Stadium financials: Calvin Oaten on DVML, DVL and DCHL

### ODT Online Fri, 2 Nov 2012
Opinion
DCHL covering DVL and DVML losses
By Calvin Oaten
Stadium finances dismay, says the headline (ODT, 31.10.12). The story states Dunedin Venues Management Ltd (DVML) as posting a loss of $3.214 million. Mayor Dave Cull says “it is not sustainable”.

But let’s look at the combined performance of DVML and Dunedin Venues Ltd (DVL) and we see a fuller picture. Let’s face it, these two entities are joined at the hip and are no more than an arrangement of convenience, for the dispersion of liabilities attached to the stadium. DVML’s loss at $3.214 million is arrived at after receiving revenue of $6.093 million, offset by expenses of $6.395 million.

It then pays DVL $3.667 million rental for the use of the stadium. This is offset by receiving a (subvention) payment of $782,000 from Aurora. Net loss $3.214 million. But we then need to add the carried forward loss of $3.256 million from the previous period to disclose the consolidated loss at $6.470 million.

Turning now to DVL, we find the declared position is: Revenue $3.672 million, expenses $16.051 million for a loss of $12.379 million. This is offset by a (subvention) payment from Aurora of $7.292 million leaving a loss of $5.087 million.

This is offset by a tax credit of what could be $775,000 for a net loss of $4.312 million To this is added interest rate swap losses (a totally incomprehensible concept) of $8.579 million for a total consolidated loss of $12.891 million.

So combining the two scenarios we have a total consolidated loss attributable to the stadium of $19.361 million. This, Mr Cull, is really what is not sustainable.

Interestingly, nowhere in either set of accounts can one find any evidence of income derived from the much vaunted private funding. Why? Is it because as the PwC report says, it can only be treated as operational revenue, and therefore goes direct to the events promoters such as the ORFU?

Looks like it. They in turn simply pay – or not – a rental to DVML for the use of the stadium by event. This is what is expressed in DVML’s revenue statement. All this raises the question: what happens if DCHL is unable to produce those subvention payments?

It has already served notice that since July 1, 2012, it will no longer borrow to provide payments of $23.2 million to the DCC which consisted of, $10.450 million dividend, $5.25 million capital repayment of stadium debt, and subvention payments to DVL and DVML. As can be seen this amounts to $17.25 million offsetting the already considerable losses incurred.

There is no doubt but that the stadium will figure very largely in the city’s future funding difficulties, which are so manifest.
ODT Link

Posted by Elizabeth Kerr

31 Comments

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

31 responses to “Stadium financials: Calvin Oaten on DVML, DVL and DCHL

  1. Anonymous

    As predicted on the back of the envelope some years ago, costs would be around $20 million per annum. And the true opportunity cost is $40 million. The next elections, IF THEY OCCUR, will be very interesting.

    • Elizabeth

      I hear the council has taken precautions to hook our Davey Cull and the non-Fifa Sydders Brown to heart monitors.

      • Elizabeth

        But here’s another chance for city renters and ratepayers to lose money while the hacks of the hospitality trade resist targeted rates.

        http://www.odt.co.nz/sport/rugby/233071/bledisloe-test-dunedin

        • Elizabeth

          DVML had come to a favourable financial arrangement with the NZRU, and with venue hire covering the stadium’s operating costs for the event, DVML would take a percentage of the revenue from the match. -Burden

          ### ODT Online Sat, 3 Nov 2012
          October date for Bledisloe Cup test
          By Debbie Porteous
          Bledisloe Cup rugby returns to Dunedin next year with confirmation the city will host the third match in the three-test series. The game between Australia and New Zealand will be played at Forsyth Barr Stadium on October 19 – the first time the old foes have met in Dunedin since 2001.

          With the addition of 450 seats in the Otago Daily Times stand, the number of seats available would be 29,255, which was probably the largest crowd for a sports event at the stadium. -Burden

          The match was announced by New Zealand Rugby Union (NZRU) chief executive Steve Tew yesterday as one of seven domestic All Blacks tests in 2013. Mr Tew effectively confirmed the game for Dunedin in March following the announcement of a bail-out package for the Otago Rugby Football Union.
          Read more

          Infrastructure costs and other to the ratepayers of Dunedin are ?
          Cull isn’t likely to tell you.

  2. g2-f290f0ae19ebe197bb01e8c796329156

    Calvin, you might find the PSF under Current Liabilities. They’ve paid the money, but not yet got anything for it, so it’s a liability…

  3. This peter-paul shit needs to stop. No wonder people get the shits ’cause no-one can keep up with it all, and yes, I realize that’s the whole idea.

