Baypark operator Tauranga City Venues Limited has succeeded in obtaining a $5million bailout from the Tauranga City Council.
The alternative would probably have resulted in the council controlled organisation being declared insolvent.
Baypark Stadium.
As part of Thursday's Ten Year Plan discussions the council recommended the equity injection be over three years in amounts of $2million, $2million and $1million.
Instead of a single $5million payment, the ‘softer option' lessens the impact on rates and keeps it to one half of one per cent of the rate take.
Tauranga City Venues Ltd will have debt of about $14million by June 30, 2014, requiring nearly $1million in interest payments each year.
TCVL does not produce $1 million in profits.
Debt and interest will continue to grow until either the overall business earns enough to pay interest and start to reduce debt, or interest payments decrease to a manageable level by way of debt reduction – or a combination of the above.
TCVL is technically insolvent and Audit New Zealand has relied on a letter of comfort from the city council to achieve its ‘sign off' in the annual audit process.
TCVL previously presented a long term strategy to the council workshops based on taking control of existing revenue streams at Baypark and reducing the overall debt created by the capital payments regime to purchase the stadium.
The first steps were taken in 2011 with TCVL taking control of the venue's major cash flows, and being both the stadium and speedway operator.
Another $2million plus $101,000 in dividends is payable in the 2012/13 financial year under the purchase agreement.
The stadium will be paid off in the 2013/14 by payment of the last $2million.
The decision to support TCVL is unanimous with several councillors mentioning how unaccustomed they are to agreeing with Murray Guy.
He said the debt is not TCVL's, it is the council's and is created by the council.
He would have less people phoning him about it, if instead of it being publicised an equity injection, it was instead as taking five years of the debt back.
'The way we have gone about this is to imply that they have created the debt, that they have failed to meet the debt, which is totally false,” says Murray.
The decision means TCVL will be able to reduce debt levels, improving its ability to generate profits and begin to repay debt due to lower interest levels.
The impact on council of providing the $5million is as a ratepayer funded loan of $5m spread over the next three years.
It will delay TCVL's return to profitability and full debt repayment compared to the one off payment, but will permit the rate increase to be staggered over the next three years with the impact in year one being $210,000 increasing the $509,400 by year three and then reducing as debt is repaid.
In discussion, councillors were critical of prior reporting from TCVL to council.
'Going forward we need to know the bad news,” says David Stewart.
'We don't want any more rosy reports, we just need to know what's going on.”
He also thanked the current TCVL chairman for coming clean on ‘we have got a dog'.
Mayor Stuart Crosby says it is the first ratepayer money to be paid into Baypark and for what the city has, it still makes a good deal for ratepayers.
He says the $12million deal over time came with the land required for the TECT Arena, plus several hundred car parks, resource consents and state highway access.
'You don't need to be that hard on yourselves,” says Stuart.
'Do that exercise today and see what it costs.”
The original TCVL financial models were voided by the virtual overnight stopping of the stadium's sponsorship funding as a result of the world financial crisis, says Stuart.
'We have got to adapt to the changes that are happening around the world and in New Zealand – we are definitely on the right track.”
30 comments
Posted on 27-01-2012 07:49 | By charob
well there go our rates out the window. who can afford to stay in tauranga. I wonder if I put an application to put a cash injection in our business that is about to close because of lack of funds would it be accepted............... looking forward to the comments of other readers on here.
WtF
Posted on 27-01-2012 07:51 | By The Vale
Are you &%$@g kidding me. This should demand a ratepayer revolt.
Is Murray Guy for real on this?
Posted on 27-01-2012 08:26 | By Gee Really
Is this the same Cr Murray Guy who seemed to object to a $100,000 loan to the Jazz Festival because of something about policy? What miraculous policy does this $5million loan fit under? Take a good look at the story which in my opinion is full of weasel words. What happens if there isn't enough income/profit to pay back the loan? Yes, the ratepayers will cough again. Perhaps Cr Guy should take up a Speedway driving hobby fulltime and give up trying to run a city.
