New stadium millstone saved Otago union

NZ BAILOUT: NZRFU change manager Jeremy Curragh and Dunedin City Mayor Dave Cull speak to media at a press conference about the bailout of the Otago Rugby Football Union.

Saving the Otago Rugby Football Union was simply a byproduct of the Dunedin City Council’s need to ensure the new Forsyth Barr Stadium doesn’t eat into ratepayer money, mayor Dave Cull says.

A marathon meeting yesterday saw the council voted 8-5 in favour of forgiving the $480,000 owed to the DCC and council-controlled company DVML in return for a raft of concessions for the city, including three Category A All Blacks test matches.

Cull was scathing of the ORFU, accusing it of ”coc(king up” its stewardship of the game.

“I think there is pretty much universal agreement that they coc(ked up, and that they coc(ked up on a chronic basis. Pretty reprehensible really, but we have to deal with the situation as we find it.”

And Cull suggested that had the impressive new indoor stadium not been a factor, the DCC would have reached a different decision.

The ORFU was bailed out because “the financial model around the so-called private sector funding component of building the stadium is dependent on revenues from the games that professional rugby play there.

“I’d have to say, before it was being built and right up until now, that was the most imprudent, risk-laden way of financing anything. It was basically pretty stupid, but we’ve got it, and we have to find a way of maintaining the revenue stream for that, or it falls back on the ratepayer. This deal has avoided that,” he told Radio Sport.

Cull said the ORFU part of the deal was “minor compared with the rest”.

Asked if that meant they could have lived without the ORFU being saved, had it not been for the stadium and the need to host matches there, Cull replied: “I think that everybody could have.”

Cull said yesterday that $4 million income per annum had been at risk if professional rugby had not been secured for the stadium.

“In the absence of alternative funding streams (that) would have to be offset by a compensating increase in rates, and that would be considerable to say the least. Being aware of that, we came to the conclusion here at council that any deal that only included dealing with the ORFU insolvency situation could only be a stopgap, and the other problems would remain.”

The DCC decision was the final strand in a tangled web of deals to keep the stricken ORFU afloat. As part of the deal, the board will have to resign and its constitution will be rewritten.

The meeting started at 2.30pm, and agreement was only reached at 10pm after several briefings and extensive debate.

Three weeks ago the ORFU announced it would go into liquidation at the end of the week, as it was faced with $2.35 million in debts and a forecast $750,000 loss for this year.

Cull said liquidation of the ORFU had been the most likely scenario at the time, and had continued to be so for some time.

“Council’s concern is not about the survival or otherwise of the ORFU,” Cull said.

“That would be irrelevant for council were it not for the financial implications of insolvency for our ratepayers. That’s both the direct implications, whether to local businesses and community groups who are creditors and the DCC, or indirect because of stadium financial models. The DCC’s involvement in discussions over the ORFU was motivated simply by the need to minimise ongoing costs to our ratepayers.”

- The ORFU reduced operational expenses, including ongoing player payments.

- NZRU provides a $500,000 loan for working capital.

- NZRU confirms All Blacks Tests in Dunedin in 2013 and in 2014 in addition to this year’s Investec Rugby Championship Test against South Africa.

- 2012 player contracting spend to be cut by $290,000 from the original budget.

- DCC and DVML have agreed to forgive debt of $480,000.

- A North v South match to be played in June, and DVML receives all revenue and covers all costs.

- NZRU will enter into an additional sponsorship commitment with Bank of New Zealand, the ORFU’s biggest creditor, owed $1.2m.

”One of the conditions of the loan we are giving to the union is that the ORFU constitution will have to be modernised,” NZRU chief executive Steve Tew said.

”We will want to have a new board in place that has the right blend of skills and experience to ensure this union never again finds itself in the predicament it currently faces. And we will be insisting on ongoing scrutiny of its business plans and accounts.”

The DCC owes millions for the construction of the Forsyth Barr Stadium, and there is considerable ratepayer disquiet at the interest costs on that debt. Several questions remain about the final cost of the project, and in February the DCC called in independent auditors to try to discover what the final cost is.

With corporate boxes, season tickets and sponsorships sold on the basis that Otago ITM Cup games would be played at the stadium, a collapse of the ORFU, and the ensuing likelihood the province not field a team in this year’s ITM Cup, would have had serious fiscal ramifications for the stadium.

Cull said it had been discovered that there were no agreements in place for either the Otago ITM Cup team or the Highlanders to play at the stadium.

”Whether the ORFU went into liquidation or not, DVML was left with a very risky situation, as there were no contracts in place guaranteeing an income stream from professional rugby in our region. DVML had taken on the running of the stadium under the impression that those contracts were in place, underpinning that revenue stream.”

Cull hoped DCC and DVML might eventually be able to recover half of what it was owed from the proceeds of the North v South game. Players are volunteering to play to in the match for free and ORFU change manager Jeremy Curragh said All Blacks captain Richie McCaw and Players Association manager Rob Nichol had been ”circuit breakers” in arranging the game.

Their new stadium nearly became the worlds biggest greenhouse.

Writing off debt is painful and the losers here will not want to see themselves get a repeat dose, but this is better long term for them than forcing the Union into bankruptcy.

Bankruptcy would see the debt lost anyway, so the only upside is vindictive pleasure.

This deal is better for the council than the alternative.

Pity some of the ignorant locals cant grasp that fact. They would rather punish and take a big hit than compromise and take a much smaller one.