What about the state of New Zealand stadiums?

EMPTY: Not all events appeal to sports fans.
EMPTY: Not all events appeal to sports fans.

Rugby has become our religion, Peter Lineham said in 2011.

Kiwis, never a people particularly enamoured of traditional faiths, used rugby to fill the New Zealand void, the Massey University professor suggested. Crowds in grandstands had become congregations, our prayers were to Richie, and our places of worship had become rectangles of grass 70 metres wide.

But what happens to our cathedrals, the large stadiums found in every major centre, if we lose faith?

The covered 31,000-seat Forsyth Barr Stadium in Dunedin, constructed in time for the 2011 Rugby World Cup, may be the newest major sporting facility in the country but has already proved the most controversial.

The bulk of its $224 million construction cost came from Dunedin City Council, but ongoing costs to ratepayers have caused considerable angst. Ratepayers were forced into a $2.3m bailout in May, and are mulling whether a permanent annual subsidy will be required to keep it running.

Getting to grips with exactly how much stadiums cost is a tricky exercise. Construction has often been piecemeal, with grandstands redeveloped or rebuilt over time, blurring total capital expenditure.

And determining operational costs - whether stadiums require ongoing contributions by ratepayers - is further complicated by many facilities being run from within city councils or by council-controlled organisations. This makes the extraction of a discrete set of accounts, most notably in Dunedin and Waikato, an impossibility.

Analysis of accounts for Wellington and Auckland, run by dedicated trusts and two of the most transparent stadiums, shows that break-even is realistically the best case.

Eden Park recorded a $7.2m loss in 2013, although chief executive David Kennedy argues that this includes an $8.2m depreciation charge and the stadium is making a cash surplus.

"Large facilities like this generally do attract a bit of government support in other countries, and they're regarded as public facilities," says Kennedy.

Massey University economics lecturer Sam Richardson, who has turned analysis of stadiums into a career, says there is a good reason the facilities are seen as public ones.

"The general consensus is that the private sector doesn't build stadiums, because if you have to start paying interest on your capital loans it's extremely difficult to make the thing financially viable," he says.

Shane Harmon, the chief executive of the Wellington Stadium Trust, says the best stadium operators can hope for is to break even.

Harmon's stadium generated a modest $3m surplus last year, despite a downturn in attendance for rugby - the main user of the facility - and recently floated the idea of putting a roof on to the 36,000-seat stadium to make it more attractive to punters.

Such plans have been touted before, but failed to gain traction once its cost, of up to $100m, became apparent.

"We're not advocating for a roof, we just want to know if it's feasible, and know if there's a desire to go there," Harmon says.

But even if this plan came to fruition, Harmon is not sure a roof would prove a magic bullet. "I'm not convinced that the roof is the answer to smaller crowds either."

He characterises large crowds at the turn of the millennium, when Super rugby crowds in Wellington averaged more than 30,000, were because of a happy coincidence of honeymoon and history. "It was the crest of a wave at that point. A number of things happened at that point of time that we saw crowds that filled stadiums across the country."

A replacement for the archaic Athletic Park and the novelty of professional rugby were the drivers, he says. "It would be very difficult to return to those days. We're in a different era now."

At New Zealand Rugby headquarters, chief executive Steve Tew broadly agrees that the glory days are over. "One day we could aim to get back to those days, but you have to accept the world has changed."

Tew says crowd attendances for a Super Rugby game are down 5.8 per cent on the year to date, but points to broadcast viewers increasing 2.5 per cent as where part of the tension lies.

Viewers watching broadcasts of a game have supplanted punters going through stadium turnstiles. New Zealand broadcasts more live sport per capita than any other country, Tew says.

But there is one niche where the faith of the rugby faithful remains strong: All Blacks tests. Hosting the national team is often the only time stadiums up and down the country reach capacity.

While great for New Zealand Rugby coffers, Massey University's Richardson says the All Blacks have warped stadium construction priorities.

"It's an absolutely huge detriment. If you're building a stadium where the financial viability year to year relies on an All Blacks test, there's no question New Zealand Rugby plays a massive part in whether these facilities are going to be used to their potential," he says.

Sean Murray, the general manager of events and economic development at Hamilton City Council, is happy to be operating the relatively modest 26,000-seat Waikato Stadium.

Murray also does not whitewash the bill - $55m in today's dollars was spent upgrading the facility in 2002 - or who is the primary beneficiary.

"It is a big cost. Certainly I hope rugby appreciates that, because they're not putting down the capital costs," he says.

FOR his part, Tew says the criteria for hosting test matches are "transparent", and smaller venues in New Plymouth and Napier have played host in the past.

He does, however, say ticketing revenue plays a part in allocating matches and notes Dunedin's decision to build Forsyth Barr Stadium came after New Zealand Rugby downgraded the status of Carisbrook, effectively dropping it down in the pecking order.

These issues are particularly vexed for Christchurch, whose residents are faced with a debate over replacing the quake-stricken AMI Stadium.

In 2012 the Government announced a new, covered, 35,000-seat stadium as an anchor project of the Christchurch rebuild. Central government would contribute $37m to its total expected cost of $290m, with Christchurch City Council funding the remainder.

Hiccups in securing insurance payouts, and claims from the council that costs for other infrastructure projects have blown out, have cast doubts on whether a stadium of that size is a priority.

In the interim a temporary 18,000-seat facility was built for $32m. And how temporary is temporary? According to accounts for the Christchurch Stadium Trust, the facility is being depreciated over five years from its opening in 2012. The cost-sharing agreement between the Government and the Christchurch council gives a decision date on a new facility in 2016.

Tew says the All Blacks have given a commitment to play in Christchurch, but this commitment is limited. "That will run out at some stage. And then we will have to have discussions."

Hamish Riach, the chief executive of Canterbury Rugby, is keen to salvage Christchurch's position in test-match rankings and warns that while a smaller stadium might save ratepayers more than $100m, it would come with costs.

"If they make a decision to build a boutique stadium - if that's all they build, you can understand that decision - there are consequences. We may never see the Wallabies play in Christchurch again."

Riach is also unimpressed by suggestions rugby attendances are on a downward trend - he says numbers fluctuate with no clear trend - or that smaller stadiums are now better. "I think that's a very short-sighted view. Builders should contemplate what the city might need in 50 years and it's not necessarily about rugby. What happens if football or curling becomes the new national sport?"

Canterbury University economist Eric Crampton says building capacity for a solitary annual All Black test is akin to "buying a six-bedroom house just in case both sets of grandparents come to visit at the same time".

Crampton says the proliferation of large loss-making stadiums, both in New Zealand and worldwide, has been mainly because of the economic equivalent of hustling. "Sporting teams have been able to convince councils all over the place - and have been able to play them off against each other by threatening to move - to build excessive stadiums."

Tew is neutral on whether Christchurch should go ahead with the proposed covered stadium. "That's not really for us to have a view on. What people build is totally up to the community for whom it is being built."

The question for Christchurch will come down to opportunity cost, says Victoria University emeritus professor of accounting Don Trow. He says, given declining attendances, Christchurch should consider going small. "Someone's got to explain and say times are different and you don't build this type of big stadium now. Christchurch should maybe steer clear of this proposal and spend their money on something else."

Even at rugby headquarters, there's a growing realisation that bigger might not be better. One source close to New Zealand Rugby says the high-water mark in stadium building has been reached. "I don't think we'll ever see another large stadium built in New Zealand. Certainly not the Rolls-Royce option being touted in Canterbury."