DCC councillors, no idea annual cost of owning, operating FB Stadium

Updated 2013/10/08 at 10:47 am.

DCC departing councillors [ODT Files 8.10.13] 1Platitudes — and much more, including seriously remiss untruths about the ‘value’ of councillor contributions — flew at yesterday’s city council meeting. Dunedin City Council members farewelled five long-serving councillors at their final meeting: Neil Collins, Syd Brown,
Bill Acklin, Fliss Butcher and Colin Weatherall.

Councillors said Cr Brown was a fair-minded and trusted member, a consistently hard worker who made a ”very substantial” contribution, especially on financial issues and as a strong advocate for Mosgiel, in his 15 years on council. ”He is a wise old owl. When he speaks, I listen and know we all do,” Cr Collins said.

Read more at ODT Online.

——————

Comment received.

JimmyJones
Submitted on 2013/10/07 at 6:31 pm

The average DCC councillor still has no idea of the annual cost of owning and operating the FB Stadium. They have been misled by the way the annual reports are arranged and they get confused because there are two stadium companies with similar names, as well as an interest cost to the DCC for the loan to buy the shares to buy the stadium.

Jim Harland, Paul Orders and their staff have been asked many times to disclose the total financial impact of the stadium. Mr Orders eventually promised to do this at an annual plan public meeting, but it hasn’t happened.

The annual reports of the stadium companies (DVL & DVML) to be approved today by our hapless councillors, have enough info to calculate a good estimate of the total cost.

These figures are from the annual reports page 6 (DVL) and page 9 (DVML). Remember that in these reports the term “subvention payment” means “subsidy” and has the effect of disguising the size of the companies’ losses. The city’s renters and ratepayers end up paying for both the disclosed losses and the subsidies so we need to add them together to get the total impact.

Total Stadium Impact:
Item:___Disclosed Loss_____Subsidy_______Total Loss
DVL:______$4.8 million______$7.3 million_______$12.1 million
DVML:_____$1.0 million______$0.6 million_______$1.5 million
Cost of interest on debt for DVL shares:________$5.1 million
Cost of rates subsidy for DVML (approx):_______$2.0 million
Total Ratepayer Impact (approx):_______$20.7 million

The DCC held stadium debt is $78 million and I have chosen the interest rate to be 6.5%. There might be some other costs that I haven’t thought of. The actual interest rates paid by DVL seems unrealistically low to me at 5.87%. Most DCC projects are charged 7.00%, so DVL’s low interest rate could amount to a secret subsidy of $1.6 million.

Anyway, $20.7 million per year is a lot of money and citizens and councillors need to know what is going on. We have heard DCC mayors and councillors promise financial transparency, but it seems that some of them have wanted to keep this figure quiet.

[ends]

Posted by Elizabeth Kerr

*Image: odt.co.nz – departing city councillors who brought you the stadium, one way or the other . . .

19 Comments

Filed under Business, DCC, DVL, DVML, Economics, Project management, Property, Site, Sport, Stadiums, What stadium

19 responses to “DCC councillors, no idea annual cost of owning, operating FB Stadium

  1. Anonymous

    Meanwhile, we’ve known the $20M per annum figure quite well here for 3 years or so. It’s not that hard to work out.

    • Some early mentions of “$20 million pa” at What if?, not all in the same direction !!!

      JimmyJones
      Submitted on 2010/09/28 at 5:20 pm
      Paul, the debt is for a long time, and for a while the DCC is seriously constrained from adding to the debt mountain without suffering a credit downgrade. The warning is explicit.

      More important than this is the stadium’s forecast operating loss which will be with us for the lifetime of the stadium and probably longer. Compare the stadium capital cost $200+ million, to 50 years of operating losses, 50 x $20 million = $1 billion. Some of you people call this economic development, but I call it economic vandalism.

