House of blame

Grand event venue or civic disgrace?

STEVE KILGALLON
Last updated 05:00 03/06/2012
Forsyth Barr Stadium

AMBITIOUS: The Forsyth Barr Stadium has left a city divided and its ratepayers facing vast debts.

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The prospect of yet more glittering new stadiums being constructed by ambitious city fathers – as being debated right now in Christchurch and Auckland – is met with scorn by some in Dunedin, where the saga of the Forsyth Barr Stadium has left a city divided and its ratepayers facing vast debts.

A covered stadium was a grand concept for a city of just 125,000. At various times, it was imagined that it might host international soccer, rugby league and even swimming; that penguins would frolic in a (converted) adjoining quarry, and not just that the biggest names in rock music would visit, but, perhaps, the Dalai Lama and British royalty. With significant "private finance" support, the cost to the taxpayer would be capped at a mere $91million and the stadium delivered to the dollar at a total cost of just $188m.

Now it's been built, there remains debate on quite how much it actually cost. Its creator says it came on time, on budget. Some critics argue double that. Dunedin council engaged consultants PricewaterhouseCoopers to give them a figure, and explain any blowout.

Dunedin mayor Dave Cull, who took power on a broadly anti-stadium ticket, is weary. "It's now about how we shape the future," he says. "We can't change it ... [so now] the challenge is to turn something that could be a financial liability into a community asset."

The story of the stadium begins with its predecessor, Carisbrook (nickname: House of Pain), which had hosted rugby tests since 1908. Two miles from the city centre, its bleak terraces hosted generations of blue-and-yellow-scarved students. But by 2003, it was considered antiquated, with appeals to council by the already financially troubled Otago Rugby Union for redevelopment funds.

So Dunedin City Council set up an advisory group to consider the options. By 2006, that group had been replaced by the Carisbrook Stadium Trust (CST), chaired by local dentist Malcolm Farry, chairman of the Highlanders rugby franchise and hate figure for the anti-stadium lobby. By February 2007, Farry had produced a plan for a $188m roofed stadium at Awatea St. A year later, the council resolved to build it, and the finished stadium opened in time for the Rugby World Cup in August 2011.

Between those bald facts are five years of internecine warfare in Dunedin, three High Court actions, claims of conflicts of interest, a divided council, a pile of debt and an even bigger pile of documents. The stadium itself, most agree, is an iconic, stunning building. They don't agree about much else.

THE STUDY of Bev Butler's home in City Rise is filled with box files, the product of perhaps a thousand requests under freedom of information legislation that has ferreted out many news stories and serially embarrassed the trust, the council and the rugby union; she once received, in error, an email from the new stadium's commercial manager, Guy Hedderwick, intended for his boss Ewan Soper, asking: "Hi Ewan – at what point do I tell her to piss off – regards Guy".

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Butler was president of protest group Stop the Stadium, which mounted two unsuccessful court cases to prevent construction, then was wound up by the council for not paying its legal costs quickly enough. She experienced both ends of the spectrum: from several chaps turning up unannounced at her front door to hand over $1000 donations to the cause, to telephoned death threats. Stop the Stadium's death left the remaining anti-stadium lobby disparate, but still vocal.

They argue that the stadium was rushed through without real consultation, financial models were hopelessly optimistic, there were serious conflicts of interest, ratepayers should not be propping up professional rugby in the city and Dunedin simply couldn't afford it.

One, Russell Garbutt, calls it: "Perhaps the biggest civic disgrace perpetrated upon ratepayers in living memory."

Farry, meanwhile, is eloquent and exasperated, saying he's sick of "mischief makers" and feels he has answered his critics a "hundred times; they just don't listen". He has ready-made answers for each of the criticisms of the stadium. "We're excited and delighted we were able to achieve something of lasting value to this community," he says. "It delighted the majority of people; we're disappointed at the remnants of those who were against it still trying to make their point. Surely it's time to give it up and relish and embrace the stadium?"

Major debate and valid questions remain about how the stadium was funded and built and whether the council made the right decision to throw in so much public money (originally $91m, but later $148m) as explained in the sidebars to this story.

But even one of the stadium's opponents, "What If Dunedin" blogger Elizabeth Kerr, says the continuing arguments have caused Dunedin to "stagnate" and ignored the need to regenerate the city.

