DCC Draft Annual Plan 2014/15 Submission by Bev Butler

Received Friday, 9 May 2014 at 12:00 p.m.

Submission to DCC Annual Plan 2014/15 by Bev Butler

Thank you for the opportunity to speak to my submission.

I would like to express my support for the stadium review announced a few months ago.

Stadium Review

Due to concerns expressed by various members of the community, and my own growing concerns about the stadium issue, I decided to enquire into spending by DVML, through LGOIMA. It soon became clear that inappropriate spending had been occurring for some time within DVML eg hotel bills for up to $US350 per night etc. Purchase of boys t-shirts, gloves, hat, chewing gum and shaving gear. These are not business expenses. It is clear from some of the expenditure claimed that there is an ingrained sense of entitlement, which is unacceptable.

I understood that Council staff have been committed to curbing their budgets because of the debt problem and were unhappy to see the unbridled spending occurring within DVML. It wasn’t without its difficulties to obtain this information – DVML didn’t release it willingly. DVML treated the request as an imposition rather than an obligation. I was however – persuasive. Without the mechanism of LGOIMA requests some of this information may not have seen the light of day and hence steps made to address this wastage. It was reported in the ODT recently that DVML are now looking into charging for the future release of information. I believe this is a retrograde step: the purpose of acquiring official information is an important check on how public officers use public money or carry out their duties. Without it, unbridled corruption could occur.

Unfortunately for the Carisbrook Stadium Trust, they also operated inappropriately never dreaming that a group of citizens including myself would request information officially to expose their inappropriate spending. In fact, the former CEO, Jim Harland, informed me in 2008 that the CST was not subject to LGOIMA. What Mr Harland failed to tell me was that he had sought two legal opinions which both confirmed that CST was subject to LGOIMA through the DCC under section 2(6). To this day, Mr Malcolm Farry still shows considerable resistance to this and I have had to make several complaints to the Office of the Ombudsman. Mr Farry could have been prosecuted under the Ombudsman Act for his obstructiveness in releasing certain information should the Ombudsman have chosen to do so.

Why has this group of citizens continued to obtain information about the construction of the stadium? After all, it is now built and why don’t people just move on, as some say. I shall now explain why many people have not let go as would normally be expected.

Some may recall after the Christchurch earthquake there was a news item on TV1’s Close Up program. Shock and horror was expressed over invoices being sent to Christchurch residents for repair of their chimneys damaged in the quake. These invoices were for $2,000 and criticism was expressed at so little detail on these invoices. They just stated labour and materials $2,000. This was considered completely inappropriate invoicing and at the time there were questions of possible fraud.

Well, those quake invoices pale into petty significance compared with the CST invoicing. The CST presented millions of dollars worth of invoices to the DCC with merely two words on them: “Trust costs”. And, furthermore, this is after the Auditor General stated in his September 2007 report that no payments would be made to the CST without detailed invoices.

The former DCC Chief Financial Officer also sent me a letter in October 2007 stating that no CST invoices would be paid without third party invoices to support them. It was recently stated in an official information request that these third party invoices do not exist. In response, Mr Farry has now produced some paperwork, which the DCC is processing. This should have been done at the time and not retrospectively. When discussing this with a lawyer I said that the CST invoice process left the door wide open for fraud. The lawyer’s response was: “Not an open door, Bev, but a bloody great cavity!”

I emphasise that I am not saying that fraud occurred, what I am saying is the process was so flawed that no-one would know whether fraud had occurred or not. There is no statute of limitations on private or public fraud. According to the CST financial statements presented to the Charities Commission more than $71 million of public money went through this Trust. Every single dollar must be accounted for. Personally, I think it appalling that the process was so sloppy given that all the CST trustees are so-called top business people including two accountants. At best it shows the sheer arrogance of those trustees. I have also found other unexplained discrepancies in some of their financial reporting which I will deal with in another forum.

Another reason why a group of citizens are still investigating the stadium is because we believe criminal activity may have occurred.
So the issue is not whether you are pro or anti stadium but whether you are pro or anti corruption.

Outcomes from the stadium review

What I hope eventually comes out as a result of the stadium review includes:

1. A cost/benefit analysis of all the possible scenarios for the stadium including:
(a) Retaining the stadium under DVL ownership and DVML management
(b) Bringing the stadium “in house” under direct DCC ownership and management
(c) Privatising the stadium
(d) Mothballing the stadium until the private funding is raised as was promised by the CST prior to the stadium construction.