      Remember that DVML profit forecasts have been released (with its SOI) but the big losses will be from DVL (forecast not released). The third component is the interest on the DCC-held stadium debt. At the DCC Mayors Forum, Mayor Chin lied to us by correctly saying that DVML will break-even, but at the same time leading us to believe that this represented the full burden on the city’s renters and ratepayers. It does not.
      https://dunedinstadium.wordpress.com/2010/09/28/dunedins-newest-mp-and-the-hot-potato/#comment-13406

      ****

      Calvin Oaten
      Submitted on 2010/08/13 at 11:03 am
      Kate [Wilson]; Peter is right. No matter what you think, Malcolm and his associates, – including Peter Chin and Jim Harland – did their level best to “sell” the stadium. Malcolm stumped the provinces, extolling the benefits. He even said there would be a $20 million economic benefit per year accruing to the districts because of it. Lee Vandervis and I had a session with Malcolm on radio Rhema and it was a constant “my way or the highway” rant all through.
      Oh. and let’s not forget Peter, at the grand announcement Malcolm stated that there would be no call on ratepayers for funding. In fact, he stated that if it could not be funded out of existing resources (whatever they were) then he would have no part of it. And that is a fact. So you see Kate, your faith in Malcolm might be just a little rose hued.
      https://dunedinstadium.wordpress.com/2010/08/06/seriously/#comment-12568

      ****

      Calvin Oaten
      Submitted on 2009/11/13 at 10:14 am
      Kate [Wilson]; you say “The time for debate on the building of the stadium has finished, now we have to ensure that we reduce costs by deriving unique and original ways to fill it, while not adding new financial burdens or reducing income streams from other sites.” Brilliant! So, let’s spend $45 million plus to construct an international class conference centre in the Octagon. That should do it, ensure that the stadium won’t be compromised. Oh, and while we are at it, how about we set up a management company with a board of directors with fees and expenses amounting to some $100,000 pa. Then of course we should have a management structure for the directors to direct. So, we appoint a manager at a salary of $230,000 – $250,000, set up an office with staff, computers etc and then let the whole lot become part of the revenue over expenditure. The revenue of course, will come from patronage of the combined venues. But that is OK because Malcolm Farry said that there would be economic benefits to the region in excess of $20 million per annum once this is all up and running. Kate, as a councillor, don’t you think you should perhaps go and shear some sheep?
      https://dunedinstadium.wordpress.com/2009/10/16/highlanders-news/#comment-9075

    • Yes, Anonymous, there are no hard maths involved. The hard bit is to get an official statement from the DCC and to get the ODT to fix their selective blindness. To me, $20 million each year is a shit-load of money being wasted. We were lied to then, and we are being lied to now. What ODT readers see is Dave Cull saying he was encouraged it was ”heading in the right direction”. and- ”They both increased their revenues and decreased their costs, so in both areas where they can do anything, they’ve got a good result”. There was no mention of DVL’s big loss either.

  2. Russell Garbutt

    Jimmy Jones, of course the real costs have been obscured – what is important to realise is why they are obscured.

    Firstly, there are those that caused this whole stadium mess to happen. The people like Malcolm Farry, Jim Harland, Peter Chin, Syd Brown, and the rest of the “active” Councillors, the “investigations” group involving the Community Trust, the ORFU and representatives from the Otago Regional Council and the DCC and of course the private Carisbrook Stadium Trust. They want any facts to be obscured or remain hidden because the figures and forecasts they provided over an extended period of time were always shonky and have been proven to be so. They also want all or as much of the details obscured because many of these people or the groups they represent have benefited financially from the entire shonky deal. Whether it be from over-inflated land prices, consultation fees, or the like, many of these people or groups have fleeced the ratepayers. Just witness the whole financial mess round the DCC bail-out of the ORFU and the Carisbrook purchase shambles.

