'Physical shock' hits ARC head over Beckham

22:28, Mar 05 2009

The scale of the $1.79 million loss on superstar David Beckham has left Auckland Regional Council chairman Mike Lee "physically shocked".

But in an interview with Stuff.co.nz he said ratepayers will not pay more and, besides, people should realise that in the events business you win some and lose others.

They got 80,000 at a U2 concert and just 16,600 at Beckham.

The ARC yesterday announced it had made a "disastrous" loss on December's Beckham and LA Galaxy game.

Auckland Mayor John Banks has slammed the news, saying the ARC should go.

And a rates critic, David Thornton of NoMoreRates.com, claims the Beckham loss will push accumulated Mt Smart stadium losses out to $6 million. Ratepayers will have to fund it, he said.

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Lee flatly denied this but with "grave employment issues" needing to be resolved around the Beckham decision, he would not detail what went wrong.

"The loss from the LA Galaxy event, I found personally shocking, I was physically shocked when I found out about it," Lee said.

"A lot of people in the ARC feel the same way."

Lee said there were no law enforcement issues behind the Beckham loss but there were "serious flaws in management".

This was why he had referred the issue to the Auditor General (AG).

"It's quite unusual to call the AG down on one's head."

Lee said the Beckham loss would not be dumped on the ratepayers.

"The idea is that the ARC has a debt over Mount Smart in terms of the Eastern Stand which was built on time and on budget... It's a very well used facility."

The $25 million Eastern Stand was to be paid off through gate takings.

They did not get enough on Beckham.

"I envisage that what will happen, given the David Beckham event .... it looks like that debt has got a little bigger and we will be repaying it over a longer time."

Rates would not go up.

"We are going to tough it out.... What we are trying to do is maintain some commercial discipline and try and get it to pay its way; it just looks like its going to take a little longer."

Beckham had looked promising in planning but the recession began hitting.

"It was a luxury event at Christmas time when people were starting to become concerned about discretionary spending and it became a spectacular failure."

Three years earlier they had taken a huge gate from U2.

"I don't want to sound flippant but you win some and you lose some in this sort of event business and it is a very bitter pill to swallow.

"We are determined to fix up the serious flaws that have emerged in the way the stadium was managed for the event."

Speaking earlier from Sydney, Banks told Stuff the Beckham loss was an outrage.

"The ratepayers of Auckland will be shocked at this very bad news and instalments of worse news that logically follow this kind of incompetence," Banks said.

He was not surprised at the ARC's performance.

"It is more classic evidence that the region cannot afford and doesn't need an ARC," he said, adding the region needs to be formed into a super city.

This is expected to be the main recommendation of a Royal Commission into the Auckland region due to report later this year.

Banks said he the ARC needed to have accounts that were open, transparent and accountable.

Mount Smart's Eastern Stand should not have been built.

"I was highly critical that that dump was upgraded at great expense to the ratepayers when I was last mayor of this city....

"I can hear the flapping of the wings as the roasters come home."

David Thornton of anti-rates group NoMoreRates.com told Stuff today that since 2006 the stadium, home to the New Zealand Warriors league team, has accumulated losses of over $6 million, hidden in the ARC's accounts

"I think that is deceptive and I am going to bring it to the attention of the Auditor General."

Thornton was dismissive of the notion of ring-fencing the loss: "In other words they are going to put this loss as ‘reserves' in the accounts, but the figure will be in brackets, meaning it is a minus figure," Thornton said.

"This is the stupidity of a system that allows councils to get away with what I call really creative accounting ... in the commercial world you wouldn't be allowed to do this."

Shareholders and investors would be quick to spot the shenanigan, Thornton said.

"In the real world you don't do it, it's a smoke and mirrors operation."

Thornton, who has crunched the numbers for the stadium, says losses there are accumulating annually.

While the stadium is an ARC business unit, its accounts are not publicly discussed and are instead consolidated into the overall account.

Each loss from the stadium is transferred to what is described as a reserve fund which Thornton summed up as "a reserve that is deficient in funds."

Stuff