2. A cost/benefit analysis of the natural turf vs artificial turf .

3. An honest, full analysis of the entire stadium costs – by this I mean a report showing ALL annual costs of the stadium including DVML costs, DVL costs, DCHL costs (including from all the companies directly and indirectly). Ratepayers deserve an honest assessment – it won’t make ratepayers feel any better but at least we will know the full extent of the cost of the stadium. Many people think that the stadium costs Council just a million or two per year when in actual fact it is costing Council approximately $20 million per year overall, directly or indirectly. Ratepayers have a right to know. It is also very difficult to expect Council to make decisions when they are not presented with the full extent of stadium costs.

4. A formal request from the Council for the CST to front up with the three $1 million donations for construction which Mr Farry very excitedly announced in 2007. None of these donations have materialised nor has Sir Eion Edgar’s $1 million donation he announced in DScene in August 2009. A request for interest on late payment at market rates would also be appreciated.

5. A request for an increase in payment for naming rights from Forsyth Barr to keep it in line with what was initially promoted to Council by the CST’s agent The Marketing Bureau. Council was told naming rights were worth over $10 million but Forsyth Barr is only paying $5 million. Eion Edgar is trying to double count his $1 million ‘donation’ as being part of the $5 million naming rights. Naming rights are a corporate contract not a ‘donation’. As a trustee of a number of Charitable Trusts Sir Eion Edgar knows this. He can’t have it both ways.

6. A review of the Stadium Hire Agreement with the ORFU. David Davies, a former CEO of DVML, said ratepayers would be very angry if they knew what was in it – obviously this agreement is not advantageous to the ratepayer. So much so the ORFU are in a position where they only need to sell 200 tickets to break even.

7. No DVML staff should be working for the ORFU – ORFU is a private business and it is not up to the ratepayer to be subsidising the Union through providing staff support.

8. An assessment of the estimated substantial maintenance costs which are looming as reported in the DVML/DVL annual reports. Part of the projected $188 million (‘not one dollar more’) construction cost was a $6.4 million maintenance fund, which never eventuated, like the $45 million ($55 million including interest) in private funding for the construction lie.

Finally, the inappropriate spending, which occurred in the CST and continued through DVML when CST staff transferred to DVML, needs to be addressed. The community were provided with misleading information throughout the stadium construction but thankfully there is a democratic process in place which allows these matters to be exposed, to prevent this from happening in the future and bring those responsible to account.

[ends]

Posted by Elizabeth Kerr

24 Comments

Filed under Business, Construction, CST, DCC, Democracy, DVL, DVML, Economics, Name, ORFU, People, Politics, Project management, Property, Sport, Stadiums

24 responses to “DCC Draft Annual Plan 2014/15 Submission by Bev Butler

  1. Dunedin City Council – Media Release
    Extra Funds Proposed for Stadium Debt Repayment

    This item was published on 09 May 2014

    The Dunedin City Council will consider using savings to repay more debt associated with the Forsyth Barr Stadium. The Council will next week consider approving a one-off payment of $2.271 million to help balance the Forsyth Barr Stadium accounts. Of that, $1.77 million would be used to repay DVML debt, with the balance to fund a cash shortfall. The payment would be funded from DCC savings made in the current financial year.

    DCC Group Chief Financial Officer Grant McKenzie says, “A one-off payment to reduce debt further would be good for all parties and would clearly respond to community demand for the DCC to reduce its overall debt level.”

    In a report to be discussed as part of the Council’s Annual Plan deliberations next week, staff say the payment would enable Dunedin Venues Management Limited (DVML), which operates the Stadium, to balance its budget for 2014/15 while a comprehensive review of Stadium management and operations is completed. The Stadium has been operating for more than two years and during that time it has been unable to meet its budget. The draft DVML budgets for the 2014/15 year and onwards forecast annual losses. The report also recommends increasing the annual ratepayer contribution to the Stadium by an extra $715,000 annually from 2014/15, but this is an interim solution. That funding would come from rates.

    In January 2014, the Council endorsed Chief Executive Officer Dr Sue Bidrose’s proposal to carry out a comprehensive review of the Stadium’s management and operating model. The review is being carried out in conjunction with parent company Dunedin City Holdings Limited and the DVML Board. It will be completed mid-year, which will be after the 2014/15 Annual Plan budget decisions have been made.

    Mr McKenzie says, “An interim funding decision is required by the Council to allow the Stadium to meet its financial obligations in the coming financial year. The ongoing budget for DVML will depend on the outcome of the review.”

    Download the Forsyth Barr Stadium 2014/15 Budget Report (PDF, 200KB)

    Contact DCC on 477 4000.

    DCC Link

    ****

    9.5.14 ODT Stadium debt reduction to be considered

    • Mike

      Of course despite the ODT headline this doesn’t actually reduce the stadium debt, it just stops it growing larger, for just one year

    • Why is the Stadium handout always sneaked in after the Annual Plan hearings?
      Why can savings be found to give money to Stadium but not for anything else?
      Given the appalling performance of the CST and of DVML under Hansen’s leadership, why is he still Chairman of the DVML Board?

