Stadium: DCC proposes extra funds for stadium debt repayment

Comment received from Mike
Submitted on 2014/05/11 at 12:42 pm

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.

[ends]

****

Dunedin City Council – Media Release 9 May 2014
Extra Funds Proposed for Stadium Debt Repayment

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.” Read more

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

Media Stories:
9.5.14 ODT Stadium debt reduction to be considered
9.5.14 Stuff (Fairfax News) Stadium could cost Dunedin ratepayers millions
10.5.14 ODT Stadium payment may rise

Related Post and Comments:
9.5.14 DCC Draft Annual Plan 2014/15 Submission by Bev Butler
10.5.15 (via comment) ODT In Brief: Stadium review sought

Posted by Elizabeth Kerr

35 Comments

Filed under Business, Construction, CST, DCC, DCHL, DCTL, Delta, Democracy, DVL, DVML, Economics, Highlanders, Media, Name, New Zealand, ORFU, People, Politics, Project management, Property, Site, Sport, Stadiums

35 responses to “Stadium: DCC proposes extra funds for stadium debt repayment

  1. John P.Evans, concerned citizen

    Smoke and mirrors. How can the council reduce overall debt by one entity paying off the debt of another. If this works for the council, I may put the proposition to my banker. If he agrees I’ll tell all as it means that we can borrow from ourselves and reduce our indebtedness. Better sell the bank shares also. They’ve got to be the loser in this scenario!

    • Mike

      Subvention payments – in this case writing off losses by one part of a company (DVL/DVML) against profits by another (forestry/delta/etc) to reduce the amount of tax you pay is a sensible accounting strategy.

      It also means you can keep the losses off of the DCC’s books. As ratepayers we see these losses as a reduction in our yearly rates rebate, this means it doesn’t show up on “rates increases” which is very convenient even though the actual amount we pay goes up.

      Now if you’re going to get serious about this you should load up the losses with everything you can, if you’re being stupid you give DVML a pass on paying rates, if you’re being smart you charge them all the rates you’re legally allowed to and then write that off too (the city’s leaving maybe $40k on the table by not doing this, just to salve some ex-councillor’s hurt feelings).

  2. John Evans

    Elizabeth, what happened to Bev Butler ‘s submission? Regards

    John evans

  3. Mike; the only fault I have with your reasoning is that the ‘subvention’ payments to DVL did not come from (City Forests/ Delta etc) they came from Aurora Energy Ltd only. That is the fraud in the AP. It suggests the dividend of $5.25m (less tax adjustments) was from DCHL generically. Wrong! It is Aurora only, and its only revenue comes from the sale of services to the conglomerate electricity consumers. A bloody great subsidy from the citizens to the Stadium. The DCHL others provide the $10.450m to the DCC.

  4. Hype O'Thermia

    It’s nutty, it’s stage-magician stuff. If the magician borrows a $2 coin off you, covers it with a hanky on a table then pulls it out of your ear and gives it to you, are you better off? Aren’t we too grown-up to be told this crap about how if you shuffle money from a pocket to another pocket to an ear it’s somehow paid one debt without incurring another?
    Spoiler alert:

    It’s THE SAME $2 COIN, folks!

    It’s like taking out your Kiwisaver funds to get the car roadworthy and saying it didn’t end up costing anything because you didn’t put it on the plastic.
    Smoke, meet mirrors. Dave, meet reality. Now shake hands nicely.

    • Mike

      Oh it’s not magic, the money that goes from the profit making part of DCHL (while there still is one) to DVL to pay for the stadium doesn’t go to the ratepayer rates rebate.

      It’s your pocket and my pocket that gets lighter as this process happens, and the banks holding the mortgage whose pockets get heavier.

      There is however a tax advantage to the DCC if they do it this way, that’s because if DCHL was paying this same money to us as a rates rebate it would be a taxable profit and the government’s pockets would also get a bit heavier.

      The DCC had a choice, they could have kept DVML/etc in-house, that would mean they would be paying tax on the money that comes from DCHL but it would also mean that the law restricting funding of CCOs would not apply – instead they decided to go for the money saving (not a bad thing) but it limits the control they have over DVL/DVML, they have to behave more like independent companies, including perish the thought, the mandate that they “conduct their affairs in accordance with sound business practice” and that they “exhibit a sense of social responsibility by having regard to the interests of the community in which it operates” (and in this context that’s not the rugby community, it’s the wider Dunedin community).

      • Hype O'Thermia

        So whose job is it to make them “conduct their affairs in accordance with sound business practice” and “exhibit a sense of social responsibility by having regard to the interests of the community in which it operates” ? Because whoever it is they’re not doing it. Time for a written warning? Opportunity for training to being them up to competence? All those hoops that have to be jumped through before you can sack anyone!

  5. Peter

    The stadium financial money go round seems to me not so much robbing Peter to pay Paul, but Peter robbing Peter to pay Peter!