Lemon
Posted on 27-01-2012 08:44 | By kiwiwayno
Well it's now confirmed. Not only did TCC buy the city a Lemon, they have proven how utterly inept the councilors are. The business case put forward was theirs. It was wrong. They have admitted the council created the problem. It's fault all around on the part of the council and they need to be held to account. I would like one or all of the councillors to comment on here about just how the hell the city can afford to provide a loan when the city is burdened with debt like it is. It seems to me that the use of the word "Loan" is glossing over what it really is - a justification for a higher rates burden on the city. I bet when it's paid back (if ever) that the rates burden wont be reduced!! Tauranga you need to make sure you dont forget about this! We are halfway through an election cycle - make sure you remember this when you cast your vote next year. It's time for change of guard - the current crop are proving themselves to be completely hopeless. And we are paying for that.
Thanks
Posted on 27-01-2012 09:09 | By Phailed
For the $5million of our money. I'm sure it won't take long to spend if the way the hotpools and just about every council facility is run. Look at the salary rumoured for the pools CEO! Not surprising council is running scared of competition for its crematorium on Sunlive a few days ago. It would be great if we had more choices than using council run stuff.
Posted on 27-01-2012 09:21 | By whatsinaname
may be the councilors should take a cut in pay and put it towards the debt. Or sell it. but who would want to buy a lemon......
Declare TCVL insolvent then
Posted on 27-01-2012 10:28 | By bigted
Like any business, if they can't even break-even then they must fold. Simple. We (ratepayers) are not a bank, like some councillors may think. We MUST go back to maintaining the city and sell, sell, sell the uprofitable liabilities.
Bridgecorp Stadium
Posted on 27-01-2012 10:42 | By Openknee8ted
would be an appropriate name
City Debt
Posted on 27-01-2012 12:50 | By Colleen Spiro
Just in the last couple of days $5 million for Bay Park $4 million plus for University in the city where no one can park....I DESPAIR. We do have at least 3 councillors that I know of that are involved or love speedway, don't we.
@ Gee Really
Posted on 27-01-2012 13:32 | By SpeakUp
You wonder about Cr Murray Guy? Well, he's a keen petrol head at Baypark Speedway. And as far as I know, Mayor Stuart Crosby has a cosy well-paid seat on the TCVL board. Any more questions? All commenters here, watch this space. The Citizens Monitoring Council is a grass-root ratepayers' movement that, for now in the background, watches and monitors Council operations but will flower in the upcoming months to the next local elections. You all are invited to be part of this exciting process of citizens' initiative. In time the CMC will publish and call to participate to expose and stop TCC hidden agendas, spendthrift, cronyism, mismanagement, double dipping as CEO's in council controlled entities like TCAL and TCVL, obscene salaries, financial ruin (half a BILLION dollars debt) and utter unaccountability. -Citizens Monitoring Council-
Fixed income
Posted on 27-01-2012 13:35 | By nerak
Will the esteemed members of TCC give hard cash to the pensioners, who do not get a pay rise to pay the ever rising rates. Anyone on a fixed income finds the idiocy of TCC bordering on criminal. And what gave them the right to provide a "letter of comfort"? Certainly not the people who pay them. Baypark will continue to hold out it's hand. Come on people, there must be better in Tauranga to choose from for our council. This lot need sacking, and now.
told you so
Posted on 27-01-2012 14:01 | By tonyb1
Like I said early this week the bail out was already on the council meeting to make the decision was a joke, these deals are done and decided on by the old boys network over a couple of bottles of wine And the wine is paid for by the rate payers
Amazing
Posted on 27-01-2012 14:45 | By Jitter
There goes the recently announced 2% cap on rates. Previous Councils and CEO have a lot to answer for over this mess. Too much of the origional deal was done under the table out of the view of ratepayers. However many people did go into print at the time to warn the then TCC that this would turn into another disaster. They never learn. Another dysfunctional council
im there
Posted on 27-01-2012 15:03 | By tonyb1
Hi speak up im there with bells on
Now u know.
Posted on 27-01-2012 15:07 | By Zara
Now you know why Bobs a multi millionaire and the councillors and the mayor earn between $70K and $100K each .
I Kept Telling You ,Now do ya believe me??
