Carisbrook: DCC losses

Ch39 News 3.7.13 Orders Clark Cull 1

Dunedin City Council – Media Release

Carisbrook documents released

This item was published on 03 Jul 2013.

A large number of documents relating to the purchase and subsequent sale of Carisbrook have been released publicly today.

These can be found at www.dunedin.govt.nz/carisbrook-documents

The DCC bought the sportsground, surrounding houses and some vacant land from the Otago Rugby Football Union for $7 million in 2009. With the sale of Carisbrook confirmed last week, all the properties have been sold.

Contact DCC on 477 4000.

DCC Link

Ch39 News 3.7.13 Hands

### ch9.co.nz July 3, 2013 – 6:35pm
Carisbrook sale costs city $2.3 million
The Dunedin City Council’s purchase, then sale of Carisbrook, has cost the city $2.3 million. But that figure, confirmed at a media conference today, is not the only drain on ratepayers. And while the release of costs ends a controversial era for the city, the vagaries of commerce, rather than the decisions of politicians, were blamed in the wash-up.
Video

Ch39 News 3.7.13 Dave Cull 1

### 3news.co.nz Wed, 03 Jul 2013 6:11p.m.
Ratepayers question Carisbrook sale
By Brooke Gardiner
Dunedin’s Carisbrook Stadium has been sold for $3.3 million, which is less than half what the Dunedin City Council paid when it bought the place three years ago. Construction company Calder Stewart bought the former sports ground for almost $4 million less than the council forked out to the Otago Rugby Football Union in 2009. And it could be three years before the council sees any money. The deal went unconditional last month, but the council’s only just released the finer details of the agreement.

“They have three and a half years to pay for it. We’re leaving the finance in and they’re paying us 5.5 percent on that money.”

Ruing the loss of ratepayer funds, Mayor Dave Cull says they should never have bought the stadium. “I opposed it at the time. I don’t think we should have bought it. I think we were buying it for the wrong reasons, but the choice over whether to buy it or not was not this council’s,” says Mr Cull.
Read more + Video

Ch39 News 3.7.13 Carisbrook 2

### ODT Online Wed, 3 Jul 2013
DCC confirms $2.3m Carisbrook loss
By Chris Morris
The Dunedin City Council has confirmed a $2.3 million loss from the sale of Carisbrook, and revealed a complicated financial arrangement with the new owner. Mayor Dave Cull, at a media conference this afternoon, confirmed the council would recoup $4.7 million of the $7 million it paid for the historic sports stadium in 2009. However, Calder Stewart, the company that bought the ground off the council, had only been prepared to pay $3 million up front, Mr Cull confirmed. Instead, a deal had been struck that meant the company would pay at least $3.3 million, but deferred for up to three years, with payments made as the ground was subdivided and sold by Calder Stewart, he said. The sum paid would rise to $3.5 million if demolition was not completed within six months, meaning the council would keep a $200,000 bond paid by the company, Mr Cull said. The deal would also see the company make up any difference at the end of three years, meaning the council was guaranteed its money, he said.
Read more

● Full report in the ODT tomorrow

Related Posts and Comments:
27.6.13 State of the City —DCC or Dunedin?
28.5.13 Carisbrook: Auditor-General #fails Dunedin residents and ratepayers
23.5.13 Carisbrook: Calder Stewart to demo Dunedin’s historic stadium
20.3.13 Carisbrook: Shifting explanations for DCC $7m spend
6.3.13 Carisbrook: Cr Vandervis elaborates
6.3.13 Carisbrook: Question obfuscating mayor and council #rugby
20.2.13 Carisbrook: DScene suggests joint venture Calder Stewart / DCC

● List of Carisbrook posts back to 19 August 2008 [comment]

Posted by Elizabeth Kerr

*Images: Ch39 Dunedin News (3.7.13) – Paul Orders, Robert Clark, Dave Cull [screenshots]

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32 Comments

Filed under Architecture, Business, Construction, CST, DCC, DCHL, DVL, DVML, Economics, Heritage, Hot air, Media, Name, ORFU, People, Pics, Politics, Project management, Property, Site, Sport, Stadiums, Town planning, Urban design, What stadium

32 responses to “Carisbrook: DCC losses

  1. Russell Garbutt

    It is going to take time to be able to digest all the background papers that have been released, but some points that I think are vital, should be made.

