Otago Daily Times: Stadium funding in doubt • 12.02.08
http://www.odt.co.nz/news/dunedin/34078/stadium-funding-doubt
Otago Daily Times: Stadium funding in doubt
By Chris Morris on Monday, 1 December 2008
Uncertainty surrounds a major funding stream for Dunedin’s planned Otago Stadium after $18 million was wiped from the value of the Community Trust of Otago’s overseas investments in just six months.
Continuing global economic turmoil was to blame for the decline, which saw the trust’s capital reserves drop from $190 million on March 31 to $168 million on October 31, trust chairman Bill Thomson confirmed yesterday.
The $22 million drop in value - including about $4 million in grants distributed since March, plus administration costs - meant trust members were now “running the ruler” more closely over each funding application, he said.
It was “inevitable” the trust’s $7 million annual grants budget would be reduced next year, and a reluctance to reduce support for smaller community groups meant the trust’s attitude towards capital projects might need to change, Mr Thomson said.
“We have got to be mindful of our financial position. It’s inevitable we are going to have trim our donations budget back for the coming year.
“We are confident there will be a recovery . . . and we will restore our reserve position in the fullness of time, but it would be irresponsible for us not to put in place strategies to address that shortfall,” he said.
Those strategies would be discussed in meetings early next year, and the debate would “inevitably” include Otago Stadium funding, he said.
He confirmed the Dunedin City Council’s application for a $10 million grant, to help pay for the planned $188 million stadium, had been received and was being assessed as part of the trust’s valuation process.
He said it would be “inappropriate” to comment on the likely outcome ahead of board discussions but added: “We can’t look at the stadium application in isolation of the state of the markets at the present time.
“It [the $10 million DCC application] is something like five times the size of any grant we have made before,” he said.
Carisbrook Stadium Trust (CST) chief executive Ewan Soper said, when contacted, the $10 million grant was “one of the fundamental components” in the stadium funding package, and questioned whether the stadium could proceed without it.
“Obviously, if there are difficulties with the trust’s contribution, it could mean there are difficulties with the project,” he said.
It was not the only financial hurdle facing the project, with private-sector fundraising proving “more difficult than anticipated”, he said.
The trust was required to raise $55.5 million privately, with 60% to be confirmed by February 2, but had so far found only “around $12 million to $14 million”, Mr Soper said.
“I guess the same financial environment impacting the trust is also impacting those who may contribute through private sector funding.”
It was expected the majority of the outstanding money would need to be confirmed in the next few weeks, before Christmas, as January was expected to be a “pretty dead” time for fundraising, he said.
The thought of losing the Community Trust’s $10 million grant was not one Mr Soper wanted to contemplate yesterday.
“We have a lot of work to do to get the private-sector funding over the line. The way the response has been to date, it would be pretty hard to contemplate a greater challenge for private sector funding.”
Dunedin Mayor Peter Chin said, when contacted, the trust’s decision - whatever it might be - was “something we will have to take into account once the decision of the Community Trust is made”.
“With all of these things that happen, they are all challenges to the whole project. That will be a matter council will have to decide come that time. I’m not going to second-guess that at all.”
The Community Trust books are not the only ones under pressure, with Southern Trust chief executive Karen Shea, of Dunedin, yesterday confirming income from the trust’s 1200 gaming machines had dropped by $7 million, to about $47 million, this year.
The result was a $3 million reduction in grants this year, down to $18 million, and it was likely reduced funding would continue next year, with consequences for “hundreds” of Dunedin groups and organisations, big and small, she said.
“We will still continue to try and fund as many organisations as we can, but we won’t be able to continue to fund them at the levels we have in previous years.”
Gaming trusts had already decided not to support the stadium “to the detriment of all other smaller projects” and she doubted the Community Trust board would opt to approve the $10 million grant.
“They [the council] can’t have expectations that they are going to get millions and millions of dollars, because they are just not - not by a long chalk.”
Mr Thomson said he was surprised at the speed with which financial fortunes had turned in the past six months, saying the downturn was “a [financial] storm that is unprecedented in size”.
However, he was confident the trust’s diversified portfolio, including a mix of international and domestic fixed-interest and equity investments, was strong enough to weather the storm “in the fullness of time”.
“It’s just a case of how much time that will take,” he said.
• The latest Carisbrook Stadium Trust report will be debated by the city council at a finance and strategy meeting today.