Posted on 27-01-2012 16:13 | By ROB PATERSON
TCC WARNED MANY TIMES SINCE 2007 TCVL have now finally hit the wall, reporting in December2011 that it was technically insolvent so it came whinging and griping, to Council about the $5 million debt (or whatever the correct figure is) and scrounging for a capital injection of TCC ratepayer funds, based on financial premises that are basically unintelligible to wipe the debt. The Sports & Expo Centre lemon known as Tect Arena is not even in this equation.Let me repeat the message over and over again until those responsible for this financial mess in TCC stand up and are counted.For the record TCC failed to heed all the warnings and the accounting facts available.It seems all current Councillors at the stroke of a pen seek to wipe the TCVL debt but it is still a debt only now it is directly on TCC ratepayers when we were promised this would never happen.It is a paper entry shuffling money about but the debt still remains. On 15th February 2007, I wrote to all 11 TCC Councillors individually and Mayor Crosby and subsequently to the 5 new Councillors elected in Council at the October 2007 Local Body Elections providing them with copies of the previous correspondence. Incidentally, this was not the only letter sent. The warning given was loud and clear, yet Councillors didn't take the slightest bit of notice nor for that matter have the media, who were also given copies of that correspondence. Few people, if any, have ever shown any interest in the Baypark purchase debacle so it is strange to see so many critics appearing now it has all turned to custard. The deed is done and surely it is now time to hold to account those responsible for the financial mess. The text of the 2007 letter was as follows: - To the Mayor & Councillors Tauranga City Council 'Re: BAYPARK 'BLUECHIP” STADIUM, TE MAUNGA JUNCTION - COUNCIL PURCHASE / PROPOSED EVENTS CENTRE It is with the utmost reluctance that I feel constrained to write to Councillors personally, regarding the above matters. As a ratepayer, I am seriously concerned with what I perceive to be Council's current intentions regarding the above site. Council have as I understand it, had recent confidential meetings on the proposals, the last being on Thursday, 14th December 2006 to consider a report which I believe dealt with the purchase proposal. The financial implications of buying the Baypark Stadium will not stand scrutiny and if it was purchased at the 2006 improved Rating Value of $22 million (final figure was $12 million) then the annual interest alone would be $2.2 million and if a further $35 million is spent on a proposed Events Centre, that will add a further $3.5 million - a total of $5.7 million a year in interest with operating costs of at least the same amount plus ongoing maintenance on top of this probably resulting in $300 a year being added to everybody's rates bill. This Stadium can't make a profit, no Stadium in New Zealand does and the substantial losses will have to be funded by ratepayers. Currently, inexplicably, no general rates are paid on this site, only limited sewage rates. I am also disturbed by the fact that, when I specifically questioned the Mayor Stuart Crosby at our meeting on 21st September 2006 on this very point, he advised me that Council would not be directly involved in purchasing the Stadium, which no longer seems to be the case and that the whole Events Centre proposal for the Baypark site was being reassessed. It is worth recalling the Stadium lease terminates in 2020, the Stadium is already in place and available for public use without any financial input by Council, which has absolutely no experience in running Stadiums. There is no need for Council to purchase or develop the Stadium any further as Council will bear the full brunt of operating a Stadium and Events Centre without any subsidized help. Currently, Speedway holds a maximum of 19 meetings a season and with small attendances of about 4,000 people, the annual gross takings would be say $1.5 million less operating and maintenance costs and as it seems no interest is allowed for and no rates charged, these normal business expenses, as far as I can see, are not presently taken into account in the current running costs. Speedway itself may possibly not be there much longer anyway, leaving concerts and rugby, plus the usual non-paying activities to provide the income. This paints a very sorry picture financially. If these incongruous proposals ever get off the ground, ratepayers will suffer substantial and continuing losses. Having regard to this, Councillors should be fully aware of the provisions of Sections 44, 45 46 and 47 of the Local Government Act, 2002 (enclosed) and that the collective Council and Councillors personally may well be liable for any losses suffered by ratepayers from the investment which is of a wasting nature and funds