The Invercargill City Council's holding company, Holdco, will lend up to $7 million to the owners of Stadium Southland - a decision the council made possible last month without telling its ratepayers.
Holdco chairman Norman Elder confirmed this week that Holdco would lend up to $7m to the stadium owners, the Southland Indoor Leisure Centre Charitable Trust, with the money to go towards the stadium rebuild.
The city council last month voted to allow Holdco to modify its statement of intent so it could loan the money to the stadium trust, he said.
The statement of intent was changed to allow Holdco to make advances to significant recreational assets.
The rationale was that Holdco was able to loan the money to the stadium trust at about a 2 per cent lower interest rate than it would have got from a bank, he said.
If the stadium trust had borrowed the money from a bank all the money pumped into the stadium by its principal community funders would have gone towards repaying the bank in the next three to five years, Mr Elder said.
But, because Holdco had loaned the money to the stadium trust at a lower interest rate, the income from the community funders would be used to repay Holdco and the difference in the interest margins would go back to the city, he said.
"It's a saving in interest rates, it's a saving to the community and the margins don't go to the bank. They go back to the community."
Mr Elder, also a city councillor, said Holdco had not been required to tell city ratepayers of the decision when it was made.
"As long as [Holdco] acts in accordance with its statement of intent it doesn't require additional consent from the public. It's a council controlled organisation but it has its own board which makes its own decisions."
When asked if the ratepayers should have been informed, given the significance of the amount of money lent to the stadium, he said it had not fallen into the council's "significance policy" because it had not impacted on rates or ratepayers. Mr Elder said Holdco had taken out security against the loan.
"In the unlikely event of a default . . . [Holdco] would assume ownership of the stadium."
Invercargill City Council chief executive Richard King said the "bridging loan" would be repaid in three or four years by the stadium trust. That money would come from the stadium funders, principally the Invercargill City Council, Invercargill Licensing Trust, the Community Trust of Southland and other operational revenue.
Ratepayers were not putting any additional money into the stadium above what the council had previously agreed on, he said. As such, in relation to the public not being informed, he questioned whether it was of public interest.
- The Southland Times
What impact would Labour's proposal to reduce class sizes have on student achievement?Related story: Cuts only half the story - educators
Subscribe to a digital replica of The Southland Times.
Southland Times subscriber news and information.
Click here for information about advertising with The Southland Times.