      • Exactly. Rugby rules. Appearances rule. DCC loves throwing good after bad in the wrong direction. God defend fraud and corruption perpetuated on our account.

  2. Whippet

    Good one Bev. Unfortunately as far as the CST is concerned, nothing has changed, and not likely to . Are we about to see history repeating itself out at Mosgiel, where the community board has handed over the investigation of the pool complex to a trust, and they are already asking council for more money, but they haven’t even prepared a budget for the money to be spent on.. Maybe they have already booked the hotels and rental cars to do a tour to nowhere.

  3. Crash Hot from Wilma McCorkindale at Fairfax News

    MUST READ: 9.5.14 Stuff: Stadium could cost Dunedin ratepayers millions
    http://www.stuff.co.nz/national/10029151/Stadium-could-cost-Dunedin-ratepayers-millions

    Excerpts:

    Stadium-weary Dunedin ratepayers may have to stump up more millions for their roofed facility if the city council votes “yes” next week. […] Bev Butler, one of the facility’s most vehement opponents, said the [council] proposal showed it was “obviously dire straits” for the stadium. Butler and her colleagues had city-wide support for their organisation Stop the Stadium before construction of the facility got the green light in 2009. Today’s announcement came as Butler was fresh from addressing the council’s annual draft plan hearings about continuing concerns over soaring stadium costs.

    “I mean they’re p…ing in the wind,” Butler said today. After being open for nearly three years and having had its honeymoon period and [ratepayers] paying millions and millions of dollars, the debt has actually increased. It is actually disgraceful that this is happening. It’s all because they never listened to the community when the community told them that their figures were wrong.”

    Butler quoted from a 2008 advertisement seeking community buy-in for the stadium’s construction, that said the stadium would be profitable and debt-free. The Carisbrook Stadium Trust (CST) said in the advertisement “the business plan for the stadium shows that it makes a profit” and that “unlike nearly all other council-owned facilities it will not need annual funding support”. CST also said its “assessment has been confirmed by two of New Zealand’s leading accountancy firms”.

    Ironically, before the stadium proposal was mooted, the Dunedin City Council was one of the most financially well-heeled in the country.

    Read the full article and wonder at your city council and its leadership, wonder hard.

  4. Anonymous

    Trusts are the new model.
    Council creates an incorporated Trust.
    Council funds the Trust.
    Trust deed grants wide powers to the trust.
    Trust has minimal accounting and reporting requirement back to Council.
    Council maintains the convenient fiction of “arms-length”.
    Trust approaches Council for more funds.
    Repeat.

  5. Fernfrond

    A modest rant apparently rejected by Stuff.

    The local rugby clique seems to wield some strange power over the Dunedin City Council. Whatever it wants it seems to get and it’s nearly always at the expense of someone else. The thing about Dunedin rugby stadium is that before it was built so few people wanted it, so many people saw through the spin, and yet it still went ahead. Why was that? And even though so many of the worst predictions have come to pass, why has the Carisbrook Stadium Trust and their allies on the Dunedin City Council remained unaccountable for their reprehensible decisions? Currently Dunedin is like a bankrupt rabbit caught in the headlights. Almost everyone hates the stadium but no one dares ask the tough questions about it. The council, ratepayers, and local newspaper need to grow a backbone and either get rugby to pay it’s fair share or get rid of the thing down once and for all.

    Thank God for free speech.

  6. It was always only ever about rugby. It was rugby folk who dreamed it up and sold it to Harland and Chin. Why? Because the ORFU was broke, owed over $5 million ($2m of which was to the DCC) and needed to be bailed out. The DCC obliged and we have all seen how it has panned out. It will probably go down in Dunedin’s history as the greatest fraud ever perpetrated. We are in the ‘shock horror’ stage at present, not knowing quite what to do. They know it’s a dead duck but can’t quite admit it. I suspect it hasn’t yet reached crisis point, but it soon will. Just wait till interest rates take a bit of an uptick. It won’t take much, two or three per cent will do and all hell will break loose. Just wait.

  7. Toby

    I see that B-P was not happy with Bev naming names and B-P now wants those spoken about given an opportunity to respond. I wonder if those comments originated from the old Carisbrook Hotel committee ?

  8. Toby; I think Bev was referring to those across the road from the old Carisbrook Hotel in the old Carisbrook ORFU rooms. They were talking about stiffening their resolve to ‘rort’ the DCC. Those in the old Carisbrook Hotel were just talking about stiffening whatever they could penetrate. There is a difference, though it might be hard (there it goes again ) to discern.