applied in any purchase may well be deemed to have been unlawfully expended. The warning signs are there and Council and Councillors will, in my opinion, be negligent if they become involved with any financial commitment in respect of this site, to ratepayers detriment. Council, despite its continual denials, does have serious conflict of interest issues in respect of the Baypark site, its development Resource Consents and its operations generally. In my opinion, there is no current or existing Resource Consent in place for the proposed Events/Exhibition Centre, because it is radically different from and larger than the one envisaged in 2004/2005. The above is of course in addition to the cost blowouts that have already been or will be experienced with Baywave, the Art Gallery and the absurd Museum proposal, all of which could well come back to haunt Council. I can only guess where Council is getting its advice on the financial implications from and I suggest that Councillors subject this to rigorous scrutiny and get proper independent, forensic accounting advice. Three years ago it was said, when Council was looking at a joint venture Events Centre with the Stadium owner, involving an input of around $3 million with a subsidy of $275,000 per annum, that this would involve a substantial ratepayer contribution. The current proposals will be 10-20 times worse. Enclosed are copies of Council's Evaluation and Monitoring report, dated 22nd September 2003 and Key Research evaluation, dated 9th September 2003. It is my understanding the lessee and sub-lessee have not provided regular specific, full annual audited accounts as required by the Council lease, so how Council could even start to undertake a due diligence programme is anyone's guess. I would like to make it clear that I have no financial interest in this matter other than as a ratepayer but I do have real concern for the older ratepayers on fixed incomes and young first homeowners and their ability to fund these extravagant schemes. P.S. The following is a list (which is by no means exhaustive) of non-performing, over-priced projects - both existing and proposed: - • ROUTE K $45 million • BAYWAVE $16 million • ART GALLERY $10 million • MUSEUM $25 million • BAYPARK purchase $22 million (Final price was $12 million) • EVENTS CENTRE $35 million ESTIMATED TOTAL: $153 million!! __________ ENJOY TCC Ratepayers but don't be fooled by the glitter and hype because behind all the TCC nice to haves and excesses you will find a pile of debt and overspending. TCC has moulded itself into a Potemkin(something that appears elaborate and impressive but in actual fact lacks substance) type oligarchy(government by a small group of people) ever fearful of being exposed for what it is.
@ Rob Paterson
Posted on 27-01-2012 16:46 | By SpeakUp
Your initiative is outstanding! Thank you. "...TCC has moulded itself into a Potemkin(something that appears elaborate and impressive but in actual fact lacks substance) type oligarchy(government by a small group of people) ever fearful of being exposed for what it is." This is true and financed by the silent she'll-be-right crowd (We love the humor in your clever 'misspelling' of 'molding'). Until...until a paradigm shift occurs in the awareness of the people, usually initiated by (monetary) calamity. This is happening exponentially right now. Just like the debt finance structure we have been subjugated to. It stands to hope that accountability and liability will eventually find their legal reality according to the provisions of Sections 44, 45 46 and 47 of the Local Government Act, 2002. We'll be in touch. -Citizens Monitoring Council-
Public Meeting...
Posted on 27-01-2012 16:51 | By Tony
I wonder how many of these usless people would show at a public meeting to explain to us what is going on...TCC have no money ...It all yes all belongs to the rate payer. This is really mismanagement on a grand scale
Hobsons Choice
Posted on 27-01-2012 17:38 | By Fun in the Sun
Some serious questions do need to be asked about how the original purchase decision was arrived at, and how we got to this position. However it looks to me like the Council this time round had little choice as while the rate payers are told the money is owed by TCVL the rate payers via the council have underwritten the loan. So pay now or cover the default. Either way we lose.
crosby
Posted on 27-01-2012 21:59 | By len barron
how did crosby get to be a director on the tcvl.who voted for him ? not the rate payers .i thougt he was voted to be our mayor not get more money out of the rate payers for his pockets . is he on any more boards run by the council
huh
Posted on 27-01-2012 22:56 | By Capt_Kaveman
i dont have much to say as its all been said already, but in the end this had to be delt with, but for building or aquiring anymore projets it needs to stop
What are you wondering SpeakUp?
