks he can side with them and try and help them suck this city dry for their stadium. All to cover up their ineptitude by making it appear as if the stadium is working. And let’s try and get some of the that ‘tickle down’ cash too. The stadium is supposed to generate so much cash; let’s get some of it back to pay off the stadium.
Yes Mike, I like the idea of avoiding high council taxes. I think there are three choices:
1. extend the debt and pay $115m more taxes over the 40 years
2. your and Athol Stephens’ idea to keep the 20 year term and pay more now to avoid the even greater cost of #1
3. Alistair’s suggestion to cut spending (my preference)
It is a reasonable assumption from the way the report is written that Athol wants a tax increase, but he wants to shift the blame away from himself to the councillors. The loan extension is presented as being unattractive and he will want the suggestion to raise taxes to come from the councillors. Athol has chosen to not present #3 to councillors as an option and I doubt that any of them would like to cut funding to their pet projects.
Amanda, I am also waiting for some of that ‘trickle down’ economic benefit. Did you know that the predicted economic benefit to Dunedin and Otago of completing the stadium is $133.5 million (HHTL 2007). Can you feel it yet? We are promised that more will come once it starts being used. The DCC have been careful to not do a peer review of the economic benefit estimates.
Jimmy I think you misunderstand – I’m proposing we pay it off asap maybe in 5 years or so, not in 20 years; this way we avoid the bulk of the interest. I agree reducing the council spending is a great way to make it go even faster
Yesterday Lindsay asked about the cost of replacing the new stadium roof. The 2007 HHTL feasibility study (uncensored) says that the ETFE roofing will last 25 years and cost $15 million to replace. Accountancy rules, very sensibly, require that this cost is evenly spread over the 25 year lifespan, which is $600,000 per year. This is called depreciation and any estimate of financial viability that doesn’t include depreciation is fictional or fraudulent. It is worth mentioning that the ORC & DCC decisions to build the stadium were done without the councillors being given financial estimates that included depreciation (or interest); they were only given EBITDA (Earnings Before Interest Tax and Depreciation).
The stadium is made of many assets that need replacing. Each asset lasts a certain time and costs a certain amount to replace. The depreciation of the roof and all the other parts can be combined into one figure, but for the stadium we don’t know what this is because they keep changing it. The CST told me it was $5½ million per year, and then the High Court was told that it was $3½ million (STS vs DCC AJS2) and now we are asked to believe that it is $1 million (DVL SOI June 2011). So far there is no explanation for this reduction (which makes the financial situation seem less horrific).
They think they have it covered, if Fubar stadium is proven to be not such a cash cow (shock, horror) then we will hear about how the benefits of the stadium cannot be counted in mere cash! No. The feel good factor is everything. Who can put money on that right? Capitalism for some (those who made money from the stadium), but feel good rhetoric for the rest of us.
Simply writing off the cash value of an asset (depreciating it so you can reduce your tax burden) doesn’t help you replace it 15 years later.
You have to end up with $15m in 2011 dollars in the bank 15 years from now if you want to replace it. That’s why you create a capital maintenance fund now rather than abandoning forward planning and deciding to screw the next generation (and why you need to increase how much you put in it, in line with inflation).
the High Court was told that it was $3½ million (STS vs DCC AJS2) and now we are asked to believe that it is $1 million (DVL SOI June 2011). So far there is no explanation for this reduction (which makes the financial situation seem less horrific).
I’m pretty sure if a person was to make the argument that $125m of the stadium had an expected lifespan of more than 50 years, and then you got that nice Mister Key to wave his wand to remove 2% straight line depreciation on that, then there is no mystery here.
But remember the real reason you can claim depreciation on a capital item is so that you can put the money away to replace it tax free. If you just take the tax windfall and don’t save to repair or replace your asset (as Athol proposes) then you are simply abandoning your asset to the ravages of time.
Apparently the plan is to have a nice shiny stadium until Malcom gets his knighthood and then let it turn to a shabby mess.
Mike, you said Simply writing off the cash value of an asset (depreciating it so you can reduce your tax burden) doesn’t help you replace it 15 years later. This is true, but as James alludes to, the recent tax changes mean that their stadium is a bit less useful as a tax loss for the whole DCC.
The wonderful thing about depreciation is that it helps give a realistic measure of profitability. There is a cost to owning an asset that wears out. If you own a private car you might prefer to only think about that cost when you replace it with a newer one (one every 10 years for instance) – but if you are a business and need to measure your profit, then you are required to distribute the cost of your assets over their useful life. This doesn’t give you any more or less cash to replace worn out things, but it does help shareholders and ratepayers to not be deluded about how well their business is going. It is therefore illegal to state your net profit without it including the cost of depreciation (and interest). If depreciation was not charged every year, the profit in most years would be unrealistically large, but in years that you replaced a big asset the profit would be a horrendously large loss. Accounting rules prevent this. The IRD has its own rules.