Now it's about making the stadium work. The "anchor tenant" is financially troubled Otago rugby, recently bailed out by the council; council could hardly afford to, but did so, says Cull, because it needed to keep Otago rugby in the stadium and in the hope they would pay off small local creditors. Bizarrely, in a near dictionary definition of ungratefulness, Otago's chairman and vice-chair are suing Cull for libel after he criticised the union's management.

The stadium was pushed as a multi-purpose venue. An appendix to the "CST Feasibility Masterplan Report" of 2007 said it was important it was "perceived at a community level to be multi-purpose and cater for more than rugby". Since it opened last August, only two major non-rugby events have been held: a gig by Elton John, and the 150th birthday celebrations for Otago Daily Times publishers Allied Press. Neither paid a stadium hire fee. In June 2008, two major concert promoters had told the D-Scene newspaper what should have been self-evident: Dunedin was too small, remote and student-oriented to provide the sales base to attract big-name acts. In February this year, council-owned stadium management company Dunedin Venues Management Limited's (DVML) chief executive David Davies said concert bookings for the stadium would be "thin" in 2012. "What's thinner than one?" asks Garbutt. Cull says the council has to leverage the advantage of having a roof, guaranteeing events won't be rained off. Farry, who wanted to run the stadium for its first two years, is disappointed the council hasn't attracted more concerts.

The council envisaged DVML would return a substantial annual dividend to help defray loan repayments. Incredibly, DVML were told to borrow money, if they had to, to ensure a return. "There is no way a company could be milked like this without blowing apart at the seams," says University of Otago academic Rob Hamlin. DVML duly baulked, the board was sacked and replaced by new directors, Denham Shale and Bill Baylis, both former South Canterbury Finance board members. "A 100 per cent commonality of board membership with a company described as the biggest corporate fraud ever in this country takes real genius," laughs Hamlin. DVML predicts a $2.4m loss this year, saying it cannot cover the cost of debt-servicing on the stadium loans, and Davies cried at a press conference to announce his resignation. Cull says it was "completely unrealistic" to expect the stadium to service its own debt (it was originally predicted to make an annual profit of around $100,000); instead he's instigated a review to find the best operating model and how it can run at the lowest possible cost. Farry, meanwhile, reckons the trust would have run the stadium at a modest surplus. Pro-stadium councillor Syd Brown also says the stadium can be profitable: "It will work, it is an asset."

Hamlin argues it may never be viable: if it cost $200m in loans, that means raising $500,000 a week to cover the interest. "Every person from the child born yesterday to the octogenarian blowing bubbles down the old folks' home would have to go to that stadium once a week, without fail," he says. Garbutt believes it would be most sensible to mothball the stadium.

Exarcerbating Dunedin's precarious finances is that while the stadium was being built, the city also upgraded sewerage, the town hall, the Regent Theatre and the Otago Settlers' Museum.

"In hindsight, you wouldn't do them all together ... we already had enough capital spending on our plate," says Cull.

"The spending of the last decade is a habit that is proving hard to shake," says anti-stadium councillor Lee Vandervis, now advocating huge cuts, including closing the council's entire PR department. "We have to try and fund a stadium that is, quite frankly, unfundable under any model or budget produced; it means we have to cut back on absolutely everything, there is no room for manouevre anywhere. There is a way forward, but it's not an easy way."

Garbutt argues Dunedin has sacrificed "opportunity cost". There's no chance of the council taking on any major projects in the medium term because it has no money.

PwC concluded that, with interest, the stadium eventually cost $224m, a four per cent or $36m over-run, a figure mayor Cull accepts. But stadium critic Calvin Oaten calculates the final cost, all things considered, at $485m, though that considers interest which wouldn't normally be included in such calculation. "But the costs of putting the stadium in place will, over time, pale into insignificance when we take into account the cost of owning and operating it," he warns.

The council owes $602m, which the Otago Daily Times calculated was $4778 per resident. It's an increase of 1700 per cent on debt levels 12 years ago. But, says Hamlin, it's actually much worse: the high student population means a low number of ratepayers, so each now bear an $11,377 debt.