  6. Which Peter are you Peter? The robbed or the robber?

  7. ### whaleoil.co.nz May 13, 2014 at 5:00pm
    More proof local government is turning feral on ratepayers
    By Cameron Slater
    Alexander Tytler wrote of the cycles of civilisation in the 1700s and mused that the first signs of decay of any civilisation are when authorities start to ignore the rule of law.
    Whilst we live in an apathetic society and the issues of others don’t bother us, we should be concerned by the way in which local government is starting to act in New Zealand.
    Saddled with increasing debt and with development bogged down in bureaucracy local government is becoming notorious for its negative impact on progress, growth and our way of life. Pushing ideals for intensification and running riot with a cavalier and arrogant attitudes local government is out of control. Culturally, local authorities believe they have the right to act the way they do and they will blatantly ignore their functions under the Local Government Act and Resource Management Act until a Court corrects them – which doesn’t occur much because property owners don’t often take them to court.
    Read more

    • John P.Evans, concerned citizen

      There is only one way to reform local government. Make it smaller.
      Lower salaries for the top people and less employees. Any other model worsens an already dire position.

      • Oh totally, John. For a mainly rural district with a just one large town (including Mosgiel) and several tiny townships we don’t need the raft of council staff/managers/team leaders who aren’t directly seeing to maintenance and upgrade of the core infrastructure network, environmental health standards, practical planning and regulatory functions, and primary governance officer support. The empire needs to be busted once and for all – LGNZ has a lot to answer for in ratcheting up the ‘imagining’ of LTA functions. As if DCC didn’t already have that own infection. The consequence of Central Government divesting its responsibilities to councils is the extra layer of stodge to the whole bureaucratic ‘industry’.

  8. The corporate and political bullshit continues.
    PRO-STADIUM Dunedin City Council deliberately steals your money and the money of our most vulnerable citizens, to not only ‘approach’ debt (DCC finances are in a dire state, ‘approaching’ is not ‘reducing’) but also to subsidise professional rugby (ORFU, Highlanders and NZRU) via DVML and DCHL/Aurora Energy (Otago power consumers). Unless ratepayers drag the council miscreants before the Bench the misappropriation and misuse of ratepayer funds will continue. Dunedin people get your spines straight on this — STOP acting like trained lonely mice at the behest of this fraudulent and corrupt city council. In concert, hit DCC head-on using the LGA and the Crimes Act.

    YOUR PRIVATE MONEY DOWN THE TUBE
    ### dunedin.co.nz May 14, 2014 – 7:52pm
    Annual plan deliberations see another $3 million for the Stadium
    Another three million dollars is being spent on Forsyth Barr Stadium. The Dunedin City Council voted to spend the money during its annual plan deliberations this morning. And like everything to do with the stadium, the council’s decision was not without controversy.
    Video

  9. Millions more for stadium
    Millions of dollars of ratepayers’ money is set to be poured into shoring up Dunedin’s struggling Forsyth Barr Stadium, but the city’s crumbling coastal defences will also receive a boost, the Dunedin City Council has signalled. […] The discussion came after councillors earlier voted to pump another $3.6 million from council savings into Dunedin Venues Management Ltd, the company running the stadium, in the coming financial year.
    http://www.odt.co.nz/news/dunedin/302328/millions-more-stadium

    ****

    Cr Chris Staynes said the stadium was built not on the basis it would make money, but that it would attract money to the city.

    Support seen as best option
    Forsyth Barr Stadium may be losing money but events held there since it opened have provided a $45 million economic benefit for Dunedin, the boss of the company running the stadium said as the city council agreed to pump in another $1.4 million to help the company break even. Councillors agreed yesterday that covering Dunedin Venues Management Ltd’s predicted loss for 2014-15 was the most sensible option until a realistic operating model for the venue was in place.
    http://www.odt.co.nz/news/dunedin/302311/support-seen-best-option

  10. Peter

    It is indeed ironic that with the council voting for ethical investment—-which I support…. they continue to bankroll an unethical investment like the stadium, manipulated for years now by a clique of vested interests. These vested interests are the people who used public money which they then privately made their own money on. Is that ethical? Do we just now go along with this and turn a blind eye?
    I get the distinct impression this new council doesn’t really know what to do with the stadium and are in panic mode. The easiest thing in the short term is for them to continue to shore it up, and bring no accountability to those who have promised private funding/donations for the stadium. (We know who they are, don’t we.)
    I am beginning to feel this stadium review will lop a few dunderheads, to give an impression there is a plan to deal with the stadium, and continued blind faith will be put on the new CEO, Terry Davies, and any new ‘restructured’ board, to ‘get things right’. (Bureaucrats, by nature, restructure to either get rid of people or to look ‘onto it’….when they are not.)
    The trouble is that the fundamentals for a successful, debt free stadium are not there… and never have been. If stadiums in bigger, more geographically favoured catchments can’t get it up, what hope have we got? None. I’m confident this year’s ‘one off’ will be joining a string of ‘one offs’.
    How long can this travesty last? The council needs to get some balls and make some hard calls on the stadium. The trouble is there seem to be too many eunuchs who don’t want to ruffle (rugby) feathers.