    Firstly, the release of this data simply would not have seen the light of day in my view if the previous CEO, Jim Harland, had still been running things. Paul Orders and some of his team are like chalk and cheese compared to Harland. I cannot recall one negative comment about Paul Orders and his close management team by anyone. He and his team come across as forthright, honest and totally committed to the City. Contrast that situation with when Harland was still here and Chin was nodding off in the background.

    Secondly, there still is complete confusion from the ODT about the actual loss. The reported loss has jumped over a million dollars over a day. Determining facts, understanding, clarifying and writing unbiased reports should form the very basis of reportage. It seems too hard for many newspapers to investigate anymore, and the ODT’s unwillingness to commit some serious money to fund full investigations into matters that concern its readership is really poor. Maybe there are no reporters within the ODT that have the necessary skills to pursue the real story. Maybe there are but they are not given the time or resources to do so. Maybe there is just no will to expose their friends.

    Lastly, and probably most importantly, is the total unwillingness of those in the present Council to hold those responsible for these avoidable heavy financial losses to account. Time after time it has been shown quite clearly that the previous Council – most of whom still languish round the current Council table – acted in the way that they did in entering into deals with the ORFU against the best interests of the ratepayers. Put bluntly, enough of these Councillors and some of the Council staff acted in the interests of the ORFU and other closely associated parties, and acted against the best interests of the ratepayers. The view of the present Council seems to be that they have no option but to accept that millions and millions of dollars of ratepayers funds have been either lost or unwisely spent, but nothing will be done about it.

    Remember, it is not only the ORFU that have been able to access the City’s treasure, but the friends of those City companies like Delta. How many millions of dollars went out the door on land speculation in Queenstown and Luggate? Who were the Directors of Delta and DCHL at the time? This was as much ratepayer money as that money that went out the door on propping up the ORFU.

    Well, as a ratepayer, I expect those that have been given responsibility to also accept accountability. If it can be shown, as I believe it has, that some Councillors and some Council staff have acted contrary to the best interests of the ratepayers, then they should be prosecuted. And the Local Government Act allows for that. I will not be voting for any candidate that will not be totally willing to expose and prosecute those who have been complicit one way or another in what can only be described as a series of major deceits.

  2. Mike

    I agree – I think that the summary of the Carisbrook numbers are (for once) actually correct. The ODT’s number $3.4m is just about right.

    The only quibble is the $2m – that it was used instead of a loan to fund the $7m purchase is neither here nor there and it’s good to see that in their latest accounting they’re not trying to remove it from the cost of Carisbrook cost – on its own it’s a cashflow issue.

    What’s not accounted for is the “opportunity cost” of that $2m – how much more would the city earn if it had been invested, or how much less interest we’d be paying if we used it to pay down debt. The answer at 5% per year is about $100k/year so $400k so far and increasing by $100k every year for ever (because you know we’re never going to get it back).

  3. Anonymous

    The decision appears to have been ratified at Council meeting on 6th July 2009 (under matters to exclude the public: “Property Matters”.) I presume that this would simply rubberstamp a decision made by an earlier committee, which would have a resolution and a vote.

  4. Mike

    I think the final Carisbrook vote was slipped in with the vote to build the stadium and done in public

  5. Anonymous

    These documents tell two different stories:

    1. The tabulation of Carisbrook debt from February
    http://www.dunedin.govt.nz/__data/assets/pdf_file/0003/331473/2013_02_11-Council-Carisbrook-Debt-tabled-information.pdf

    2. The “media workshop” figures from 3rd July
    http://www.dunedin.govt.nz/__data/assets/pdf_file/0009/331488/Carisbrook-financials-3-July-2013.pdf

    The question remains as to whether or not the $2 million debt was actually repaid by the ORFU. If it was, why is there a discrepancy between the two tabulations of figures?

    The July figures say there was a cash loss of $2.3 million i.e. the difference between $7 million and $4.7 million. But the balance of debt owing in the February figures is $5 million, which would leave a cash loss of $300K.

    Further, the Mayor’s announcement that the loss was $3.4 million is at odds with both figures.

    This sale/purchase should be referred to the Auditor General and/or the Serious Fraud Office.