    Next are the group of Stadium Councillors whether it be on the DCC or the ORC. They have been plainly shown to be central to the whole stadium project going ahead. The question that is central is whether this group were simply stupid, or whether they were willing participants in a process of pushing something through that was clearly nonsensical. Some, like Neil Collins, readily admit in public that they don’t understand Council papers, particularly those with financial detail and merely follow the lead of those that apparently do. People like Syd Brown and Paul Hudson. But in hearings after hearings and in spite of overwhelming evidence that showed that the figures and data supplied to Council were erroneous, misleading and in some cases, false, these Councillors plunged on ahead in the same way as the Captain on the Titanic, and with the same result. So easy to see why these Councillors want as much data obscured as possible.

    Next are the current Councillors. While some, or most of them can point to their opposition to the Stadium, they were elected on the basis of increased transparency and in most cases “making it work”. They have had no other plans other than acceptance of what is sitting on the ground and seemingly have not considered a single other alternative. The problem with this stance is that it is as plain as the evidence that was presented in hearings before the stadium was built, that the stadium will NEVER work. The operational costs outweigh the operational income by vast amounts, and this disparity has no other way to go in the future except increase because of deferred maintenance and complete unwillingness to force professional rugby to meet its financial obligations to pay for the use of the stadium at a reasonable level. And we have no way of knowing whether the costs of construction debt will go up further. These Councillors don’t want to admit that “making it work” is not working and so are perfectly happy to go along with bundling the stadium financials into a wider group with the further confusion of entities such as DVL. Hoping that “something” will happen does not indicate community leadership or vision.

    Next are the regulatory or enforcement authorities such as the Office of the Auditor General. As per with the Kaipara mess, the OAG have been shown to be remiss in the least, and the residents of Kaipara (who I think have less debt per ratepayer than Dunedin) are taking legal action against the OAG. The OAG are supposed to safeguard ratepayers from reckless, stupid or foolhardy actions by Local Body Councillors or employees. Were the OAG simply remiss or complicit in the DCC decisions to borrow money to levels above limits imposed to protect ratepayers? What was their role in the shonky land deals in DCC owned company Delta which resulted in huge financial losses borne by DCC ratepayers? Easy indeed to see why these agencies would be keen to obscure any failings on their part I would have thought.

    Lastly, obscuring any facts reduces the chance of actual accountability. How much easier it is to just say that “there is no point in re-examining the past” or “just move forward” rather than this person or that person was directly responsible for the financial hardships or ruin that have been foisted upon the ratepayers of Dunedin. I think we have seen enough evidence to show that allowing people or entities to just “walk away” does not work either.

  3. But is that even the total cost? I don’t think so. It might be what they are paying in interest etc but I’ll wager there are more costs than that.

  4. Updated post at top of thread.

    ### ODT Online Tue, 8 Oct 2013
    Retiring councillors farewelled
    By Debbie Porteous
    Dunedin City Council members farewelled five long-serving councillors at their final meeting yesterday. Councillors closed the final meeting of the triennium with praise and well wishes for councillors Colin Weatherall, Neil Collins, Syd Brown, Bill Acklin and Fliss Butcher, who all announced their retirements before the local body elections.
    Read more

  5. I wonder just what it is that is put in the water jars at council table? It seems to set them all off on a tangent in which the brain loses all sense of proportion. This latest example of ‘self congratulations’ from one to the other is an incredible show of ‘narcissism’ and ingenuous ‘claptrap’. I find it deeply insulting when those staying (hopefully) wish to emulate all those who are bowing out. For God’s sake, some after twenty years or more couldn’t discern an ‘ethic’ if it jumped up in front of them. What an ‘epitaph’ to be leaving under.

    • Collins and Bezett have been door mats.
      Bezett is gunning for re-election as a “no nonsense” councillor…
      As for that piece of mud Hudson, how many stupid voters will rank him highly ?

      Have these men faithfully represented their wider constituency, and even before the central ward was formed ? NO.

