MORE SPENDING COMING: READY OR NOT 

The stadium is being built but new concerns keep rearing up.
The most trenchant revolve around predictions that additional money will be requested for the stadium and whether Council should agree to such requests. Let’s be clear. These predictions are valid. More funding requests/needs are surely not far away. Already the building cost has risen $10 million and some $3 million has been allocated to set up Dunedin Venues Management Ltd (DVML): the operating company, and mount opening events. It seems no-one in City Hall realized such things cost money before DVML’s CEO was hired and informed us. In fact extra costs were on the cards from day one, but had they been acknowledged, the total projected cost would have soared past the mythical $188 million and scared even the most ardent supporters. They are still not being made public. That might have something to do with a looming election.

What might further funding be requested for? 
• construction budget blow outs
• extra payments to contractors because of scope changes or delays
• features lopped from the original concept, or “reprioritised” to reduce cost - like artificial pitch reinforcement
• additional facilities and/or services needed to bring the complex up to acceptable standards. E.G. Will our “world class” stadium have enough toilets for a capacity crowd or will it be “Portaloo Village on University Plaza”?
• operational expenses not budgeted for
• an enlarged marketing and promotional budget required to attract events.
• the Highlanders/ORFU needing a financial underwrite to ensure their position as the stadium’s only major income generator.
• suggested add-on facilities to enhance the stadium’s appeal.
• an operating loss for the stadium year after year.
• capitalised interest on borrowing
• any combination of the above.

These run across a spectrum from almost essential if the stadium is to operate, to “nice to have” frills.
Obviously the first question to ask is "Why was this not in the budget in the first place?". Then the benefit versus cost of any spending proposal has to be assessed. What do ratepayers get for the money? But the additional question must be asked, “What will the cost to ratepayers be, if Council decides NOT to spend the money?” Take artificial reinforcement of the playing surface as an example (with hypothetical figures). Imagine that without reinforcement, the pitch can sustain only two first class matches a season, compared with say five needed to produce sufficient revenue for the stadium to cover operating costs. The cost of reinforcement is $1 million. The projected annual loss without it is say $5 million. Many opposed to building the stadium in the first place will argue it is good money after bad, and certainly if reinforcement is necessary the cost should have been included honestly at the planning stage. It wasn’t. Neither were a number of other features. But the decision to reinforce the pitch or not has to be made on the basis of the situation NOW. Simply that is: either spend $1 million of ratepayer money to upgrade the pitch …… or spend $5 million of ratepayer money to cover the losses. That looks a simple choice, but is hypothetical. Reality is likely to be more complex and less predictable. A request for a larger promotional budget to off-set dropping revenue would be much more problematic: much more of a gamble. Operating losses and/or capital spending requirements in the next few years could reach a point where bad money and the good money being thrown after it, become very difficult to distinguish one from the other. In any case, other fledgling (or even core) Council projects cannot be allowed to starve because the stadium cuckoo is swallowing all the fat financial worms, no matter how hungry it is. 
I would oppose any extra funding for the project unless it was absolutely necessary for the stadium to open its doors, and the alternative was even higher on-going costs. It is impossible to categorically say "no more funding" when so much associated with the costs of this project was fudged and even hidden. We simply don't know what is ahead. What we do know is that the stadium is fast approaching completion. It costs money just sitting there. So the sooner it is open and able to earn something to off-set its operating costs the better.

Where any extra money (or borrowing) would come from is also of concern. Council itself is already neck-deep in debt. In addition its demands on its companies have forced them to borrow to pay dividends to Council. The companies are now fast approaching their own debt limits. Worse, the continual draining of their reserves by spendthrift Councils has constrained the companies’ ability to seek investment opportunities. Council’s companies, the geese that have laid golden eggs over years for our ratepayers, cannot grow. For want of capital they cannot expand their operations and thereby their profits. They have no more to give without changing their capitalization ratios to allow them to borrow more. In other words they would have to do what Council has already done: exceed their prudential debt limits. There is already pressure on them to do just that.

The stadium is the most expensive project ever embarked upon by Dunedin’s Council, and it is overwhelmingly funded by debt. It can’t help impacting on financial choices, opportunities and decisions well into the future. In the next few years Council is likely to have very little room for financial manoeuvre. Very hard decisions will have to be made. Foremost among considerations must be how best to limit the cost to ratepayers. The irony is that there will may be demands for spending coming for the stadium, where it is cheaper for the ratepayers to pay up than not. 

Agreeing to every request for spending on stadium extras is plainly untenable. But insisting that no more should be spent on the stadium for any reason whatever is short-sighted too. Either position, held unconditionally, risks costing ratepayers millions more. That is an insidious result of an irresponsible decision to embark on a debt-funded project whose full cost was deliberately obscured, and for which a business case was not made.

To avoid unaffordable rate increases year on year, Council will need to be extremely disciplined in cutting costs. That is a given. Council did not control or take responsibility for the stadium development process. In many areas it has no knowledge of the costs incurred or even who incurred them. As stewards for the ratepayers that is reprehensible. Leadership, discipline, oversight, vision and flexibility will be required. Council must take back responsibility for major issues and projects, review and control them. It must cut operational costs without degrading services. By these means, and by promoting Dunedin’s economic welfare by utilizing local providers of goods and services, the city may start to claw its way out of the debt morass we have been landed in.