I don’t think we disagee here – mostly I’m trying to point out that depreciating an asset and putting the money asside to repair or replace it are two different things and you should be doing both if you are being responsible.
Just taking the depreciation write off is cash positive and looks good to the cashflow part of the bottom line even though it is a stupid thing to be doing long term.
Perhaps I’m stupid and naive, surely DCC must manage its financial position in the round. ‘Merely’ shoving a decision through at Monday’s FSD Committee meeting for the Forsyth Barr Stadium Debt Servicing Plan doesn’t cut it. Treating the Stadium project in isolation is a grave ineptitude.
I realise that every day there’s no fix it’s costing us more dollars. However, I HAVE NO CONFIDENCE in the council’s financial managers and elected representatives. Their ability to put forward a well-vetted managed solution with the least impact on residents and ratepayers is precisely NIL. These arrogant ignorant incompetent fools have already abandoned their (statutory) fiduciary duty of care to the good citizens of Dunedin City. They couldn’t talk their way out of a common jail cell.
Encouraging local people to attend events at the stadium is NOT making a dime to reduce the impact of the stadium debt on residents and ratepayers. Locals paying for their tickets, hospitality, merchandise, whatever, only serves to redistribute wealth in the community’s capped pool. How many times do we want to give our money to evil bastards might be the question.
After all this, would you trust Athol Stephens with your life savings.
The stadium is quite a lot less useful for the DCC (it’s added another $750,000 hole in their accounts each year). The other element of Athol’s tax ‘dodge’ is that it requires the DCC group to be making a larger profit. Ooops.
There is also a difference between the accounting-value depreciation, and the actual costs of repair/maintenance. The originally intended maintenance fund would have grown to easily exceed the cost of replacing the roof. However, funding the maintenance this way was an interesting exercise. The difference between the (taxed) income on the investment (realistically 4% after tax), and the interest payable (8%) on the same amount would have made paying down the debt faster a far more lucrative option. Over 25 years, the difference is ~$20m.
Elizabeth, it’s worse than this: “Locals paying for their tickets, hospitality, merchandise, whatever, only serves to redistribute wealth in the community’s capped pool.” It doesn’t even stay here simply moving from pocket to pocket because of the steady stream of GST heading north.
Hello Dave,
Well, you do have an interesting life. The FSD meeting on Monday will be another nail in the coffin of the city’s financial body. I read with interest the latest manipulations proposed by the ‘Gurus’ of the money tree in the suggestions to increase the authorised capital structures of both DVL and DVML. DVL is to be set at $160 million $1 shares and DVML at $10 million shares. In both instances these increases will be uncalled. This, however, places a legal obligation for the shareholder/s to come forward with the cash should circumstances arise requiring it. It does however, provide collateral security against which monies can be borrowed up to the amount of the authorised capital should it be required.
In the case of DVL, it seems to me that this action anticipates doing just that. This means that the DCC’s commitment to the stadium has progressively risen from the $91.4m in 2008 (consisting of $85m plus $6.4m capital maintenance fund) to $98m, to $139m, to $144m, to $147m in the current Plan. Now we can see that there is likely to be a need for an additional $13m, a figure coincidental with a so-called gap identified. In all, an increase of almost 100% since first mooted. So much for the “on time on budget” mantra of the CST chairman. I suspect that these moves confirm that the so-called ‘private funding’ of some $45m (including the Government $15m) which the public were led to believe was part of the construction capital is in fact to be treated as operational revenue for DVML.
Coming to DVML. the increase in capital to $10m will enable it to carry debt to cover non budget features such as large screens, temporary seating, signage, catering, and sundry ‘goodies’ deemed necessary to the operation of the stadium. Well, why not? Then of course there is the already identified loss of $900,000 to host the RWC, which will have been increased by the addition of more matches due to the Christchurch earthquakes.
Of course there is no talk whatsoever, about how or where the extra money to service all of this additional debt is coming from, other than the expeditious use of time. We now hear of forty years instead of twenty to pay down the debt. We also hear of an additional $115m in interest as a result of this.
