Wednesday, January 28, 2015

Mike Butler: When a council runs a business

Just two years of Hastings deputy mayor Cynthia Bowers calling the shots for Horse of the Year and the show is in trouble with expenses overtaking income and the person who created the show appears to be taking the blame.

Last week event manager Kevin Hansen was told by a reporter that Bowers, the chair of Horse of the Year (Hawke's Bay) Ltd, confirmed that she had advertised for expressions of interest from event management companies "to deliver all or part of the show from next year",

Hansen, a former international showjumper, has been the show's event manager for 18 years in which time it has become the biggest equestrian event in the Southern Hemisphere and the region's largest.

From scratch, Hansen has created the premier Australasian show that attracts around 2000 horses and 80,000 attendees each year.

Last year’s show was the best terms of income (people through the gate, sponsorship, and trade rents) over the past five years. But the show ran at a loss of $108,000.

Income has steadily grown: $1,880,000 in 2010, $2,222,000 in 2011, $2,127,000 in 2012, $2,271,000 in 2013 and $2,363,000 in 2014.

Expenses have grown more: $1,706,000 in 2010, $1,951,000 in 2011, $1,997,000 in 2012, $2,190,000 in 2013 and $2,386,000 in 2014.

Horse of the Year (Hawke's Bay) Ltd took control of the show in 2012 from Showjumping Hawke's Bay, with Hastings District Council, Equestrian Sport New Zealand and Showjumping Hawke's Bay as equal shareholders.

A party of 18 Chinese visitors including eight riders and their supporters, paid for by Horse of the Year, was one substantial extra expense noted in the 2014 Horse of the Year annual report, although the actual cost was not recorded.

Additional expenses for an unprecedented and over-the-top health and safety plan were another factor, with an actual amount missing from the report.

A decision to run the cross-country at the showgrounds instead of at the equestrian park at the back of Flaxmere brought an unintended consequence of a loss of gate takings although that does not seem to be reflected in total income.

The 2012 Horse of the Year (HB) Ltd business plan shows that an agreement to lock in the Horse of the Year event to Hastings for 15 years was fundamental, to protect a claimed $11.52-million annual benefit to the region’s GDP.

That plan also noted that a further two-year contract with Hansen’s management company Event-Pro was in negotiation as well as an intention to request tenders for event management from 2016.

Also noted was the fact that the financial record of Horse of the Year was not plain sailing with losses in the 2009 and 2010 years.

But two years under council oversight and the show has the hallmarks of council-run businesses featuring a lack of financial discipline and runaway costs. Councils lack financial discipline because they know they can always hit up ratepayers if anything turns to custard.

Announcing the intention to tender out management publicly and so soon before this year’s show is unusual and shows clumsy management style.

Other members of the board of Horse of the Year (HB) Ltd are Richard Dee of Showjumping Hawke’s Bay, Jim Ellis from Equestrian Sports New Zealand (who has resigned), Cindy Mitchener and Colin Stone, both independent.

Perhaps the board of Horse of the Year (Hawke's Bay) Ltd needs to look at its own performance before appearing to blame others.


Anonymous said...

Well Stone is another who has lived on public funds for many years.
You are right though,councils are best out of running businesses.

Brian said...

When Councils enter the field of business, they enter as rank amateurs, and from the performance of most of them look likely to remain as just amateurs. One must realy ask the question of why (for the most part) can these very Councillors be financially responsible on a personel level; yet while voted to look after the interests of their ratepayers go to such extremes of promoting Council debt?
If we look back at the formation of local Government in the mid nineteenth century what do we find.
Councils were given the powers to provide water, sewerage and waste water disposal, roads, in other words Core Services; then along came libraries (Although helped in no small measure in the first instance by an American capitalist) then Museums in the larger centres.
Today we see Councils into the field of Sport, the building of costly stadiums, Olympic areas (Just in case). This follows the time proven political rule that the Caesars in Rome lived by; namely “Bread and Games”. Although the adjustment here in New Zealand is Beer/Hot dogs and chips being the recognised substitute. Pity the old tradition of being thrown to the Lions has fallen into disuse!
Now Central Government wants to institute Super Councils, answerable only to them, a financial Ratepayer cash cow that they can milk five times a day without the troublesome problem of having to answer to ratepayers the greater bureaucracy the greater the debt demand.
It was Abraham .Lincoln who remarked when faced with an ever increasing bureaucracy during the Civil war
Not enough teats for all the piglets!
After reading your article Mike, my only comment is
Has the Hastings Council any common sense? Or in this case the better question might any Horse Sense?