  4. ormk

    Great to see these figures collected and presented so concisely. Why wasn’t there a line in the last agenda,”Discuss how to resolve a total consolidated loss attributable to the stadium of $19.361 million”?

    Thanks Calvin.

  5. Hype O'Thermia

    If certain shocked and horrified decision-makers had been following the contributions of Calvin, Rob and many others here, on the ODT online and elsewhere they would have been forewarned of the stadium-associated revelations.

    • Elizabeth

      It’s as if the editor has suffered a blunt contusion. Sees the problem then runs away to JWOD*, and ends weakly, out of steam, with the hope that those in power “will turn their full attention to making our new stadium a profitable investment of which the city can be proud”, and would they please read the annual report[s].

      ### ODT Online Sat, 3 Nov 2012
      Editorial: Council must keep eye on the ball
      Just as it seemed the Dunedin City Council was determined to focus on a different attitude towards debt, revelations that a worse-than-expected $3.2 million loss by the company running the Forsyth Barr Stadium was not even discussed at this week’s full council meeting have put it back in the firing line and raised questions about its priorities. The loss – nearly $1 million greater than forecast – was recorded in Dunedin Venues Management Ltd’s (DVML) 2011-12 annual report, which was released a day later to this newspaper. But it had flown under the radar at the council meeting, with no mention of the reports on DVML or Dunedin Venues Ltd (DVL), which owns the stadium, on the meeting’s public agenda, and no indication those reports had been circulated publicly and to media – as required under the Local Government Official Information and Meetings Act – ahead of the meeting. The reasons for that are unclear and convoluted.
      Read more

      *John Wilson Ocean Drive was closed from August 2006, to allow construction of the Tahuna Wastewater Treatment Plant outfall.

  6. Hype O'Thermia

    Talk about fiddling while Rome burns, the DCC has more fiddlers than a Stephane Grappelli tribute concert and they’re all lined up on the John Wilson Memorial Drive facing out to sea so they won’t catch an inadvertent glimpse of the Fubar Stadium.
    Reading about the “not hidden, no conspiracy” under-the-radar report, did anyone else have a flashback to Yes Minister and the practice of hiding important papers among a vast amount of other papers in the numerous red boxes Jim Hacker was supposed to work his way through, the expectation of Sir Humphrey being that he would not get to the important material and it could be dealt with by Sir Humphrey in the way most convenient to himself.

  7. Anonymous

    The bloody ODT is part of it by knowing about the extent of the problem but then playing down or dismissing it. The online editors will publish Calvin’s information online but print the lowest denominator in the paper. That position will come back to bite it on the arse some day. Or has it already started biting?

    Recall the paper is trying to ‘streamline and improve work practices’ involving laying off staff. Maybe its subscription issue could be connected to its reporting of council affairs, protection of Stakeholders and lack of accountability for their Stadium Councillors?

    This is a city too small to hide newsworthiness among the pet and rugby stories.

    ### ODT Online Thu, 20 Sep 2012
    Editorial review under way at ODT
    http://www.odt.co.nz/news/dunedin/226678/editorial-review-under-way-odt

  8. Anonymous

    …and blowhard stories about John Key. National, rugby bludgers and golf…? The only thing missing to reach Nirvana was rescuing a cat from a tree or working in something about the royals. The excitement in the editorial office must have been palpable. The cleaners would have had a damn difficult time of it cleaning the slobber off the keyboards.

  9. The royals will be worked in very soon when they visit no doubt….

  10. ormk

    Just read the editorial review which finishes talking about the prospects of rate rises.

    We were promised $66 a year on our rates bill.
    We were promised there would be $40 million of private funding.
    We were promised, “Build it and they will come”

    There is very little confidence or good faith in this council.

  11. Anonymous

    Otago Daily Times sponsors stand in stadium. Otago Daily Times reports on stadium. Hmm… how are we meant to have faith in a paper to act impartially and investigate the issues? I wonder too if any real money was paid for this sponsorship? I very seriously doubt it. Another sponsor collecting on name recollection while the people forced to pay for it continue to get diddled.

  12. Jack

    Interesting. The above editorial review link at ODT Online is no longer working? It appears as though the newspaper has taken down its two paragraph story.

