Total ratepayer impact: 6-month stadium operation estimated at $10.2m

Comment received.

JimmyJones
Submitted on 2012/05/19 at 9:59 am

…keeping the DVL 6-month loss out of the media was a PR success for the McKerracher Group. The size of the loss ($5.2 million) is very significant and so it is inconceivable that Dave Cull and Paul Orders were unaware of it. The idea of pretending that the stadium is completely represented by DVML is DCC policy. The plan was that DVML’s finances could be manipulated to break-even and all the losses would end up in DVL. DVL was to be swept under the carpet and not talked about.

This deception is the likely purpose of having both DVL and DVML. The real financial horror story is seen by simply adding the results of DVML and DVL and the DCC.

The size of the DCC costs is undisclosed, but my guess is maybe $3 million. So we have for the total ratepayer impact for the 6 months of operation $2.0m (DVML loss – not $1.9m) + $5.2m (DVL loss) + $3m (DCC costs) = $10.2 million.

It is a reasonable assumption that the full-year ratepayer impact will be double the 6-month result, i.e. $20 million (remember the $3m is a guess). I expect this to continue for the lifetime of the stadium. It is easy to hide this from the councillors, but the awareness and collaboration of Dave and Paul is shown by them promoting the “only $1.9m loss” spin.

Read the full comment here.

Posted by Elizabeth Kerr

39 Comments

Filed under Business, DCC, DCHL, DVL, DVML, Economics, Events, Media, People, Politics, Project management, Property, Site, Sport, Stadiums

39 responses to “Total ratepayer impact: 6-month stadium operation estimated at $10.2m

  1. ormk

    Does that figure include debt servicing?

  2. JimmyJones

    Yes, ormk. In the 6 months, DVL paid $3.8 million of interest and $3.1 million of depreciation. The report claims that it owned the stadium for 5 of the 6 months. DVML paid $88,239 of interest and $78,136 of depreciation.

    The total ratepayer impact doesn’t include any capital payments for the debt. Probably none has been paid so far, but when it does this will increase the ratepayer impact.

    DVL, the stadium owner, has borrowed $224,270,000 from the DCC for the purchase of the stadium. DVL has failed to pay some of the interest on this debt and so it owes us about $3.8 million. This represents a subsidy from the City’s renters and ratepayers and is most of the “DCC costs” that I referred to above. There will be other DCC costs as well.

    Never forget that the total ratepayer impact is DVL + DVML + DCC. The DCC stadium team and their media partner want you to think that it’s only DVML.

    • Elizabeth

      JimmyJones, therefore so very hard to keep the faith of renters and ratepayers. As Hype O’Thermia says we will all have to keep publishing wider, much ~ W ~ I ~ D ~ E ~ R ~ than the McKerracher Group.

  3. Continually separating and describing the DVL + DVML + DCC arrangement helps inform people as more start to question and seek information on this. Like the Stadium Councillors, the above information repeated from time to time is a good idea and does something for the community the media fails at in this town. Noting the total ratepayer debt Death By Ds formula DCHL + DVL + DVML + DCC + Don’t Tell Them How Bad It Is also helps people understand the wider rort.

    Many people do not understand the complexity but it is that same complexity which is gnawing away at people in Dunedin… they might not know how but the feeling is spreading they’re getting done somehow.

  4. JimmyJones

    Yes, Elizabeth. I think that our commenters, letter writers, e-mailers, researchers, OIA requesters and you have all been doing a great job. The RESIGN protest was very successful. All of these efforts are good and need to continue. As Hype O’Thermia and Anonymous have suggested, there might be other other things we can try as well.

  5. Calvin Oaten

    Jimmy; you say that DVL has borrowed $224,270,000 for the purchase of the stadium. But surely it only requires $162,000,000 odd as the DCC’s commitment as deduced by PwC. So why are we picking up for the rest?

  6. Anonymouse

    I agree, the ODT have not picked up on the fact that the DVML and DVL profit and loss should be consolidated into one HUGE loss. But people look at you blankly when you explain that DVML is just the tenant getting a sweetheart rental rate and that the interest and depreciation is in the landlord company DVL. (Not including the DCC “synergies”, sponsorships and whatever else they could bury or postpone). People hate numbers and don’t understand financial reports, so they go on believing that the powers that be “know what they are doing”. Meanwhile the people in charge think everything will be rosy if the Highlanders reach the playoffs. Bread and circuses.

  7. Hype O'Thermia

    Anyone old enough to remember this radio series?

    My name is Randy Stone. I cover the night beat for the Daily.
    Slouching in a dark corner, avoiding observation, is the DCC
    wearing a pair of cargo pants – very suitable for cargo cultists. Each pocket has a different name. DVL, DVML, ORFU, DCHL…. Busy-busily it moves money (and IOUs, and demands for interest and principal payable) from one pocket to another until it sees a defenceless ratepayer.
    Another mugging in the city that never sleeps.
    Copy boy!