  9. ### ODT Online Sat, 10 May 2014
    Stadium payment may rise
    By Debbie Porteous
    Dunedin ratepayers will be called on for the third year in a row to help balance Forsyth Barr Stadium’s books. City councillors will next week be asked to consider increasing the ratepayer contribution to the stadium by $715,000 a year, bringing the total the city’s ratepayers pay towards the stadium each year to $9.840 million. Council staff are proposing using savings the council made on interest payments this year to cover the extra $715,000 and to make a one-off payment of $2.271 million to the council-owned company that runs the stadium.
    Read more

  10. Rob Hamlin

    The new ex-local ‘good ol’ boys’ establishment fiscal ‘grey man’ is turning out much as I expected:

    “Council staff are proposing using savings the council made on interest payments this year to cover the extra $715,000 and to make a one-off payment of $2.271 million to the council-owned company that runs the stadium.”

    The DCC’s massive exposure to interest rate swap derivative debt instruments that is hidden within the ‘variable rate multi-option note facility’, that is itself hidden within DCTL is presumably the source of these interest rate ““savings””.

    They are of course no real ““savings”” at all from this source in 2012/13. In the last three years this community’s massive exposure to swap risk has led to losses of circa $11 million in 2010/11, $25+ million in 2011/12, and a gain of circa $11 million in 2012/13. The losses of course were vigorously hidden in the books for the relevant years, never to be heard from again – ‘cept from me – much to Thomson’s disgust. The gain by contrast has been put blazingly forward this year as a “““saving””” to be spent on the Foobar moloch’s ongoing losses – God help us all.

    By my maths this ““saving”” still leaves us 25 million plus down on expectations on the pile of debt derivative shyte that the three DCTL bank partners in the facility above sold us at some point in the last few years. ““Savings”” My ass, they are likely to be well gone, plus some, by next year.

  11. I’m at the point that I WILL NOT believe any figures whatsoever espoused by LAY PERSON city councillors who pretend to know high finance.

    They don’t know high finance – if they did they would not be slumming it as city councillors at Dunedin, of all godforsaken places.

    The council books need to be opened up and that will take, I suggest, truly independent senior audit and accounting experts (working for the Community, not the Council) to fathom the Council’s consolidated accounts and publish straightforwardly the results for public consumption. A ‘court’ of accounting inquiry, if you will. [Audit New Zealand can get knotted]

    Until that happens I don’t place any faith in Council Piggies cutting slots in their own backs.

  12. Toby

    Yes Elizabeth. Layperson city councillors who pretend to know high finance, and yet cannot recognise $16 million walking past them out the door.

  13. Peter

    Do l detect a subtle shift in language re the stadium’s future? No longer ‘making it work’, but more about shoring up its losses one year at a time.

    • Hype O'Thermia

      Strike out “get behind it”.
      Substitute “lurch from one belt-tightening setting to the next” until the have-nots have been totally separated from the haves, and the haves have left town permanently, no forwarding address.

  14. Peter; these are the actions of people in denial. If you pretend long enough that things re solvable then hopefully it might turn out to be true. But in this case it is now three years on and they still cling to that dream. Pathetic really. As Rob hints, when the bell rings everyone hit the deck.

  15. Mike

    Now is a great time to remind people of section 63 the Local Government Act which reads:
    ——————————————————————————–
    Restriction on lending to council-controlled trading organisation

    A local authority must not lend money, or provide any other financial accommodation, to a council-controlled trading organisation on terms and conditions that are more favourable to the council-controlled trading organisation than those that would apply if the local authority were (without charging any rate or rate revenue as security) borrowing the money or obtaining the financial accommodation.
    ——————————————————————————–
    http://www.legislation.govt.nz/act/public/2002/0084/latest/DLM171886.html

    Which as I read it means that the council can’t fund DVML in a more advantageous way than it would receive itself from its own bankers – my reading of this is that just bailing DVML because it’s losing money would be illegal, they have to loan them money at a comparative rate to what they would get from the bank.

    It’s an obvious target for a ratepayer’s injunction …..

    The reason for this law is pretty obvious, the government wanted CCOs to compete with private enterprise on a level playing field – if DVML wants to rent out space it shouldn’t be able to undercut a competing landlord who can’t tap the ratepayers’ pockets to charge a rent below cost.

    • Mike, wondering if you might email another version of your comment here – reminding of the legislation – to all city councillors, mayor, Sue Bidrose, Grant McKenzie, and Sandy Graham.

  16. Does anyone else get the feeling that the hounds are circling? If Dave Cull and his mates don’t toss some more logs on the fire then woe betide the hounds come in.

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