Stadium: Fairfax business editor pokes DCC’s Fubar

### stuff.co.nz Last updated 05:00 05/03/2014
Business
Empty seats, empty pockets
By Chalkie
[…] Chalkie is concerned by a $48 million scheme to build a stadium in Petone for the benefit of the Phoenix A-League football team and its fans. From what we know of the proposal, the Hutt City Council – which means ratepayers – will be asked to contribute $25m towards building a “boutique” 10,000 to 12,000 seat arena at the southern end of the Petone Recreation Ground. […] The good burghers of the Hutt will be best placed to judge the practicalities of the scheme when further details are available, but the financial side has worrying similarities to the set-up of Forsyth Barr Stadium in Dunedin. Arm’s length charitable trust controlling the budget? Check. Private sector funding promised? Check. Troubled sports franchise as anchor tenant? Check.

[…] In Dunedin, those involved in developing the city’s shiny new covered stadium are far from universally popular after ratepayers ended up with huge debts and an ongoing headache from running the thing. The original idea, itself controversial, was for ratepayers to contribute $129m – split between $91.4m from the city council and $37.5m from the regional council – towards the $188m cost of the stadium, with private sector funding contributing $45.5m. The balance was coming from local trusts and a government grant. In the end, the stadium cost $224m and the ratepayers were hit up for $200m of that. The private sector funding was virtually zero.

You could write a book on the series of failures that left a relatively small number of people – Dunedin has a population of about 126,000 – exposed to such high costs. But even in the short version written by PricewaterhouseCoopers it seems councillors were not well informed about the project and financial controls were inadequate. The controversy still simmers. Local campaigner Bev Butler, a determined and resourceful opponent of the stadium scheme, continues to unearth aspects of the process that do not reflect well on its management. One of the latest involves the relationship between Carisbrook Stadium Charitable Trust, which runs the project, and the council.

The problem in this instance is the lack of transparency around public spending, even when there was obviously concern at the outset to keep a firm grip on it. More than that, Dunedin got in over its head and allowed itself to be the schmuck landed with everyone’s bill at the end.

Money from the council was supposed to be transferred to the trust only to pay for third-party invoices billed to the trust. An exception to this rule provided for the trust’s administration costs to be covered by a general monthly payment from the council. These “trust costs” invoices were for between $40,000 and $90,000 a month, running from July 2007 to January 2010. According to Butler’s information, which tallies with the council schedule, the payments totalled $2.2m over the period. An Official Information Act response from the council to Butler said the money was paid “to cover staff and administration costs” of the trust “to facilitate ease of administration”.

Chalkie can see that it would be easier to pay for the trust’s incidentals in this way. However, it opened a big hole in accountability for spending because the staff and administration costs detailed in the trust’s annual reports for the period total $1,068,796, more than $1m less than the sums invoiced. It is not clear from the accounts how the other $1.1m was spent because no combination of other costs – marketing, PR, fundraising or project administration – seems to come close to the right figure. Chairman of trustees Malcolm Farry told Chalkie he could provide documents to clarify the details last week, but unfortunately they were not yet available as we went to press.

There are several lessons for the Hutt City Council, including to beware of using a charitable trust as the development vehicle, to ensure private sector money is paid up front with a buffer for contingencies, and to ensure there is no ambiguity about costs.
Read full article

● Chalkie is written by Fairfax business bureau’s Tim Hunter.

Related Posts and Comments:
24.2.14 Carisbrook Stadium Trust: ‘Facts about the new Stadium’ (31.5.08)
22.2.14 Carisbrook Stadium Trust costs

Posted by Elizabeth Kerr

25 Comments

Filed under Architecture, Business, Construction, CST, DCC, Design, DVL, DVML, Economics, Geography, Media, Name, New Zealand, ORC, People, Politics, Project management, Property, Site, Sport, Stadiums, STS

25 responses to “Stadium: Fairfax business editor pokes DCC’s Fubar

  1. Carolyn

    Charitable Trust: This is what feathery bill is considering for the development of the Mosgiel pool. Could it be for the same reasons that Fubar used a charitable trust?

  2. Carolyn

    Apparently the ex wants the pool to be near his development, to encourage more sales for his business.

  3. Bev Butler

    We have now reached the stage of:
    Trapped within Bertrand Russell’s famous paradox.

  4. Anne Elliot

    I love the last sentence of the published article, “…local authorities should remember citizens would rather have bread than circuses.”

  5. Pedant

    Anyone hear the one about corrosion on the structural fixings?

    • Ah. Thanks Pedant. Let’s put our contacts to work.
      To be read in conjunction with no depreciation and no maintenance budget.

    • Anonymous

      It’s ironic that significant corrosion on the structure or the also rumoured subsidence of the foundation, would actually be good news. It would permit a claim for construction fault under the building warranty.

  6. Na. They’d fix it. no win.

    But the management company could be nailed…..

  7. Phil

    The subsidence in one corner has been ongoing almost since Day One. That’s what you get with reclaimed land. There were several places where they never reached bedrock at the time of construction and had to rely of friction piling, which is always a bit Heart In Mouth. Unless Hawkins carried out the geotechnical survey themselves, they are unlikely to be liable for any construction fault resulting from a lack of Good Ground. From memory there was even something written into their contract specifically excluding them from such liability.

    • John P.Evans, concerned citizen

      The lawyers for the council manage to write contracts in Favour of the staff and golden handshakes and also write and accept clauses to suit the contractors. Are we not better to have independent solicitors NOT from Dunedin in each and all of these matters.

      • Yes, of course. The thing about lawyers from another place, my father (an “unpaid” county councillor) drummed that into me when I was a young teenager. I watched him and a couple of pals score a signiificant win at the High Court against the then town clerk, to uphold a matter of natural justice. Made perfect sense not to use Dunedin lawyers then as now.

  8. Hype O'Thermia

    Phil, of course there was “something written into [Hawkins’] contract specifically excluding them from such liability”!
    Everyone and his horse had their eyes on the ball more than our bewitched, buggered and bewildered Council.

  9. Hype O'Thermia

    Vada their quirky use of the word “unexpected” !

  10. Anonymous

    There sure is something wonky with their reporting.

  11. Comments by Hype O’Thermia and Anonymous refer to this news item. Port Otago Ltd had been doing well with dividends to close ORC’s stadium debt. But oops! A ‘slight’ re-calculation required.

    ### ODT Online Wed, 12 Mar 2014
    Another year of stadium rate
    By Rebecca Fox
    Unexpected ”interest changes” mean Otago ratepayers will face another year of paying a special rate for Dunedin’s Forsyth Barr Stadium. A targeted rate to help pay for the Otago Regional Council’s $37.5 million contribution to the stadium was due to end in June.
    Read more

  12. Peter

    Not sure whether this is the best thread, but I notice in today’s ODT that NSW Premier, Barry O’Farrell, has resigned because he had a ‘massive memory lapse’ about receiving a $3000 bottle of wine after the Liberal’s win in the last NSW election.
    They have what they call an ‘Independent Commission against Corruption’ (ICAC) over there. They were able to unearth a ‘thank you’ note Farrell wrote at the time. Another former Liberal Premier was also caught out in 2002. (Sounds like we need a similar body here in NZ)
    I note this because it again points to a glaring lack of accountability here… and the $3000 bottle of wine pales into almost insignificance compared to the multiple million dollar rortings going on here at the local government level.
    The attitude continues to be ‘Oh well, lessons to be learnt. Let’s move on.’ We continue along this line at our peril. Corruption will grow and become even more insidious than is already apparent if citizens don’t rise up and demand accountability.

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