  8. ormk

    How can we afford to keep losing money like this? Who wants their rates to be forever rising? Would this be affordable if there had actually been any private fundraising for the stadium? Perhaps we should close the whole operation and refuse discussions with the NZRU / Highlanders until we actually get our $40-$50 million plus interest since start of construction. Then we can start talking about their fees for using the stadium.

  9. Anonymous

    A major issue to change for the betterment of Dunedin is the seven Stadium Councillors still around the council table. These seven can still dominate a vote in most situations. These seven have common interests in protecting each other – this affecting their reasoning and influencing decision processes to obfuscate and support flawed visions by those whose palms have been warmed by deals past.

    The only thing they can do is resign but no individual can afford to go quietly without the fear of what the others or the stakeholders will do in response. Some cannot afford to leave. Nor will they stand for the stadium at the next election – although Acklin may be playing the Joker card – having learnt vocal support can get a Mayor and two senior Stadium Councillors thrown out.

    There’s a lot at stake.

  10. Calvin Oaten

    OK Jimmy, we are agreed that the DCC’s stadium obligation is $162m (PwC report), DVL borrows $224m (the full valuation). Question; where is the balance of $62m? Is it used to finance other shortfalls, such as closing the gap between an 11.9% and 5% rate increase (despite the claimed increase in efficiencies to the tune of $4.7m) ? Is it to provide the increase of $2.5m debt for the Town Hall update, and the $2.16m extra for the Settlers Museum ? A very handy “slush fund” if you ask me. The ones who should be asking were the councillors whilst deliberating over the Annual Plan. A nice way of dropping it on the ratepayer to pay off in 23 years without showing it as a rate increase. There is a distinct odour around all of this.

  11. JimmyJones

    Calvin, we (the DCC) didn’t need to borrow $224m. We only borrowed the $162m and the ORC, central govt etc paid for the remaining $62m. I don’t think there was any spare debt for that reason, but I am also suspicious that more debt has been added instead of real cost cutting as part of the annual plan decisions. I mean decisions by staff, not councillors.

  12. Calvin Oaten

    Jimmy; not sure, but the PwC report only covers the DCC’s commitment, which was $162m of the total $224m. Sure, the DCC didn’t need for DVL to borrow the full $244m to pay off the DCC, but it did. That was the full value of the complex including the ORC, OCT, Govt and the University’s bit. Why would DVL need to cover what is already paid? It just leaves $62m available for whatever. And this lot will have no problem with the whatever.

  13. JimmyJones

    Guess how much the University Of Otago contributed to the DCC Stadium?

    Nothing – Zero.

    See the PWC construction report part 141 which lists the source of funds and UoO isn’t one of them.
    In fact it’s worse than that because part 92 tells us that the overall impact of the UoO arrangements resulted in an overall increase in the cost to the Council of the Stadium project of $1.9 million.

  14. Hype O'Thermia

    Gee thanks John:
    http://www.stuff.co.nz/national/politics/6956872/Council-debt-a-matter-for-ratepayers-Key
    Might I remind you, John, that we in Dunedin did our damnedest to get your Minister for Local Government to take a good hard look at the wilful overcommitment of our rates & earnings money, by our council, for something we did not need, a build-it-and-they-will-come cargo-cult vision that had been sold to our mix of the thick and the opportunistic, with all the veracity of the worst kind of used car salesman – or politician.

  15. JimmyJones

    Calvin, DVL needed $224 million to buy the stadium because that was the sale price decided by the DCC (and rubber stamped by their valuer). They could have chosen any price between $zero and $224m, but $224m is the construction price and the DCC would have to show a loss if it was sold for a realistic price. The DCC has only borrowed $162m and they claim that they have made payments to reduce this to about $150m.
    An earlier plan was for DVL to sell shares to the DCC. The stadium would be bought with the proceeds of the shares and a loan from the DCC. There would be no interest payable on the share proceeds, only the debt. The DCC has to borrow to buy the shares so I think that it gives the same ratepayer impact. It is better with all the debt in one place (DVL) rather than in two places (DVL and DCC), because we can more easily see what is going on. We are told that the current arrangement will be changed.
    Last week councilors approved extra debt, I think there was one lot of $7m and another lot of some-other amount. The councilors were told it had something to do with the stadium and that was good enough for them. They had no clue what they were doing. This is gross incompetence.