    • ”We went out and got the best deal we could on the market … We had to cut our losses. We were losing money all the way through. Now we have stopped losing money. That’s a good thing.” –Dave Cull

      ### ODT Online Thu, 4 Jul 2013
      Carisbrook: $3.4m loss confirmed
      By Chris Morris
      The Dunedin City Council made a bad call for the wrong reasons when it bought Carisbrook, and the nearly $3.5 million cost to ratepayers is regretted, Mayor Dave Cull says. The size of the total losses to the council was finally confirmed by Mr Cull at a packed media conference yesterday, days after the deal to sell the ground to Calder Stewart went unconditional.

      Mr Cull was reluctant to criticise the valuations, saying they were ”valuations … not promises”.

      New details of the sale agreement with Calder Stewart were also revealed. The company has been given up to three years to pay for Carisbrook, as and when parts of it are subdivided and sold. The $3.3 million sale to Calder Stewart meant the council would recoup $4.7 million of the $7 million it spent buying Carisbrook and surrounding properties from the Otago Rugby Football Union in 2009. That left a $2.3 million cash loss for the council, which would rise to about $3.5 million if other bills – including maintenance, interest and other holding costs accrued while it was the owner of Carisbrook – were included, Mr Cull confirmed.
      Read more

      ****

      ### ODT Online Thu, 4 Jul 2013
      ‘Sensitive’ sale details released by council
      By Chris Morris
      The story behind the Carisbrook purchase is detailed in more than 1000 pages of documents released by the Dunedin City Council yesterday. Council staff yesterday published more than 50 council documents – some of them stretching to more than 100 pages and others dating back to 2007 – on a new section of the council’s website. The documents included previously non-public reports and meeting minutes kept confidential because of ”commercial sensitivity” surrounding the deal.
      The Otago Daily Times will study the material over the coming days.
      Read more

      {Link to DCC webpage added. -Eds}

  6. Mike

    Anonymous – it was, that’s clear in the documents – the ORFU didn’t write them a $2m cheque, instead the DCC (who maybe didn’t really trust them) seems to have insisted on giving them $2m less for Carisbrook (look out for the settlements that also include GST which I assume would have been refunded by the IRD).

  7. Hype O'Thermia

    Why was there all that maintenance for a property that was not going to be sold as a going concern i.e. as a stadium? Am I wrong in assuming that it was intended to be a site that the new owner(s) would clear so they could construct whatever it was that they needed it for?

    • I’m amazed at the $815,000 holding costs (including maintenance) stated for Carisbrook since 2009 !!!?
      This seems a little on the under side. Not long ago we were being told it was $400,000 per year, or thereabouts.
      Hmmm.

  8. Anonymous

    Mike, so why is the cash loss reported by Council not then $300K rather than $2.3M?

  9. Mike

    Anonymous, I think you’re looking at their original accounting (from back in February) where they looked at how much they paid the ORFU ($5m in actual cash) rather than the full $7m – that was a bogus accounting because if you’re going to include the $2m that was paid back you also need to include the original $2m loan (or leave it on the books) – this new accounting acknowledges that they really paid the ORFU $7m, even if they only borrowed $5m.

    Now that original $2m came from somewhere, some internal DCC account, and was never paid back – it’s essentially lost to us as part of the gross council debt, and we will continue to pay interest on it even now that Carisbrook has been settled.

  10. I am as confused as many others seem to be. It is the $2m loan that I can’t get my head around. If the ORFU has a debt on its books then wouldn’t the lender have that as an asset on its books? If, by the process of overvaluing the “notional price” paid by $2m to $7m and then saying because of that loan we only had to borrow $5m to make the purchase, in effect saying we just bought back the loan to the ORFU? Indeed, doesn’t that automatically convert the $2m asset into a $2m liability on the DCC’s books? Totally divorced from the purchase. After all, it was borrowed by the DCC in the first place. Someone please help me.

  11. Mike

    Calvin you’re right – originally there was a $2m debt – an asset on the DCC’s books. During the transaction the DCC in essence:

    – purchased Carisbrook for $7m and created a new asset on their books notionally valued at $7m
    – subsequently they received $2m from the ORFU that cancelled the $2m debt (and removed that asset from their books)

    (those two things happened so close in time that you can’t actually separate them and were contractually required to occur that way – presumably so that no-one ran off with the DCC’s $2m)

    From a cashflow point of view only $5m exchanged hands as the transaction occurred. It’s the confusing of the cashflow and the actual contractual deals that have confused people (including those who wrote the February summary).