Posted on 27-01-2012 23:45 | By Murray.Guy
By SpeakUp ... You wonder about Cr Murray Guy? Well, he's a keen petrol head at Baypark Speedway. And as far as I know, Mayor Stuart Crosby has a cosy well-paid seat on the TCVL board. Any more questions? ... SpeakUp,just what is it that you are wondering? Yes, I value my speedway involvement, possibly just as you may enjoy rugby, netball, swimming at Baywave or a ride on the subsidized bus. If facts / truth is of interest, NO elected member is paid as a director of a TCC CCO, only the community Directors. This is Council policy as determined by it's elected members. Gee Really, the Jazz Festival were GIVEN a $30,000 grant (gift) and a $90,000 GAL in direct conflict with written Council policy, and had absolutely NO parallels to the decision by TCC to purchase the assets of Bob Clarkson or the speedway activities off Baypark Promotions Ltd. TCVL did not create the debt or the flawed business case that was passed on to TCVL. The debt and business case had/has about as much credibility applied to it as the business case for Route K, Baywave and others - Elected members are policy makers, not the authors of a business case! Tauranga City has a multi million dollar, multi purpose recreational facility that to date has had all loans, interest costs capitalised and transferred to TCVL, in the vain hope that the cash positive 'sport of speedway' would pay for the parking, the buildings, the rugby ground and office facilities. Anybody see a Tui advert? Does anybody realize that there are more elected members than just myself and Mayor Crosby?
Lets Thing of the positives
Posted on 28-01-2012 05:39 | By Jack the Lad
Nope cant think of any, just another big balls up!!!!, privatise the entire council system, and run it as a shareholder (ratepayers) enterprise.
Is Murray Guy supporting a pet project?
Posted on 28-01-2012 10:13 | By Gee Really
As a keen petrol head at Baypark Speedway, are you paying lip service to a rates cap, but at the same time voting for $5million ratepayer guaranteed money to keep things afloat there? I agree with you there are no parallels between the Baypark/Speedway deal and the Jazz Festival deal. The Baypark one was $5million plus the secret amount paid for Speedway compared to the Jazz Festival $120,000 all out in the open.
Eleven less of these TCC turkeys would be a good start
Posted on 29-01-2012 12:57 | By RORTSCAM
Essentially there is no difference between the Baypark venture and the JAZZ Festival money grubbing because both these rorts and everything else TCC touches turns to custard - as one of the Council smartasses said it almost looks like things are planned to fail. Now there is a fact for a change.Murray Guy clearly doesn't have a clue how the financials work and Crosby and his toadies could not care less about ratepayers funds.
sell it immediately
Posted on 29-01-2012 17:22 | By The Tomahawk Kid
sell it immediately
@Murray Guy
Posted on 01-02-2012 09:22 | By Demandthetruth
Yes you are right Murray the CCO TCVL has a debt which is actually TCC debt, unfortunately however the entire purchase was a questionable process between CEO of the time & Team Leader and Friend (ex MP/Developer) without the full knowledge & agreement of elected Councillors knowing unril afterwards. AND YES a lot of people do only see You and Crosby (& aunty Bill because she has a column for oil) coz all the rest are nod head nongs who do as told, apart from catherine Stewart & even she has been quiet lately
@Jack the Lad
Posted on 01-02-2012 09:26 | By Demandthetruth
it is meant to be a ratepayer enterprise. The only problem our elected members get a frontal lobotemy when elected and forget why they are there
@Tomahawk Kid
Posted on 01-02-2012 09:49 | By Demandthetruth
C'mon just WHO will BUY IT?? Instead of jobs for the boys or girls in TCAL case we need to see a capable CEO appointed to control both TCAL & TCVL (they are not big organisations) on sensible money. Have a serious look at staffing. TCC need to appoint a Board of 1 Councillor(not to be Chair), 4to6 Community Directors, who are paid per meeting, (not all Lawyers & Accountants) who have run successful businesses (there are some very capable superannuitants). Advertise via a proper HR company & open it up to all to apply. The CEO should be paid salary plus by result based against realistic budgets, even if its a loss but lessening. The accounts should stay away from TCC office & be done in house with support of good independent Professional Accountant. Then it could be truly seen as a business & I am not saying it will not need help over the humps for a number of years. TCC budgets will need to reflect this but they NEED TO ACT NOW, because both are a true TCC leadership mess!!
@demandthe truth
Posted on 02-02-2012 23:16 | By The Tomahawk Kid
Good suggestions, but Im afraid you are just asking for more of the same - ie council GAMBLING with other peoples money. Why are you concerned Who buys it anyway? Just put it up for sale. Im afraid you are only suggesting more of the same - ie council running the place. I dont care who makes a profit or loss from it - only that is wrong to force others to be shareholders via rates. Let those who wish to purchase shares or purchase the thing outright do so if they wish. Then it doesnt matter if Mickey mouse is the CEO (I think he is at present!) But anybody purchasing the place will do their damndest to protect THEIR investment
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