  16. Elizabeth

    ### ODT Online Tue, 29 May 2012
    ORC to consider cutting stadium rates bill
    By Rebecca Fox
    The Otago Regional Council will consider cutting Forsyth Barr Stadium’s estimated rates bill by more than half to $74,900 at its meeting tomorrow. The move follows the Dunedin City Council’s decision earlier this year to drop its stadium rates bill from $2 million a year to a more manageable $134,000.
    Read more

    • Elizabeth

      ### ODT Online Thu, 31 May 2012
      Decision to cut stadium rate defended
      By Rebecca Fox
      Otago Regional Council staff deny considering Forsyth Barr Stadium’s budget for rates or talking to the Dunedin City Council before they proposed cutting the rates bill for the roofed venue. “Absolutely not,” regional council corporate services director Wayne Scott said yesterday when it was suggested by Cr David Shepherd that the regional council’s proposal to drop its rates on the stadium by half “closely balanced” with the city council’s rates decision and the stadium management company’s budget of $200,000.
      Read more

  17. Hype O'Thermia

    How about the ORC repay the extra rates levied on ratepayers in the zone that would get most “benefit” from the cack-brained Lindsay Creek part of the Leith-Lindsay project which was eventually abandoned? They “had to do it”, the government said so. They had to protect those areas from a 1 in pick-a-number years flood, there was no alternative. Until there was.
    Sudden switch in CORE BUSINESS saw a hand-out for the Fubar Stadium, but ORC rates levied on the basis of “direct benefit” had been spent so couldn’t be refunded. Buying property where the earth works had been planned to take place – so “it had been spent on the project”!
    Yeahhhh.
    Seems to me the ORC acquired property – assets – with money levied. Assets can be sold can’t they?
    Just asking.

  18. Phil

    What luck that the new total amount for rates for the stadium happens to be exactly the same amount that the stadium had in their budget to pay rates. Uncanny.

    I’ve budgeted zero dollars to pay my rates next year. I’ll be expecting DCC and ORC to adjust their billing amounts accordingly.

  19. Calvin Oaten

    Councillor Bill Acklin fined $1,000.00 plus costs of $132.89 with nine months driving suspension. Judge Coyle magnanimously stated “alcohol impairs your judgement”. Well well, and all the time I thought in Bill’s case it was ‘genetic’. Silly me.

  20. ormk

    http://www.odt.co.nz/your-town/alexandra/211538/its-got-stop-judge-warns-drink-drivers

    Drink driving isn’t going to stop with sentences like that. Are Bill Acklin’s expenses a matter of public record? I’d like to keep an eye on how much he is claiming for taxis. A second offence should have been a custodial sentence. It’s pretty simple.

  21. Peter

    I only hope that I am treated as lightly by the court if I was ever to be up on a drink driving charge. Twice.

    • Elizabeth

      ### ODT Online Fri, 1 Jun 2012
      DVML, stadium review to begin next week
      By Chris Morris
      A major review of Forsyth Barr Stadium and the company running it is about to begin, amid confident talk the roofed venue can yet be made to pay its way. However, the man asked to help solve the stadium’s financial woes admits the task remains “a challenge”, with no guarantee of success. Dunedin City Holdings Ltd chairman Denham Shale said the review of the stadium and the company running it, Dunedin Venues Management Ltd, would begin in earnest next week. DCHL, the Dunedin City Council’s holding company, had been asked by the council to undertake the review, and Mr Shale was in Dunedin this week to discuss details with fellow DCHL director Bill Baylis.
      Read more

      • Elizabeth

        Another appallingly vacuous letter to the editor of ORT today, ‘Dunedin, be proud of your new stadium’ (page 10), by J.S. Evans, Havelock North. Last paragraph reads:

        “What you whingers are doing is instilling in the youngsters around you a sense of hostility towards something they will grow up with, feeling great pride knowing that they have this stadium that no other place in the country has. I know Canterbury now want one of their own. Come on. It’s now built and it’s fantastic. A few million dollars sounds a lot – but at the end of the day it’s jolly worth every cent.”

        Always good to instill in our children a deep sense of honesty and personal integrity, to a level higher than we might achieve for ourselves.

        Maybe this was written by Malcolm’s newly retired banker. Queenstown being too close.

  22. Phil

    And Canterbury having a similar stadium would be a good thing for us ?

  23. Anonymous

    Sounds like a pet of The Chairman. Whingers is up there with haters and we all know who plays that card when the communities doesn’t agree with his vision.

    On the matter of stadiums, that smirking rugby puppet John Campbell had an indepth investigation tonight (feel free to chuckle here) on why rugby numbers were down. They came up with a few ideas, gave a couple of people an opportunity to express their thoughts and then summed up with representatives of the professional sport who were, of course, in denial with such platitudes as ‘it can’t be fixed overnight’. It must be tough on these people knowing your job is based on meatheads chasing a ball.

    Thank the Rugby Gods they still have a lame government, filthy stakeholders and stupid stadium councillors to feed their visions.

