Metiria Turei

Is the Dunedin Stadium a financial risk?

Published: February 11, 2009

by Metiria Turei

While it will never likely get the same kind of press that the Auckland Waterfront Stadium did, It nevertheless raises all the same questions about the transparency of local council and central government involvement in these massive infrastructure projects.

I oppose the stadium, and the more I read the more questions I have. Probably the most scathing release to date, admittedly from stadium opponents, reads like a soap opera of insider deals and dubious conflicts of interest:

Conflicts of Interest

The issue of conflicts of interest has arisen many times as many of the players in the project are linked in a variety of ways.

* John Farry, was a minor shareholder in a company that owned land at the Awatea Stadium site. He is the cousin of Malcolm Farry who is the Carisbrook Stadium Trust chairman.

John Farry was past chairman of the Community Trust of Otago, which has indicated ‘in principle’ it will donate up to $10 million to fund the stadium.

* Ron Anderson’s company, Arrow International, was hired to manage the stadium project. Ron Anderson is a Stadium Trust trustee.

* Dunedin Mayor Peter Chin was once a partner in the law firm John Farry and Hansen, now Webb Farry.

*Stadium stakeholders group appointed retired High Court Judge John Hansen of Christchurch to look after the interests of organisations funding the stadium. He had joined John Farry and Hansen, earlier in his career.

The release goes on to claim that upwards of $50 million has been spent to date by the Council with almost nothing to show for it. Given these claims, I wonder why no other politicians are questioning what is going on down here? This leads me to the question of finance, as public funds of any kind should be spent transparently. It’s just healthy politics.

Who is going to be the anchor tenant? It was originally announced that the Otago Rugby football Union would anchor the site, but this seems to have gone by the wayside and they are now listed as casual hirers of the venue. This is probably because they are broke. No one else is fronting and you have to wonder what the ratepayer’s exposure will be when the operating expenses outstrip the income.

Do we have a case here of where the profits of the venture, mainly in construction and land transfers, are privatised while the losses get socialised to the Council ratepayers?

Will it follow the trajectory of Wembley Stadium, where the costs doubled and trebled and then got slashed as banks and the ratepayers refused to cough up any more?

Will it follow Genoa Stadium’s trajectory, put on the block after mounting huge debt, leaving the shareholders, 70% of which were ratepayers, with a massive loss?

Are we likely to follow Stadium Australia, and gift a mega asset to an Australian Bank?

But a decade after the disastrous float of Stadium Australia Group its banker, ANZ, will take control of the debt-laden stadium for next to nothing. In effect the bank has become a mortgagee in possession.

Stadium Australia unit holders were unlikely to see their investment prosper, said John Clarke, head of ANZ Infrastructure Services.

“They will never receive any distributions, they’ll never receive any return on capital,” Mr Clarke said.

ANZ has offered $9.7 million, or 10c a unit, to take over the group, which has been recommended by the group’s board. The offer was made at a discount to the trading price of the units, which closed yesterday at 11.5c.

It seems a pretty risky type of business to engage in. Riskier than opening a restaurant, I reckon. Given that a stadium is so capital intensive and has a relatively poor jobs/capital ratio, it cannot even be justified as “economic stimulus”.

The $90 million committed by the Council last week would be better spent on maintaining Dunedin’s existing roads and other civic infrastructure, like the council housing stock that has been so sorely neglected. That would keep Dunedinites warm and dry this winter and keep Dunedin businesses in business.

Meyt says

Published in Economy, Work, & Welfare by Metiria Turei on Wed, February 11th, 2009   

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