Saturday, January 25, 2014

Frank Newman: Stadiums and pet projects

The Otago City Council has during this last week faced up to something that has been blindingly obvious to most ratepayers for many years – Council’s fancy $230 million covered stadium will forever be a black hole that eats ratepayer money.

In a report to the Dunedin City Council the Council’s CEO said the operating deficits of the last two years were going to get worse. No international rugby tests are expected to be held at the Forsyth Bar Stadium in the coming year and major events are not returning after previous shows failed to attract worthwhile crowds. Quite simply, there are not enough people in Dunedin to sustain the level of activity the stadium requires to come close to being viable.

Something must change, says the CEO, and all possibilities are being considered – there is now even talk of privatising it! That notion is really quite absurd. One thing is certain, private enterprise is not as stupid with their own money as politicians are with other peoples’ money. There will be no private sector bailout. Other options include bringing management in-house, which is a bureaucrat’s way of having ratepayers subsidise it without being fully transparent.

There will be no easy fix for Dunedin’s ratepayers. Their elected representatives of the day were reckless and ratepayers will be punished for a very long time because they (as a society) elected a reckless bunch of people to make decisions on their behalf. Maybe that’s the way natural justice works. People lose what they have (or have control over) to those better endowed with a sense of reality.

The reality is, Dunedin is now a city handicapped with debt. A significant part of that debt is the original $91m they committed to the stadium, plus the additional $57m they coughed up to pay for the cost overruns. The city’s finances are in poor state, they just don’t want to admit that yet.

Although Dunedin happens to be at the other end of the country, it is nevertheless relevant to all. It reveals a basic truth about elected bodies – they are hugely over-optimistic when it comes to projecting the viability of their pet projects. We have seen it here in Whangarei with the Regional Events Centre, but fortunately on a smaller scale. Although promises were made that the Centre would make ends meet – last year it lost $140,000. That loss would be much worse had it not been for a minority of sensible councillors of the day who used their influence to downscale what was a grandiose proposal into a more modest and sensible redevelopment which is what you see today.

As for the long-term benefits of stadiums, a study carried out in 2005 by Sam Richardson from Massey University found, “The vast majority of research into the economic impacts of sports stadiums and franchises fail to find any evidence of positive contributions of professional sports teams or stadium construction to employment, wages/salaries and economic growth.”

I would go further and say that stadium, and indeed most civic amenities like museums and cultural centres actually destroy ratepayer wealth over their lifetime. I am not suggesting there should be no development of community services – the point is there should be an honesty in the debate so communities know how much they will have to pay. Furthermore, ratepayers should demand their councillors have more common sense than borrowing to build an asset that will operate at a loss. That just does not make any sense to me.

The lesson in all of this is that the projections councils provide when they moot their pet projects are likely to be far too optimistic.


Brian said...

Frank has hit the nail on the head.

Since 1984 and the Lange Government's revision of the Local Government Act which, in principal, gave open slather to Councillors without any legal redress over financial spending.
Ratepayers need the legal right to protect themselves from the excessive and unauthorized use of rates.

We need a Ratepayers organisation strong enough to have access to demand action from the Local Government Authority.
Plus by whatever Government is in power to allow such prosecutions; or incorporate the old "Impeachment Process" back into our system of Local & Central Government.

It comes down to just what Local Authorities should spend Ratepayers money on? Entertainment/Cosmetic cities or on core activities, you cannot have both without incurring debt.

Cpt747 said...

...for sure 'Impeachment Process' also back into LCG....the 'ruling elite' just cannot resist their arrogant.. 'we will do whatever we want' mentality. Local Treason as well as National Govt. Treason ...Removing this 'ruling elite' is the only way...we DEMAND our DEMOCRACY Back...

Anonymous said...

The trouble is that those presenting as council candidates are those with an ambition to "do something for the benefit of the community". Those with a leftist tendency (and this includes many who would claim to be of the right) are particularly ambitious in this regard and suffer from the delusion that money grows on trees &/or that there is a bottomless pit full of the stuff to fund their ambitions.

Ambledown said...

Not so glamorous, but Dunedin'ites can look North to the Kaipara, and their sewerage system. The Ratepayers have a Judicial Review on 3 Feb 2014, where if the review finds in their favour, someone OTHER THAN the ratepayers will have to pay for the illegal $40M loan taken out by the council, or the Banks will have to take a complete "haircut". They will also set a legal precedent for Ratepayers around NZ. So the people CAN get justice, but at a price.

Unknown said...

You elected them or did not bother to. The buck stops with the electorate. If you took no interest in who you elect then stop moaning and take your medicine.

Anonymous said...

Coulton , read the anon comment above , which has more pertinent and intelligent analysis than your own galactically stupid statements. Anon has stated what most individuals are already aware of and concerned about. There are no checks,balances or requirements by ANY government authority as to who sees themselves fit to put their smiling face on a local government election billboard. In the main they are tyipcally worn out ex-CEO's extending a golden handshake, or a sideways elbow , ot the local folk club president. Take note of the many CV's in top positions that have turned out to be pure fantasy. Who the hell do you vote for ? or dont vote for ? .... unless there are stringent qualification requirements for local council representatives relavant to the tasks invloved - nobody has a choice Einstein.

Anonymous said...

Quite agree. Many people do not exercise their democratic right because there is just no point. Sure we can elect whom we prefer, but why bother when there is so little in the way of checks and balances to rein in reckless decisions (with ratepayers money) during their 3-year term. So we vote them out next time and then the whole sad process begins again. Pointless.

Anonymous said...

So true. These officials are usually not elected on these projects which 'suddenly' occur just after an election. Then they claim that 'we have elected them; so we trust them'. The know this is not so or else they would have been open in their election.
Locally we tried to stop the local council going ahead with an Opera House project. Interestingly this project was awarded to the sister of the CEO. Sure he recused himself; but almost the whole council decided she should get the project. Years later there is still outstanding debt and the place is a white elephant - just like the monolithic stadium that stands out as you come into Dunedin from the North.