  24. So the DCHL chairman is now responsible for making the Stadium pay its way. The Council already paying a $250,000 salary for the DVML CEO, and a similar figure for the DVML Board, to do exactly this. If the DVML CEO and Board have failed to achieve their task, and it has be given to someone else, then why are they still on the payroll.

    • Elizabeth

      Great point, Alistair.

      Then this at ORT, wtf….

      Mrs C “I’ve recently had more to do with the stadium, the DCC and DVML, and I don’t get the feeling there are many who aren’t trying hard to make things work as well as they can.”
      http://www.odt.co.nz/news/dunedin/211546/dvml-stadium-review-begin-next-week#comment-30682

      DVML – the good people that hire your stadium out for NOTHING, and offer sweetheart deals to ORFU.
      DCC – the honest ‘for the people’ council that refuses to admit ORFU enjoy a history of defrauding ratepayers and misappropriating charitable funds, to prop up professional rugby.

      Nevertheless, Mr Shale and Mr Baylis have to look at the structure of the companies as well since they will now fall under the DCHL umbrella; and as we know DCHL has limited abilities to continue propping a failed stadium project. Should be interesting, if not expensive to see where they get to. DCHL isn’t squeaky clean… what can we really expect?

      • Elizabeth

        Search engine term: new book about dunedin rugby stadium

        (is that the one they wanted to do using ‘that photographer’….)

        whenever we get a search like this it’s like media (read: ORT) are preparing a story

  25. Elizabeth

    ODT reports (page 28):
    Broker Forsyth Barr hosted a free lunch at the Stadium yesterday for 60 southern investors that were to be briefed by Mainfreight’s chief executive Don Braid and its head of research Rob Mercer. Both men’s flights were diverted away from an icy Dunedin International Airport.

    Wonder if Foobar pay hire fees to DVML for their corporate use of the stadium, y’know, given they’re so late to front up with substantial payment for the pleasure of their naming rights.

  26. Anonymous

    I think the good people of Dunedin should advise the DCC that they have now decided to pay their rates in arrears.

    The title SIR – Slick, Insincere and Rich. Just more of the old boys network and their white collar activites !!!!.

  27. anonymous

    Forsyth Barr failing to honour their contract and pay up in advance means they got all the recognition before handing over one dollar of their own private money. Dunedin Ratepayers were not given that option.

    Forsyth Barr byline is… “Investors have put their trust in Forsyth Barr for investment advice for over 75 years” so hopefully some FB investors may also be ratepayers and may wish to reconsider with whom they invest.

    If FB could not afford the upfront payment and are now drip feeding it perhaps you should be even more worried about your investments.

    • Elizabeth

      See more at new post:

      7.6.12 Stadium: Forsyth Barr naming rights
      Yet another revelation has popped out of the woodwork in the troubled Dunedin rugby stadium saga. This time, the much heralded head naming rights deal has been revealed as another non-event with the ratepayers again footing the bill.

      Not long ago this surfaced, things might be getting a bit tough for Mister Ed, the talking horse…

      21.5.12 NZX Market Supervision inquiry
      “I needed a wee bit of extra cash at the time so I was happy to sell. It’s a free market – anyone can buy, anyone can sell. That’s what markets are for, aren’t they?” -Eion Edgar

  28. Elizabeth

    25 July 2012
    DCC Finance, Strategy and Development committee meeting

    Agenda – FSD – 25/07/2012 (PDF, 75.4 KB)

    Report – FSD – 25/07/2012 (PDF, 178.3 KB)
    Funding Transfers to DVL by Calls on Capital

    Report – FSD – 25/07/2012 (PDF, 712.5 KB)
    Revised Statements of Intent for DVL and DVML

    Other reports

  29. Mike

    I see that Brown’s F&G committee is proposing that the city raise rates by an extra $1m next year to help pay down the DVL debt (aka :Calls on Capital”)

    It’s about time they started calling on rugby clubs to pay down the debt instead

  30. Anonymous

    Given the actual financial results just demonstrated publicly in the North vs South game, the “Net profit” figure for DVML should be taken with a pinch of salt. Rather than the budgeted $298K loss given in the revised SoI, this will most likely be in the $1-2 million loss range again.

    The SoI says roughly 18 major events, with the bulk of these being rugby. These will not, no – cannot – generate revenues that would return $3.6M in profit before rental. That would be $200K profit per event. 7500 visitors generated $21K in profit, so you would have to have 75K visitors per event at these rates…

    DVML is budgeting to lose $12M over 3 years. Reminder: $1M is 1% on the rates.

    • Elizabeth

      ### ch9.co.nz July 24, 2012 – 6:58pm
      Companies to take Stadium plans to council
      The companies set up to own and run the Forsyth Barr Stadium will take their plans for the future to the Dunedin City Council tomorrow.
      Video

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s