    In essence, the DCC took that $2m they received from the ORFU and used it to fund a portion of the purchase so they only needed to borrow $5m from the Aussie banks – the sleight of hand here is that the original $2m loaned to the ORFU, that we then used to buy Carisbrook is gone, caput, we don’t owe it to a bank so we can quietly forget about it – but it originally came from somewhere, probably rates, our pockets – what happened to the $2m we originally loaned to the ORFU? It was reinvested in Carisbrook and lost because it was poor investment.

    (or alternately Carisbrook was deliberately overvalued and the $2m was given to the ORFU to try and keep them alive)

  12. amanda

    The majority of the present council is dominated by the same muppets who supported the fiscal stadium debacle: Noone, Brown, Bezett, Acklin, Weatherall, Collins and Brown. The Secret Seven that the ODT seems to be so very afraid to hold accountable for their fiscal incompetence. With these seven dominating council, Cull had his hands tied.

  13. amanda

    Observe the ODT and any article speaking to the debt and blindingly obvious is that Secret Seven names are ever mentioned. Like gormless Cull and his gormless Greater Dunedin, they are not going to challenge a strong cabal.

  14. Anonymous

    “(or alternately Carisbrook was deliberately overvalued and the $2m was given to the ORFU to try and keep them alive)”

    Bingo. Ignore the game of “find the lady” that is being played here regarding the valuation.

    Carisbrook was (very) favourably valued at $7 million.
    DCC only paid $5 million.
    DCC sold all of the properties for a total of $4.7 million.
    DCC incurred holding costs of $815K.
    On the face of it, DCC lost “only” $1.1 million.

    Yet the overall loss is reported as $3.3 million. Why is this being pushed in the carefully-prepared press release?
    Is it because a booked loss can be used as offset for tax purposes?
    Is it to cover the reinvestment of $2 million back into Carisbrook as Mike suggests?
    However it was done, $2 million of ratepayers’ money has disappeared into thin air. The DCC needs to account for this loss and people held accountable. That is why the SFO should be involved.

  15. amanda

    By re-electing these seven numbskulls Dunedin told Greater Dunedin that we do not hold incompetence to account, so no wonder the rest of council hold us all in such disregard. Better to bow down to the real power on council. Oh dear, I forgot to mention the sly old one, the head kahuna, Hudson, amidst the cabal.

  16. Russell Garbutt

    Interesting again what the ODT will or will not publish on its website. The following was submitted to the ODT on Wednesday evening in response to the ODT story on the loss (wrongly quantified by the ODT at the time).

    Why there is a loss
    Submitted on Wed, 03/07/2013 – 5:45pm.

    The answer is blindingly obvious – because the DCC Council at the time at the behest of the then CEO, Harland, decided, as was widely reported in the ODT at the time, that the ORFU needed to have a cash injection of $7 million to make it a “financially strong anchor tenant of the new rugby stadium being built for them”. The price that the DCC – let’s be honest and call it the ratepayers – paid for Carisbrook was simply not market value and it never was. The DCC and the ORFU entered into an unholy agreement that was always to the advantage of the ORFU and never in the best interests of the ratepayers. All those Councillors at that time that voted for this purchase at that price were directly responsible and should be directly accountable.

    Now I’d be really interested in knowing why this was censored. What does it tell you about the position of the ODT? Why do they continue to protect the rear ends of those incompetent fools that put us collectively in this mess? My only answer to myself is that they wish to protect those that really should be prosecuted. Why?

    • ### ch9.co.nz July 4, 2013 – 7:21pm
      Documents pertaining to Forsyth Barr Stadium released
      The DCC has released a flood of documents from the last seven years of planning for the Forsyth Barr Stadium.
      Video

  17. amanda

    Bezett, Brown, Acklin and mates should all get down on bended knee and praise the dear old ODT. With the ODT disinterest in holding local politicians to account they are guaranteed to get through and still be sitting around that council table post October.

  18. amanda

    Let’s pay attention to which politicians the ODT do bother to hold to account on the run up to the elections; I’m looking forward to the destruction that they will do to Vandervis and any other councillor who challenges the status quo of old boy incompetence (Hudson? I’m looking at you).

  19. Russell Garbutt

    Hudson? Has there ever been a more useless Councillor? I mean ever? Free meal at the Hungry Frenchman to the person that comes up with a better candidate – oh no, just realised that they are no longer operating but can’t seem to remember why…prize no longer available.