  11. Hype O'Thermia

    Actually it’s the councillors, the DCC, not the ratepayers who are in a position to make the necessary ETHICAL decisions. All we can do is vote, once in 3 years, and what candidate has the honesty to stand up and say “If elected I will be a wimpy bewildered lapdog like those who went before me”? Self-employed renters can pack up and vote with their feet. Property owners with mortgages, jobs, spouses with jojs, kids at schools can rent-strike and risk losing everything. Then live in a tent in a friend’s backyard, with fines to pay off? It’;s a risk one person can take for him/herself, it’s not ethical to impose that on one’s dependents. It would be OK if it was a small enough, angry enough community to get critical mass of dissidents but it’s not.
    Before the stadium decision was final I spoke to a wide range of people. Tradesmen and business people largely supported it – jobs! Money flowing into the region!! – but those that didn’t, those that foresaw the probable fate that has indeed turned out the same or worse than we predicted, had to be muted in their opinions because of the wide range of “consequences”, because of the octopus hold the Tartan supporters had over economic activity in this city. Upset the wrong people and you could watch contracts and orders go to anyone except yourself. They knew how things work in this city, they’d seen it in large or small instances for long enough.

    • Hype, you miss my point entirely. Given what has and is going down at DCC, ratepayers and residents have grounds to consider taking legal action against the local authority. No-one has to wait for the electoral process to tick by which clearly is not the mechanism to effect massive change in representation.

      • Hype O'Thermia

        Sorry, so what is it?

        • To take legal action.
          Why is this ‘university’ city so slow and an educated district like Mangawhai so on the ball. Rhetorical.

        • And spot Dunedin’s lack of a powerful and well-led ACTIVE ratepayers and residents association.

        • In terms of ratepayers’ private assets, is there more risk attached to being subservient to unwarranted council spending on propping up the stadium operation year in year out (it’s like Cr John Bezett’s take on the loss of sand from St Clair beach… your money gone gone gone) or to a short sharp bout of legal stoush to successfully stop the operational bleed/council subsidy (via rates funding), thereby sticking solely to debt reduction while you remove the stadium building from council holdings by whatever means available.

          On top of that there’s the potential to grab restitution from the stadium progenitors and professional rugby (with SPECIAL attention to their reckless ways).

          In that fight ratepayers and renters have numbers on their side.
          Although, New Zealanders are typically hesitant to use the power of physical numbers to right wrongs – an odd tick in the communal armory.

  12. Peter

    The comment by some councillors that ‘when’ there is a big stadium event…..rare as we know….the town buzzes. Well, it does, but the benefits go to the same people….well placed cafes etc.
    The fact that in the bigger picture the city bleeds profusely from this white elephant evades them. This kind of illogical thinking doesn’t give confidence in them, does it.

    • Toby

      How right you are Peter. The stadium was built with ratepayers’ money to bring benefits to Dunedin businesses. In other words the ratepayers are subsidising these businesses that appear to be incapable of running a business profitably, and rely on handouts. Typical Labour thinking. The State (in this case the local body) will hold your hand in time of greed, while the poor old ratepayer continues to bleed.

  13. jeff dickie

    Cullible; Adjective. A combination of being culpable and gullible. An ability to believe in the impossible. A condition often accompanied by a tendency to make dramatic backflips along with promising and doing the opposite.

  14. Peter

    Where does Terry Davies get this $45m trickle down figure from? DVML does not have an inhouse ‘brains trust’ to do the economic analysis to reach this figure. Sounds just like the bullshit we heard from his failed predecessors who couldn’t get out of the job quick enough.
    This also comes across as a jack-up to tie in with the comments by Crs Staynes and Thomson that the stadium was never built to be profitable but to bring us bucks into the community! This is bullshit because Farry and Co claimed the stadium would be a profitable asset in its own right.
    This $45m drip feed to our fabulously wealthy community, Davies tells us, is part of the stadium review. I smell a rat here. The stadium review is increasingly looking like a document that promises a new dawn but delivers nothing except a few name changes on the office doors.

    • Bound to be from COC which is helping DCC with the stadium review… The old false multiplier LIE – care of the COC ‘mohammad’ Ali and friends.

      • Peter

        Yes,that makes sense. Within Ali Copeman on National Radio giving a stadium promo, the G D Crs comments during this DAP on the stadium, to excuse another massive injection of blood money, we have the jack up.
        Probably felt the need given they will have to piss off those who have missed out. Again.
        What a bunch of headless chooks. Next they will be telling us…..now that ‘making the stadium work’ is not the issue…stadium debt is a reality, but ain’t it great when we have the….occasional… big party in town. Hold it. They already have!
        What hope have we got? Reality check,council.

    • The stadium review will arrive at SICK recommendations for raised rates spending on the whole stadium operation, cleverly hidden in council budgets the public won’t be able to see or monitor. You read it here. Massive debt and failure within the council stables does not provide any transparency or public accountability, world without end.

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