Dave, when oh when are you going to call a halt to all this nonsense. DCHL is on its knees, the city is technically bankrupt, the excavators are furiously digging the hole deeper as we speak, the money people within have gone completely berserk and still you are in denial. Please don’t tell us again that “your concerns have turned out to be justified; now we have to deal with it”. Just do it!! Stand up and shout “ENOUGH!! This must stop”. The dopey council won’t support you – except for Lee Vandervis – but at least the public will be awakened. As mayor your voice is power, if you will only use it. Declare that immediately after the RWC the stadium must be closed. DVML closed down. All expenditure stopped. Pending a full investigation by a totally independent panel, a clean-out of the whole culture existing at present by requesting written resignations from all senior and intermediate management together with their reapplications for their positions (if continued) and a review of all activities. The new CEO is coming at an opportune time to take a valid part in all of this. Let’s hope he would be up to it. Dave, you have two years to turn this mess around, doing the pain now might just improve your chances of re-election. Do nothing, and the city won’t need a mayor, the only growth industry will be for “RECEIVERS”.
You know this Dave. I know you have the intelligence to analyse the debacle you have been landed with. Do you have the intestinal fortitude to handle it? Let’s see it, and soon.
{This letter was also published at ODT Online on 5 September 2011. -Eds]
Calvin – an excellent communication, a sensible (urgent) plea to Dave Cull, Mayor of Dunedin. I fully concur with your statement:
“Pending a full investigation by a totally independent panel, a clean-out of the whole culture existing at present by requesting written resignations from all senior and intermediate management together with their reapplications for their positions (if continued) and a review of all activities.”
Yes, sadly you are right I think Calvin. The rest of the council will not support Cull against the stadium cabal. The greater Dunedin team and Cr Stevenson seem to have accepted they must just let the stadium cabal have its way. Let the money flow into the blackhole Fubar stadium. They are gambling though. Unlike Vandervis, they all look like they are prepared to stand by as the city falls apart economically around them. I don’t expect courage from them but self interest would seem to demand that they make some sort of a stand against the continued draining of funds for the stadium?
If they don’t hang together, be assured they will all hang separately.
I believe that we will see a Commissioner appointed and Council dissolved in the near future. By 2012, the hole will have grown from $8 million to $35 million and there is no way back from there with spending cuts alone.
Anonymous, I can tell you that the Office of the Auditor General seems quite happy to stand back and watch. I don’t know what it takes for such an entity to actually act on what is obvious to anyone that has spent more than 5 minutes looking at the figures.
Hell, let’s sue the Auditor General.
Elizabeth, the way things are at the moment, it wouldn’t be a bad bet, but the general feeling I get is that anyone with any statuory authority that has an actual responsibility to ensure that Local Government is acting appropriately doesn’t give a rodent’s posterior about Dunedin and its ratepayers. A shining example is Rodney Hide. He is dragging down who know’s what salary to be Minister of Local Government. Should he be concerned about the situation in Dunedin? Yes, he should, but what is he really concerned about? His image, and little else.
What this City needs is actually a civil revolt – something that Sukhi Turner talked about, but never really followed through with. If everyone in this City, or at least a very significant proportion of them, decided to withold rates on the basis of loss of confidence in the City governance, what would happen? Interesting to ponder I would think.
Sukhi tied her revolt idea to the (temporary) non payment of rates which immediately creates camps and a non following – who wants to be shaken down by DCC debt collection. Not me. Sorry Sukhi, you didn’t get out of the blocks.
Protest that works for the message?
The public’s united front on neurosurgical services staying in Dunedin.
The pressure on the government to do something about the parlous financial situation in Dunedin would more likely occur after the November election and the RWC (out of the view of international publicity). The useless Rodney Hide will be gone by then. He’s already dead meat. Pressure to build on this initiative to sack the council takes time and momentum. The DCC will, from what we can see, add fuel to their financial bonfire and we won’t have to do much!
However, they could do the gutless thing and just let Dunedin rot. Not many votes here after all. We can’t rely on Labour or National to do anything.
So, whats the goss on what happened at the Finance meeting then?
### ch9.co.nz September 5, 2011 – 6:54pm
Stadium Council loan
The Dunedin City Council’s Finance Strategy and Development Committee met today to discuss ways of funding a shortfall in payments required to fund the Stadium. Four options are being considered and some of those options involve rate increases, however one City Councillor believes the solutions are acts of final desperation.
Video
Have to laugh, Cr Neil Collins (sans moustache, to signify council austerity measures) offers up the Waipori Fund again, as he always does when the cupboard’s bare! …fails to note the Fund’s doing OK when so little else is, ah, so let’s cash it in. His financial nous will take us into the black, people! The messiah is come.
Isn’t the world bludgers’ cup the ideal time to protest? News media will be all over the place like a rash, looking for interesting extra angles. Posters, groups in printed teeshirts….. calling on John Key to make the minister and the auditor general do the job they’re paid for. There’s no point in protesting when nobody’s looking or hearing, and we know the people who should be won’t, not to us, stuff the locals. But to overseas media – oh deary me, NZ’s precious IMAGE!
