Monday 27 May 2019 9:26am
Associate Professor Mike Sam.
There was a lack of financial clarity, and potentially dangerous downstream consequences of the significant debt created, as the city built its new covered sports stadium, new Otago research has found.
“Sport stadia are among the most contentious of public expenditures for local government,” says Associate Professor Mike Sam in the opening abstract of his newly published study, Big Stadium, Small City: A Catalyst for Turbulence and Governance Reforms.
The research, published in the journal Urban Policy and Research, focuses on the decisions by local government officials in the small New Zealand city of Dunedin (pop 130,000) to approve and finance the city’s covered stadium which was completed in 2011.
Associate Professor Sam, who specialises in research on sports policy, says the paper draws on Dunedin’s case to investigate the 'turbulence' for a small city arising from public-private arrangements used to establish the project’s feasibility and financing.
These arrangements particularly refer to “the outsourcing of advice, communication and fundraising to a charitable trust (Carisbrook Stadium Trust), and the formation of council-owned companies into a complex financing apparatus to place liabilities off-balance sheets and obfuscate costs,” Associate Professor Sam says.
He notes that the 'small city' aspect is key to the study. The stadium cost $1,540 for every urban resident – proportionately equivalent to a city of one million people spending one and a half billion dollars on a sport entertainment facility.
Dunedin’s project cost $224 million with the bulk coming from the Dunedin City Council ($163 million), Otago Regional Council ($38 million), and central Government ($15 million).
“Getting this approved was a difficult sell for the local government officials of the day, and while the financial mechanisms were not corrupt, my research found the funding schemes effectively muted public opposition by way of being so complex and impenetrable,” Associate Professor Sam says.
Associate Professor Sam highlights that along with the general public, few of Dunedin’s City Councillors fully understood the relationships between the Council Controlled Trade Organisations (CCTOs) and the City’s finances, with the study revealing a DCC manager boasting “there are only three or four of us who actually understand it,” in an interview with study researchers.
The study also outlines how, responding to public opposition, the High Court could not make sense of the financing scheme either, ultimately agreeing with DCC lawyers that taxpayer contributions (and not total debt), were the yardstick for evaluating the project.
Associate Professor Sam says the consequences of this debt would include stadium bailouts, the deferment of community projects such as playgrounds and walkways, and selling-off of assets such as Citibus. One high-profile consequence was the council owned utility company Aurora Energy being found negligent in upgrading its electricity network. A potentially dangerous result of what the company’s CEO explained was born out a need to pay $30million towards the stadium.
Dunedin City Council governance structures of its companies changed as a result.
“There was a City Councillor supporting the stadium to go ahead, who also sat on the boards of a number of council-owned companies through which stadium debt was spread. This prompted the eventual expelling of the Councillor from his role as chairman of Dunedin City Holdings Limited, and a much needed review of the policies around governance of council-owned companies,” says Associate Professor Sam.
The DCC also had to change the often brick-wall approach to requests from opponents for access to information held by the Carisbrook Stadium Trust who essentially built the business case for the stadium that was approved by the DCC.
Associate Professor Sam hopes the lessons learned from Dunedin’s case will help inform other centres such as Christchurch – another New Zealand city investigating the building of a new stadium.
“Other small centres should take note of what happened in Dunedin, and pay particularly close attention to private-public partnerships and the outsourcing of key planning work to consultants,” says Associate Professor Sam.
He says the study ultimately shows that public-private partnerships are not inherently good or cost effective. They need citizen and local government literacy and oversight to make them so – small cities can learn from each other and perhaps be better at this than larger urban centres.
For more information contact
Associate Professor Mike Sam
School of Physical Education, Sport and Exercise Sciences.
University of Otago
Tel +64 3 479 8398
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University of Otago
Mob +64 21 279 5016