Private sector funding (donations) to stadium construction

One thing is certain, Malcolm Farry is confused.

### ODT Online Mon, 26 Sep 2011
$2.75 million donated to stadium: manager
By David Loughrey
The vexed issue of the level of donations the Forsyth Barr Stadium has attracted may have to stay vexed, the matter complicated by various interpretations of the definition of “donation”. The matter has been controversial since early on in the project, when, in 2008, Dunedin Venues Management Ltd commercial manager Guy Hedderwick suggested just $30 had been received. The matter was raised again at a recent Dunedin City Council finance, strategy and development meeting, and he then raised a figure of $330,000. Asked recently to clear up the issue, he said that related to just one donation. Instead, the total of donations stood at $2.75 million.

[Carisbrook Stadium Trust (CST) chairman Malcolm Farry] noted DVML has taken the total of private sector funding raised through the sale of seating packages and sponsorship towards $50 million.

Mr Hedderwick said donations had already been included in the private sector funding total for the stadium, which stood at $42.8 million in August.
Read more

Posted by Elizabeth Kerr


Filed under Architecture, Construction, CST, DCC, DCHL, Design, DVL, DVML, Economics, People, Politics, Project management, Site, Stadiums

5 responses to “Private sector funding (donations) to stadium construction

  1. Robert Hamlin

    As some of you may know an article was published in the ODT yesterday in which I outlined the responsibilities of the DCHL Board with regard to the Companies Act.

    Part of this article was edited out before publication. I do not feel that there is anything sinister about this – it was a long article for a newspaper, but the missing information is relevant to the argument presented, and for the sake of completeness the article is reproduced below with the missing sections included. These are in the penultimate paragraphs of the article:

    DCHL and the Companies Act.

    There has been a great deal of comment in this newspaper [Otago Daily Times] recently about relationships between the Council, the Mayor and the Board of DCHL. The majority of this comment revolves around who said what to [whom] and when they said it, with regard to DCHL’s inability to meet its well-defined dividend obligations to the DCC. The debate now appears to have crystallised around two personalities, Paul Hudson as Chairman of DCHL and Dave Cull as the Mayor. Mr Hudson does not seem to have taken His Worship’s broad hints, and resigned. The recent announcement, naming names, of a major reshuffle within the boards of DCHL indicate that the Mayor will try to push if he does not jump.

    However, there is still much water to go under the bridge. This board and its chairman seem determined to stay if it is at all possible, and they may yet succeed if enough councillors can be persuaded to keep faith with them. With fingers being pointed all round, and things starting to get personal, it is worth taking a look at Mr Hudson’s behaviour with regard to his obligations as a director under the Companies Act, rather than by other less well-defined expectations to communicate with other individuals, such as the Mayor.

    These duties are laid out in Sections 131 to 138 of the Act. Many clauses contain all the usual ambiguous fluff about “acting in good faith” etc. However, one clause does seem to possess the capacity to embarrass Mr Hudson and his board colleagues. Clause 136 deals with a director’s duty with regard to their company’s obligations. It is admirably short & concise: (136)

    “A director of a company must not agree to the company incurring an obligation unless the director believes at that time on reasonable grounds that the company will be able to perform the obligation when it is required to do so.”

    In 2008, When Mr Hudson and most of the current members of the DCHL Board were already in place, this city was considering building a stadium. The instalment debt necessary for the erection of the building was to be largely financed by obliging DCHL to pay an annual dividend at its existing level (or higher) for the next 20 years. However, in last Saturday’s ODT, Mr Hudson confirmed that he knew the following at the time:

    1) DCHL had established (and communicated to Council in 2006) that it could not sustain even its existing levels of dividend.
    2) He was unaware of any other company being asked to predict [and presumably guarantee its dividend at 100% of that income] for 10 to 20 years.

    If Mr Hudson is to be taken at his word, then one can only conclude that he must have known in 2008 that DCHL could not deliver, either wholly or it in any significant part, on this proposed obligation. Given this, his duties as a director under the Act at the time were absolutely clear. He should have refused to agree to DCHL taking on any such obligation in whatever form, or he should have resigned his position rather than contravene the Act. Clearly he did not do so, and neither did any of his colleagues – who must also have known if Mr Hudson did; if the Board was functioning properly.

    The Board therefore would appear to be prima facie in breach of this particular section of the Act. Who, subsequently, said what to whom, and when or how they said it, is absolutely irrelevant to this conclusion. The board of a private limited company is appointed as professional custodian of the interests of that company. It is not the Mayor’s or the DCC CEO’s job as shareholders to analyse the figures and to abide by the Companies Act. That is what the independent board members of DCHL were appointed to do on the basis of their supposed expertise – without any further reference to third parties. They were also handsomely paid to do so in this particular instance. This independence is presumably one of the justifications for holding these assets under a private corporate body.

    Many might now say “Off with their heads!” It might be more appropriate to say “Out with their wallets!” A breach of duty under Section 136 is considered to be an offence not against the shareholders, in this case the DCC, but the company, DCHL, itself (Clause 169). It would likely be dealt with as a civil matter involving compensation relating to a portion of the company’s presumed loss expressed as an incurred liability by the directors concerned. As action under Section 136 can only be taken by a company, it usually requires a partial or complete change of board personnel to achieve it. One cannot expect people to pursue themselves! As a breach of Section 136 indicates a considerable lack of competence by a board, such a personnel change is probably a prudent course of action, whether or not a subsequent pursuit of individual directors by the new board is envisaged.

    The Mayor, therefore, seems to be making a reasonable suggestion in his request that several directors depart. The argument above would probably suffice on its own, but if more ammunition is needed, then the advertisement placed by DCHL in last Saturday’s ODT, and presumably authorised by its board, can provide it. The board of any substantial private limited company that authorises a public advertisement to its owners that contains partial information, that describes assets rather than equity as ‘what we own’ and that publicly cannot get its consolidated assets ($965.8 million) to balance with its subsidiaries’ assets ($1,183.3 million) needs to be carefully scrutinised.

    However, the Mayor cannot do it all on his own. If this board and its chairman will not depart under their own steam, then Mr Cull will need to equip himself with a formal motion from Council, requesting that they do so. Such a motion can then be used as a basis for more direct procedures, if even that does not work. I would expect the councillors who represent us to actively back the Mayor on this issue – or individually explain to the Community the reasons why they will not do so.

    • Robert Hamlin is a senior lecturer in the marketing department at the University of Otago.

  2. Russell Garbutt

    A perfectly reasoned position put in a non-emotive and analytical manner by Rob. Hudson and his various Boards have no option but to go. What continues to amaze me is his failure to recognise that the game is up. Any possibility of departing with honour is now gone and he can only depart under a cloud. He will not be missed at all. Nor will his self-perpetuating mates hanging onto the grab rails of the DCC gravy train.

  3. Ro

    So, Paul Hudson and presumably his fellow directors, have breached clause 136. They didn’t resign and this situation now requires council to dismiss them by resolution. Bill Acklin’s comment on the Larsen report (dismissing it because it seemed to have a hidden agenda) revealed him as someone unaware of the responsibilities of directorships; he is probably not alone on council in his ignorance and for the mayor to get the requisite support, Acklin and his fellows will need to be informed as succinctly as possible that they must support such a resolution.

  4. Hype O'Thermia

    How do you get ANY information into the heads of those people? Surgically?

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