  13. Anonymous

    I think it is important people know what is happening in this city. Jobs are being shredded in small numbers all around us but those are not being reported on. The count it seems has to be over 50 in Dunedin before it is deemed public interest by those who control this type of news in the media. Small businesses are dropping one or more staff, medium businesses half a dozen or so and right up to big business and corporations who firing many dozens, even hundreds. Every single one of those people who lose their job creates a ripple of financial hardship which immediately effect many others and impacts the community as a whole. Still unbelievable are those companies who replace productive staff with project managers or delegaters. Permanent with casual labour. The most repugnant are those who lay off people so they can outsource. Hardest for those whose age rules them out in the notoriously ageist view of human resources. There is a reason men cried in the Delta lay-offs because faced with with no income, dependents, high cost of living and mortgage payments you can’t just ‘man up’ and get over it.

    It is happening all around Dunedin but it is being kept quiet. Companies need to be named and, where necessary, shamed for their behaviour. It should be mandatory for a chief executive officer to step down if they believe laying off staff is the only way to deal with their financial mismanagement.

    • Elizabeth

      Who knows maybe ODT was able to resolve itself by attrition, without forced redundancies.
      I don’t disagree with you Anonymous, though publishing isn’t always what it’s cranked up to be given the sensitivities of all involved with job losses (not referring here to overpaid company executives and managers that rack up bonuses while shafting workers; or blatant ‘talking up’ by those in the real estate industry, or Tourism Dunedin…).
      There’s always the need, when times are tough, to keep business positivity alive in the region via accurate news reporting, profiling and information sharing – especially during climes of Dunedin City Council’s gross mismanagement under the leadership of Mayor Dave Cull.

      • Elizabeth

        Comment at ODT Online – the abridging happened where I thought it would, and makes for a better diatribe.

        Take DCC to task
        Submitted by ej kerr on Sun, 04/11/2012 – 4:41pm.

        I encourage other ‘code-breakers’, besides Calvin Oaten and JimmyJones, to have a good crack at interpreting DCHL, DVML, DVL and DCC annual reports and pointing up missing items and opaque ‘notes’ that auditors, according to their briefs, routinely overlook. So to argue the overall position of Dunedin City Council, by ‘best estimates’ – for sadly, this is what we’re reduced to.

        The city councillors are out of their depth in managing council finances; made worse in the context of the council-owned companies and related entities. To ‘tick off’ annual reports unknowingly and without full scrutiny, independent analysis or debate is a gross dereliction of duty. Consolidated losses appear to be substantially larger than those reported. The level of council debt is difficult to discern, given obfuscation and lack of transparency. More minds to the unravelling, and analysis of the annual accounts, the better.

        Dunedin isn’t short of educated and experienced financial commentators, or indeed clued-up business people who stand well apart from those on the board of the council-owned holding company and the subsidiary boards. It also appears the outcome of Warren Larsen’s report is ‘massage’, but is the report itself in the exact same category, according to the council’s original brief? Exercise your independent opinion, please don’t hold back, raise questions, help get the issues into public domain, to make absolutely plain to the good people of the city – and the media – the position of this council.

        [Abridged]

  14. Phil

    DVML hasn’t “come” to any arrangement with regard to the venue hire. Slippery Burden yet again trying to pump his own chest. The stadium gets a share of the gate revenue, yes. That is where the venue user gets their hire fee from that they give to the stadium. A bit of a no-brainer, that comment, and nothing to do with any negotiation skills. The fee paid by NZRU is a flat fee and is not subject to negotiation. For a Bledisloe Cup match ( or a Lions test match) that fee is $100,000, no matter where in NZ the match is played. In the case of Dunedin, this should (as trumpeted by Burden) cover the operating expenses for the day. Pure luck and again nothing to do with any supposed negotiations. Shame on you, Slippery, for trying to steal other kids’ lollies and claiming them as your own.

  15. Mike

    Isn’t this game one of the 3 promised the city for the ORFU buyout? If so it cost us about $100k just to have it.

  16. Phil

    Yes, it’s the last of the 3 and won’t have any impact on the recovery of ORFU losses.

  17. Mike

    but, but, but …. there are apparently bars downtown that are going to make millions …..

  18. Phil

    Sorry, I forgot about that. And the planeloads of Australians jetting in.

  19. Mike

    and don’t forget the Rolling Stones are going to to play a benefit concert because Keith Richard’s has done so many drugs that he’s forgotten that he thought Dunedin was a “black hole” – confusing us with somewhere else, probably because he’d taken so many drugs ….