  6. peter

    I found a fair number of these comments particularly insincere. Particularly the ones from Greater Dunedin where their private comments are at variance. If these non GD are so wonderful, why did they form a ticket to promote so called better quality candidates? Such hypocrisy.

  7. Anonymous

    I think the photographer has done a good job on that picture. It encapsulates the councillors and their position on the documents they were entrusted to hold in the best interests of this city. Some of them will be hoping – HOPING! – those documents continue to be swept under the council carpet.

  8. My comment at the ODT about the $20 million stadium running cost coverup is here >> Profits and DCC companies. Tell them what you think.

  9. Jimmy, there is the small matter of the rate differential on the land occupied by the stadium. Pre stadium the combined titles had a rating value of $1.7m. As a stadium, it was decided that it should be rated at $134,000 pa excl GST. So right there is some $1.5m pa added cost. And then there is the land taken for State Highway 88 with the rateable loss also a direct cost to the stadium. These are items which figure nowhere near stadium costings. Then of course there is the Carisbrook purchase sale debacle, which was largely a smokescreen to disguise the fact that the ORFU avoided paying back the $2m loan owed the DCC.

  10. John P.Evans, council nominee

    Malcolm Farry invited 30 entrepreneurial Dunedinites to Ombrellos and asked them to support the stadium financing by committing to the project.

    None did.

    In discussions afterwards all were of the opinion that as the people who could support the stadium were not interested at any price, Malcolm’s ability to raise the private sector financial requirement was improbable, the stadium concept was a dead duck.

    It was only the ORC chairman coincidentally the real estate agent who organised the sale and purchase of the harbour basin real estate and his ORC councillors committing over $35 million of ORC rates monies and the councillors of the DCC that allowed the stadium expenditure to be approved.

    The final group in the stocks are the banks who loaned the DCC the money.

    The ANZ bank (National), loaned the money despite having purchased the Homebush stadium in Sydney a city of 4.4 million people, the stadium regularly three times a year filling with over 100,000 people for the sum of $A10 million.

    The banks knew what a stadium was worth and what an ongoing liability they are, and without the ratepayer being a victim and having to pay whatever is needed would never have provided the loan. As is being proven in Kaipara, despite illegal spending, the ratepayer must accept all of the financial errors made by council employees and councillors.

    The big doozy, not yet faced is under what conditions and what fluctuations in interest rates do the interest rate swaps wipe out the $200 million involved.

    It was the friendly banks who offered these dodgy and dangerous instruments.

    • Russell Garbutt

      John, what you describe is a key element in what many describe as the single biggest community fraud ever foisted on the Dunedin citizenry. The rugby stadium would never have been built but for a number of key people deciding it would proceed. I have often said that the number of people numbered about 20 in total. I think I am still right with that number.

      It is an appalling indictment on this community that those few individuals responsible for these millions and millions of debt, lost opportunities, and financial hardship on those that can least afford it, remain in the community without any accountability.

      Over recent years the wider community seems to have grown immune to the actions of politicians, Police, regulatory authorities and others who seem now to be able to do deals to protect the interests of the few over the interests of the many.

      Farry’s vain attempts to drum up support should have been seen by those within the DCC and the ORC as a very strong indicator that this whole project was doomed to failure. Why was it not seen so? One can only look to see reasons……..

  11. Phil

    To be fair to ANZ in Australia, the “purchase price” includes the writing off of the massive debts owed to ANZ by the original owners of the Homebush stadium who were no longer able to service the debt. The $10 million was the difference between the amount owed to ANZ and the agreed value of the stadium. The $10 million is a bit of a meaningless figure. It does show further proof however that, even in a much larger catchment area, stadia do not pay their way.

  12. Hype O'Thermia

    Thanks John Evans, very interesting background. At a guess, you were one of the “30 entrepreneurial Dunedinites” , if not you are a good friend of more than one of them.

  13. Anonymous

    Crossovers continue: I see from tonight’s game that Calder Stewart have sponsored the TV box on the North Stand.

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