The obvious: “We paid $300 million for a stadium and all I got was this lousy T-shirt” springs to mind
Perfect time for public protest is NOW and CONTINUING
### ODT Online Tue, 6 Sep 2011
Stadium debt back with staff
By David Loughrey
Dunedin city councillors yesterday baulked at the idea of doubling the period of stadium loans to 40 years, as the council scrambled to deal with the fall-out from a $3 million annual stadium debt repayment shortfall. But ratepayers may be looking at an increase in the rates they will pay for the Forsyth Barr Stadium, despite years of assurances that would not be the case.
Read more
RECOMMENDATIONS (via ODT)
1. Capital maintenance fund of $6.3m to be deferred.
2. Council staff to investigate and report to the council on:
– a. Impact of gathering additional ratepayer funding of $1m a year.
– b. Ratepayer contribution required to repay stadium loan within 20 years.
– c. A targeted rate option to allow the term of the loan to remain at 20 years.
– d. Ways capital repayments could be restructured to reduce the timeframe to less than 40 years, taking into account the council debt profile in the “out” years, after 2025.
It appears not one councillor (if we read ODT correctly) has sat down with Annual Plans and other council documents to work out on paper a coordinated plan to rid the council of this debt rather than abuse the ratepayers and residents. Where are the councillor workshops and some semblance of their practical accounting ? And the moon is made of cheese.
Total absence of leadership. ODT does not include in the report the adjournment due to loss of quorum.
Loss of quorum, good god. At what should’ve been one of the most strenuous meetings in council history. Suddenly, they had an attack of the vapours or had to be somewhere else. Skilled politicians are so very hard to find.
So who left? that ought to be public knowledge
Be fair, people. For some, there are doggy bags to fill after functions and resthomes to visit for food… and votes. Life’s hard!
Peter, this particular Cr is well known amongst other Crs for his fortuitous visits to Council committee meetings of which he is not a member round the time that the food is produced. An OAP perk I think is how he refers to it.
However, I suppose we will have to wait until the minutes of the last FS meeting are published before we find out who bailed out.
But no bail out, by this chappy, till the doggy bag is filled. Where oh where is the dignity?
He has never had any dignity.
Noone has signalled what he has planned all along; sell assets to pay for the stadium debt he created. The long term goal was always going to be this for him and his stadium cabal. Seems he feels so safe and secure in his little Waikouaiti fiefdom that he has been chosen as the person to make a big stand for this? While fiscal dimwits like Collins witter about getting money from the other fund, this seems to be the real agenda from the stadium fiscal dunderheads.
No sorry, Cr Noone has no strategy no plan – he and councillors are paid to provide governance, not to put work back on staff, in the absence of dollars or brains.
[Read: Councllors, you MUST resign now – before you do any further possible damage.]
The city should not be run by problem gamblers.
The strong message from this is that the councillors simply don’t know what to do to extricate Dunedin from this financial black hole. Better to do nothing, make no decisions and put it back on DCC staff to come up with another plan. I think it’s called buying time or playing Pontius Pilate.
When you have a council gifting $70,000 for the wealthy ODT owners’ ‘community’ Birthday Party – and they don’t know what the money is being used for – we have BIG problems. What hope then have we that the growing debt millions can be tackled by the present council?
### ch9.co.nz September 7, 2011 – 6:20pm
Should the stadium loan repayment period double to 40 years?
On Monday the council’s Finance, Strategy, and Development Committee discussed extending the number of years to pay back public sector debt relating to the Stadium, which would see interest on the loan rise from $90m to $205m. The 9 Local News Word on the Street team hit George Street today to ask if you think the DCC should double the Stadium loan repayment period to 40 years, adding millions in interest.
Video
Most, thank God, saw the stupidity of extending the stadium loan repayment to 40 years. Always worrying when you get the ditzy ones (one just giggled) who obviously don’t have the foggiest idea what it all means. Doesn’t say much about our education system reaching these kind of people. You know these are the ones who vote in the likes of……(choose your appropriate councillor).
### ODT Online Tue, 13 Sep 2011
Decline of Waipori Fund results in dilemma
By David Loughrey
Dunedin’s Waipori Fund has decreased in value, despite recently recording its best return in five years, and the fund’s directors want the matter made clear. Dunedin City Council finance and corporate support general manager Athol Stephens said the council would have to decide whether to take less money from the declining fund, or change the rules to allow the situation to continue.
Read more
Report – FSD – 05/09/2011 (PDF, 45.8 KB)
Waipori Fund – Report for Quarter Ending June 2011
What – take less money from the fund? As in “face reality”? Isn’t that a bit far fetched in the continuing shop till you drop council mode?
Yes. Greater Dunedin were elected on transparency and showing some restraint to the stadium debt but in the finish the big boys call the shots. Too difficult to risk being called ‘divisive’ by Hudson and pals. Sad for Dunedin.