  20. Anonymous

    Re companies firing staff, the following “uncertainty around unemployment” story was produced by ODT today and appears online. Presented right beside it is that big business piffle “Working it out” and its ghastly post “Being faithful to your employer”. It first came out when Delta staff were being chucked on the heap because Grady Cameron’s group invested in property speculation. These and many others in this city were faithful to their employer but can count for little or nothing today when a chief executive officer is busy protecting his or her own paycheck. That blog entry was written by the Stakeholders of this city in mind. And shame on you Otago Daily Times for once again sticking it to people losing their jobs or struggling to find one.

    http://www.odt.co.nz/news/business/233305/uncertainty-around-unemployment-wage-data

  21. Anonymous

    The ODT really, really needs to stop associating that “Being faithful to your employer” post with stories of people having their livelihoods wiped out by corporate greed. There’s nothing fair about being told to be loyal to an employer after it has just announced getting rid of you on the back of a press release. Particularly unpleasant is the super happy face on top of everything else.

    Get rid of it, ODT, before someone gets the notion to start a newspaper in this city that shows you the sort of loyalty you’ve shown it following the professional rugby, stadium and hotel pump.

    http://www.odt.co.nz/news/business/251131/telecom-axe-1230-jobs

  22. Rob Hamlin

    As this is a post about stadium financials it is worth noting in the article today that McPravda have a most interesting quote: http://www.odt.co.nz/news/dunedin/251275/details-stadium-concerts-not-revealed

    “The ODT understands fewer than 10,000 tickets have so far been sold for Paul Simon’s concert, while about 15,000 have sold for Aerosmith’s show.”

    Now this is a most unusual line to take – Damned inconvenient and unlikely to have figured in any DVML press release. So it’s fairly safe to say that this bit of the article (at least) isn’t based on one.

    It is my understanding that one of the challenges that Mr Burden faces is that he is reliant upon people travelling from the major urban centres further North to attend in order to obtain a large proportion of his magical 40,000 bums to put on his seats (bumseats). However, in both Aerosmith’s and Simon’s cases, a person (potential bumseat) living in Auckland, Wellington or Christchurch can go and see either of them play in Sydney or Melbourne for pretty much the same, or actually less, than they have to pay to see them in Dunedin – and this without having to put up with lousy acoustics, booked out restaurants and a cold tent pitched in a field somewhere to the north of Palmerston – I have heard no reports of extra flights/logistics etc to cope with the rush. Oh dear, I have a feeling how the potential bumseats’ decisions in the major centres up North will fall, or may already have fallen.

    So this situation may well end up in discounting, student freebies, empty seats, or any combination of two or three of these – and a fat loss in both instances. But to whom would this fat loss accrue, and what would this fat loss mean to us? Well, as I said in earlier posts, both of these artists would quite happily play in the Hyde Community Hall if a third party with reliable readies was prepared to guarantee a level of said readies comparable to the costs (plus expected profits) that they would acquire by playing to 30,000+ fully paying punters in a major Sydney venue. This kind of guarantee is innocently described as an ‘underwrite’.

    How much could such an underwrite exposure be? Hard to say, and one suspects that its existence and details will be, well, ‘commercially sensitive’. However, DVML’s forecast of 40,000 bumseats at $100 per bumseat for Aerosmith and about 10,000 less at the same kind of price for Simon may well be an indicative guide in both cases as these figures must have come from somewhere – and they are based on no specific market research that I am aware of.

    So we may be looking at a combined underwrite of around $7 million. If the event fails to raise the expected revenue, then the underwriter has to make up the difference and pay out to the beneficiary of the guarantee. As DVML certainly do not have that kind of money, and may well not have the necessary stupidity to issue such a commitment on the basis of their own resources, one has to look elsewhere for the backup (either directly or by guaranteeing DVML’s liquidity) that has probably been put in place in order to bring these acts to this unlikely destination. It would not be a long search.

  23. Calvin Oaten

    Rob; Mayor Cull would probably respond with something like, “Ye of little faith,” or, “some of a negative bent ‘contort’ facts to suit their own agenda.” But others like me would simply say, “I couldn’t agree more.” Darren Burden, on the other hand would simply say, “I am only doing it for the money.”

  24. Anonymous

    (Eds – its should be it, as in the city – it’s just a whinge over the paper’s continued inconsiderate position towards people losing their jobs around Dunedin. It feels like Sir was looking after the interests of his Stakeholder fat-necks, particularly as that post was first up from the employment lawyer. Thanks.)

    {Done. -Eds}

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