All Black great Chris Laidlaw believes the crisis in Otago rugby highlights the need for provincial rugby to return to its amateur roots.
In astounding developments yesterday it was revealed Otago is on the brink of dropping out of the 14-team ITM Cup provincial competition this year.
The Otago Rugby Union will apply to enter liquidation on Friday afternoon if it is unable to resolve a debt crisis.
It unveiled an annual loss of $862,000 at its annual meeting, taking its debts to $2.35 million.
Chairman Wayne Graham said the union could not operate.
Laidlaw was not surprised by the plight of Otago, and said some other unions were also close to insolvency.
"I guess the chickens have come home to roost," he said.
He predicted rugby was lurching inexorably towards crisis in his 2010 book Somebody Stole My Game.
Today he said that while the economic downturn was a factor, the main problem was that fixed costs, particularly salaries, continued to escalate.
At the same time income, specially for provincial unions, went down.
"What we need is real daylight between professional franchises and provincial unions," Laidlaw said.
He had always been in favour of provincial rugby in this country being amateur, and eventually it would have to be.
Rugby was faced with a major structural issue, and the only way to deal with it would be through an international salary accord. So far, he did not see the slightest sign of that happening.
If New Zealand lowered player salaries in isolation, most players would leave.
"We have more to lose in this country than they do in Europe, South Africa or Australia. We simply don't have the private resources that are pumped into these things," Laidlaw said.
The inevitable privatisation of the five Super rugby professional franchises in this country was now under way.
While he had no objection to private money going into sports teams, which happened worldwide, it would not earn more money that could be used to build the provincial unions.
For the professional franchises the aim was to get some injection of capital from people "not expecting to make a buck".
Once that happened, the franchises would be like "little SOEs [state owned enterprises]".
"How much private capital does there have to be before you lose control?" Laidlaw said.
He expected franchises would have to allow players to have other sources of income outside the team.
CLOUD OVER DUNEDIN STADIUM
The uncertain future facing the Otago provincial team leaves the new, state-of-the-art Forsyth Barr Stadium in Dunedin in danger of becoming a white elephant.
ORU chairman Graham said that even if financial support allowed an Otago team to be fielded this year, there would still be question marks over where they could play.
They were in the dark about the cost of playing games at the $200 million stadium, which was built to primarily host games during last year's World Cup.
"As the Otago union, we're looking at the stadium and saying we can't afford to be there," Graham told Radio Sport today.
Previous administrations had borrowed $8.2 million against the former Carisbrook stadium which had sold for about $1.2 million less than that in 2009, Graham said.
The stadium cost at least $200 million, with most of the funding from the Dunedin City Council and Otago Regional Council.
David Davies, chief executive of Dunedin Venues Management which runs the stadium, said he would not speculate on how the potential loss of the Otago games would affect the facility's budget.
The stadium was required to return a certain level of rent, and the loss of any tenant obviously put stress on that business plan.
Each team plays 10 games in the ITM Cup before the finals, with the competition running from August 23 to October 27.
New Zealand Rugby Union chief executive Steve Tew said rugby's national body had been working with the ORU for a month to try and resolve the issue.
"There are $750,000 of trade creditors in the community, which is one of the reasons why the situation is as bad as it is. That is the challenge. I guess what we're saying is we will leave the door open while this community makes a decision about whether it wants to compete in this year's ITM Cup. If they can put together a proposition that looks viable, then we will support it."
The draw for this year's ITM Cup had been held back for a fortnight while all parties waited to see if Otago was able to field a team this year.
If Otago does go in to liquidation, the ITM Cup will likely be a 13-team competition, as the NZRU does not believe a team promoted from the lower tier Heartland competition would be competitive.
Tew said the New Zealand Rugby Benevolent Fund would pay outstanding February wages to Otago's contracted ITM Cup players. The Highlanders Super Rugby franchise, also based in Dunedin, is a separate legal entity and is not affected financially.
ORU staff are facing redundancy on Friday.
The province's club rugby competitions are due to start within the next few weeks. Tew said the NZRU would appoint people to run community rugby in Otago while the issues with the ORFU were sorted out.
Otago is the second southern rugby union to face financial strife in recent times; last year Rugby Southland revealed it owed around $700,000 and in June its board resigned en masse. Earlier, the NZRU brought in a change manager and also loaned Southland $500,000 as part of a $1.5m rescue package.
Tew said the sum of the ORU's debt was "simply too vast" for the NZRU to consider a similar bailout.
It had been "effectively funding the Otago union since December" spending $200,000 it did not expect to see back again on paying staff and essential creditors, but the NZRU could not afford to do so any more.
- © Fairfax NZ News