The council has fixed the debt over 23 years, instead of 40, and managed to cap rate rises at five per cent instead of a projected 12. That, at least, will be some comfort to Hamlin, who had a vision of his 11-year-old son still paying for this stadium almost into his retirement years.

Brown, the council finance chair, says it means just $79.30 per year for each ratepayer to pay for the stadium. Compare that to the proportion of rates they pay for things like the Moana Pools and the libraries and reckons Farry that "will look like grocery money in 20 years' time, and they will continue to be brilliant pieces of infrastucture".

It's hard to know what the community feels. Before the stadium was built, surveys commissioned by the council (split), the trust (wildly in favour) and Stop the Stadium (heartily against) were all criticised for their methodology.

Now, believe Farry and Brown, the community – bar those mischief makers – are in favour. Former mayor Peter Chin, who lost the election to Cull in 2010, isn't so sure. "I believe it is money well spent ... but maybe perhaps many of the citizens didn't, otherwise I might not have lost the last election," he says wryly.

"When you look back at anything in life, you will always be able to say you could've done this better or should have done that, but that's part of life ... it is a project that has happened, and I believe it is good for the city. There is pain in paying for it, but there was pain there when we made the decision to go ahead

POLITICAL ARENA

It can't be fun being a city councilman: "Resign" and "Shame" are a taste of the banners waved at the last council meeting. Dunedin council must bear the plaudits and the criticism for the Forsyth Barr Stadium: in February 2008, it pledged $91.8m to build it.

That was subject to conditions: Carisbrook was sold, the Otago Regional Council contribute $37.5m, "private sector funding" produced $45.5m, the Otago Community Trust gave $20m and a working party found ways to cut ratepayer commitment by a further $20m. Two independent peer reviews were commissioned. One, from PricewaterhouseCoopers, cautioned the stadium couldn't rely on concerts as a base income, said revenue forecasts were "at the upper end of expectations ... we would not describe them as cautious", and called overall forecasts "not conservative".

The other, by consultants Davis Langdon, who were given a three-week deadline and not given all documents they asked for from the CST, identified doubts over cash flow, maintenance, the planned realignment of SH 88 to accommodate the new stadium, operational budgets, the exclusion of depreciation and interest and found 30 exclusions from the final costs, such as kitchen fit-out, electronic turnstiles and replay screens.

The council needed to "ensure they had a holistic view" of overall costs, they said. By the time of the final decision a year later, the OCT had cut its share by $3m, it was apparent little private sector funding would emerge until 2011, and the council had an additional underwrite commitment of $15m, although central government had given $15m.

A $10m contribution from the University of Otago was also somewhat illusory. It proved not a direct contribution, but mainly for land for a new university building on the site and shared space such as the stadium plaza. Vice-chancellor David Skeggs once remarked that it could not "extend to any investment in seats or turf".

The latest PwC report says: "We doubt anybody could have erroneously believed otherwise."

The stadium cost rose to $198m, the $20m cuts could not be found, and council, in total, was up for a $148.5m share of the project, not $91m. They pushed on. A focus group of councillors and trust members formed to update council never met and the most recent PwC report suggested: "It would not be surprising if the matter was not clear to all councillors who were being asked to approve the project."

Were council asleep at the wheel? That claim angers the then deputy mayor, Syd Brown, who says not only did the report author not interview any councillors except mayor Cull, the advice council gathered came, in part, from the very same company.

Stadium opponents such as Bev Butler and Elizabeth Kerr say their interest, and opposition, was piqued by the apathy they saw when observing these council meetings.

Current councillor Lee Vandervis – who was voted off council between 2007 and 2010 – says: "Absolutely they didn't understand, but if they had wanted to understand, the information was available ... but it was spread all over different places and they were never encouraged to look ... [but] if you google `stadiums plus economic impact', all the information you need is right there."

Vandervis mentions Massey University academic Sam Richardson's paper "Oasis or Mirage", which studied the impact of Wellington's Westpac Stadium and concluded it had no long-term impact on the local economy or employment, and that stadiums were usually unprofitable.

Both Chin and Brown see the stadium as a catalyst for Dunedin's revitalisation, and say new plans for a five-star hotel on the city waterfront show it's already having an impact. But Dr Richardson says expectations for the stadium were "off the mark" and it would never be an economic stimulant.

- Sunday Star Times

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