Selling a Stadium

This article was sent in by a reader of the blog who wishes to remain anonymous.

On Monday 9 December Council released the Investment Case for the Christchurch Multi Use Arena (CMUA), a $3 million report along with a public relations spin assuring us it’s all good. The Press has offered their own spin assuring us it will add only $80 to our rates, yearly. Let’s take a look.

This is no ordinary Investment Case, it is a Sales Presentation. No hint of dissent is mentioned, no alternative views presented. The risk of serious financial, environmental or urban planning impacts from the Christchurch Multi Use Arena (CMUA) is buried in 250 pages offering no clarity on the potential magnitude of financial danger or environmental impact.
A complete investment case with integrity would clearly identify and quantify the risks. This one does not; it simply compares stadium design options. A stadium will be built; here are the options and the one “we” like/will build.

Democracy would be well served by an investment case which spelled out the burdens, the potential magnitude of risks, including failure and highlighted that even this best case scenario will only return pennies on the dollar.

stadium

Who is Pushing this?
All who wanted a stadium were brought together to shape the report. Conflicts of Interest were not a concern; they were the criteria for inclusion.
The stakeholders per the report:
Sports 20%
Commercial 19%
Construction 15%
Professional Services 14%
Government 10%
Events Industry 9%
Hospitality 7%
Strategic Partners 6%
Elected Members 6%
Other 4%
CCC Staff 3%
Government Agencies 2%
Education 2%

And the leaders? “A set of key stakeholders formed the Project Reference Group (PRG) The PRG was comprised of representatives from the following organisations:
• Christchurch and Canterbury Chamber of Commerce
• ChristchurchNZ
• Christchurch Stadium Trust
• Cosgrove Partners
• Crusaders Limited Partnership
• HSR Governance
• Mitchell Notley and Associates
• Ngāi Tahu Property
• Sport New Zealand
• Vbase ”

The report is the precursor to public consultation. Consultation will occur once Council and Cabinet have accepted the report, plans drawn up and change not an option.

stadium3

Why Must this Be?
The stadium was put forth by the former quake Czar Gerry Brownlee as part of his CBD rebuild. Mere minions had no say in that; so why should we have a say now? Besides, political reputations are on the line and promises to those who matter were made.

Sadly it is rumoured that the current central government will withdraw their $220 million quake recovery grant to Council unless it is committed to building a money sucking pit of a stadium.

It’s All Good & Really Necessary
The report asserts that without a stadium Christchurch does not capture its share of economic benefits from cultural and sporting events which contribute to a bustling and exciting CBD. Investments in hospitality, retail, and accommodation will lead to a vibrant city and improve land values.

OK; but is this the only way, the best way? What are other options for over a billion dollars of lifetime expenditure? Silence. There are “Opportunity Costs” for any major investment, but that is not addressed. This is a sales pitch, not a report offering insights or alternatives.

What’s on Offer
Option 3a (on budget scenario) is preferred. Cost is around $472.7 million. Benefits projected to be $395.6 million leaving a mere $77.1 million deficit. The Benefit to Cost Ratio is negative returning less than the dollars spent, ranging from 70-80 cents on the dollar.

Strategic Risks as offered in priority order:
• We get the stadium size and functionality wrong
• Lack of hospitality infrastructure to support it
• Poor acoustics limit use
• It may not be easily repurposed for future uses
• Takes too long so people just give up and we suffer loss of face/commerce
• Residential use adjacent to stadium not viable due to noise (no mention of congestion, rubbish, crime, drunkenness, light pollution)
• Costs could escalate. (This is rated as having a high Likeliehood)
• Lack of contractor capacity in Canterbury could lead to lack of competition and escalation of costs
• Design/size is wrong leading to future redevelopment costs
• Transport collapse leading to increased costs to manage/mitigate
• Noise Spill from the north end of the stadium
• Treasury or Council do not approve the business case
• It could go over budget or schedule
• Too many premium seats, not enough for the masses, or the other way around

But Promoters and Teams are Clamouring for a Stadium
Not according to the report. Quoting:

“Bid Incentive Fund
A bid incentive fund is required to encourage event promoters to bring events to the CMUA and ensure it hosts a diverse range of events. An incentive fund is likely to be required to attract All Blacks tests, large-scale concerts, international rugby league and football fixtures and other(non-sporting) events to the CMUA. …. payment is essential to ensure the CMUA is competitive with other stadiums in New Zealand and the Asia-Pacific region”

Ratepayers?
What ratepayers are willing to pay gets a brief mention “the estimated average willingness to pay per household is $20 per year.” This is far less than the hundreds which will be added to rates. The increase to rates is debatable, but conservatively 5%, realistically 10% and more if any of the assumptions are off or identified risks eventuate.
Ratepayers want infrastructure and affordable rates, some want a stadium, and others would like to be able to afford to stay in their homes. Perhaps that will be in the “business case” for Christchurch, for people?

OK, many are “sports mad” or want to go to local stadium concerts. But how many ratepayers can afford to indulge them?

3 thoughts on “Selling a Stadium

  1. It is surprising that there was no discussion of dissenting views. Overseas there is a general acknowledgement that stadiums are not a great use of capital.

    See here – https://research.stlouisfed.org/publications/page1-econ/2017-05-01/the-economics-of-subsidizing-sports-stadiums/

    “Building sports stadiums has an impact on local economies. For that reason, many people support the use of government subsidies to help pay for stadiums. However, economists generally oppose such subsidies. They often stress that estimations of the economic impact of sports stadiums are exaggerated because they fail to recognize opportunity costs. Consumers who spend money on sporting events would likely spend the money on other forms of entertainment, which has a similar economic impact. Rather than subsidizing sports stadiums, governments could finance other projects such as infrastructure or education that have the potential to increase productivity and promote economic growth.”

    … and here – https://www.brookings.edu/articles/sports-jobs-taxes-are-new-stadiums-worth-the-cost/

    “Promotional studies also fail to take into account differences between sports and other industries in income distribution. Most sports revenue goes to a relatively few players, managers, coaches, and executives who earn extremely high salaries—all well above the earnings of people who work in the industries that are substitutes for sports. Most stadium employees work part time at very low wages and earn a small fraction of team revenues. Thus, substituting spending on sports for other recreational spending concentrates income, reduces the total number of jobs, and replaces full-time jobs with low-wage, part-time jobs.”

    And that’s assuming that costs are contained. This old article of the stadium is instructive…

    https://www.newsroom.co.nz/2018/09/10/231432/be-wary-of-chch-stadium-estimates

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    1. Thanks David. Yea I’ve found it slightly odd that basically everything I’ve read about the stadium admits that it is not a good use of public money but still wants to build it anyway. Quite a strange attitude…

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      1. It reminds me of a friend, who has endured 3 freezing Christchurch winters because he can’t afford a heat-pump, but then went out the other day and bought a $14k sports motorbike. I understand where he is coming from – motorbikes are heaps more fun than boring old heat-pumps. In a similar vein, collectively blowing half a billion dollars on a shiny new stadium is heaps more fun than boring old utilities and transport.

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