  20. Russell, I can think of 360,000 reasons why it is no longer operating.

  21. Phil

    That would be City cough cough Property. The partner of Cr Hudson’s daughter (Grant somebody) couldn’t quite believe his luck. He had been trying to offload the place for years.

  22. Hype O'Thermia

    No Elizabeth. Luck is the euphemism.

    • ### ODT Online Fri, 5 Jul 2013
      Carisbrook sale options revealed
      By Chris Morris
      The Dunedin City Council considered retaining Carisbrook, and subdividing the property itself, as it faced a multimillion-dollar loss, previously secret documents show. The idea was floated at a meeting of the council’s property subcommittee on December 18 last year, when council staff acknowledged it was ”not likely” the council’s $7 million investment would be recouped. A report prepared by council city property staff for the meeting outlined three options for councillors to choose between when considering the future of Carisbrook.

      The paper trail also confirmed Mr Clark was talking up the sale prospects publicly, just weeks before acknowledging to councillors a loss was likely.

      In the end, councillors voted to proceed with the sale to Calder Stewart, even after an effort to negotiate the company up to a sale price of $3.75 million failed.
      Read more

  23. The Following is the letter to the ODT which has been deemed ‘Too Long’. It might just as well have been, Too Controversial, Too Obscure, Too Contradictory, Too at Conflict with ODT’s Stance, Too Rude to Mayor Dave Cull. All of these reasons.

    It was announced by Mayor Dave Cull (ODT 4/7/13) that the total losses for the sale of Carisbrook amounted to some ($3.418 million), this being the cost to the ratepayers. This is a very sad commentary on the competence and integrity of the people responsible. That anyone in their right mind believed that the package was ever worth $7m beggars the imagination. Result, the properties change hands, presumably at a fair market value resulting in the stated loss.

    But is that it? I am as confused as many others seem to be. It is the $2 million loan that I can’t get my head around. If the ORFU has a debt on its books then wouldn’t the lender have that as an asset on its books? Originally, there was a $2m debt – an asset on the DCC’s books. During the transaction the DCC, in essence, purchased Carisbrook for $7m and created a new asset on its books ‘notionally’ valued at $7m. At the same time they received $2m from the ORFU that cancelled the $2m debt thus removing that asset from the DCC’s books. This was done contemporaneously as that would be the required treatment. From a cash flow point of view only $5m changed hands as the transaction occurred.

    That explains why Dave Cull claims only $5m was borrowed for the purchase. The DCC took that ‘notional’ $2m they received from the ORFU and used it to fund the difference to $7m. The sleight of hand here is that the original $2m loaned to the ORFU, that we then used to buy Carisbrook is gone! We don’t owe it to a bank so it just disappeared between the $5m paid and the $7m valuation on the DCC’s asset column.

    But the loan originally came from somewhere, a loan from the bank which would just lie in the ‘consolidated’ city debt somewhere. Face it, there is over $650m of that, so who’s looking? Alternatively, the ratepayers have carried it, or a subvention payment was paid (possibly from Aurora).

    So what happened to that money? It was reinvested into Carisbrook and disappeared in the difference between the ‘fair market value’ price obtained and the seriously inflated figure at which it was taken onto the DCC’s asset side of its books. Winners? Definitely the ORFU who in effect reneged on their debt.

    I would ask Dave Cull to explain why this is not the case.

  24. Elizabeth

    There is no story….. >> DCC FAIL <<

    It’s a massive eyesore now. –Clare Curran

    Sat, 21 May 2016
    ODT: The carcass of Carisbrook
    For three years, since buying the old ground from the Dunedin City Council in mid-2013, [construction company Calder Stewart’s] development director, Alan Stewart, has politely but steadfastly refused to discuss the site’s future in detail. […] A “pocket park” encompassing Carisbrook’s now-protected historic turnstile building is yet to eventuate, despite earlier talk by the Dunedin City Council. […] And Calder Stewart was also still yet to pay a lump sum to the DCC after agreeing to buy the old ground for $3.5million in 2013, council staff confirmed. The company had been given three years to pay, expiring on June 30 this year, and had so far contributed interest-only sums totalling about $420,000.

    ODT: Driving past old turf ‘heart-breaking’

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