Thursday, 10 May 2012

F-B Stadium - more of the same

Admittedly, I wrote my previous post rather late at night and with the story only just emerging. This morning, with the benefit of a few more details, I can write a little more on the sorry state of the Forsyth Barr Stadium.

From the New Zealand Herald:
The company is now forecasting a full-year loss of $2.4 million, followed by losses of $1.2 million, $1.1 million and $1 million for the following three years, council information shows.
From the Otago Daily Times:
The six-monthly result represented a dramatic turnaround from DVML forecasts released last year, which tentatively predicted profits of $91,000 in 2011-12, $30,000 in 2012-13 and $46,000 in 2013-14.
Hmm. When support was being drummed up for the facility and throughout the process of construction, Westpac Stadium was touted as the poster child for New Zealand facilities - and a quick look at the first ten years shows why:

Figure 4.1: Net Operating Surpluses ($m): Westpac Stadium, 2000-2009
Source: Wellington Regional Stadium Trust Annual Reports, 2000-2009.

This figure was from my PhD thesis completed last year (note to self: it's about time this chapter was published!). In each of the ten years post-construction, the stadium ran operating surpluses which were then used to pay down debt. Forsyth Barr Stadium doesn't look to be close - but things might get better over time (and they are forecasting reductions to losses). It wasn't until the second five years, however, that the Westpac Stadium started to post stable surpluses. The key was establishing a regular usage for the facility, among other things - something the F-B Stadium has had trouble with to date.

I particularly like Paul Walker's take on the developments at Anti-Dismal:
I can't help thinking that the obvious lesson from Dunedin is that if you want to inject economic life into your area don't build a stadium.
I just hope that other city councils learn from the Dunedin experience and don't try building grand new stadiums in their cities. Take note Christchurch!
Stadiums are typically built as stimuli - to shake loose the shackles of impending economic doom by attracting people back to the city and getting them spending, and the impacts will trickle down to all concerned and things will come right. While an admirable sentiment, that hardly ever happens. This is why I find the popular defence of attributing poor financial results on the state of the economy a classic case of the pot calling the kettle black. I've alluded elsewhere to stadium construction as being a case of keeping up with the Jones'.

While one year is hardly a sufficient number of observations to read the final rites over the F-B Stadium, there are more than a few examples of stadiums in this country that have caused grief to ratepayers in recent years - with the North Harbour Stadium and Waikato Stadium two examples that spring immediately to mind. I sincerely hope that the Forsyth Barr Stadium is not added to the list - but things (and quite a few of them) will have to change for the better.

Of course, if Christchurch builds a bigger and better stadium and the associated increased competition for events, etc, is going to make things very interesting in Dunedin. Buckle in for what is sure to be an eventful ride!


  1. Sam. Do you know the rate of return on the investment for the Westpac Stadium? Are those surpluses high compared to the investment made? Or what is the opportunity cost of the Weatpac Stadium?

  2. Paul, I'm not sure on what the rate of return on the Westpac Stadium investment. The cost of the facility was $123m, and $25m of that was from the Wellington Regional Council. I've done some work on the realised impacts of the Stadium on overall employment in Wellington, and also indirectly on construction employment and GDP - and there wasn't a great deal to report. It was a case, as you might well expect, that things remained as the status quo at an economy-wide level, since Westpac was a replacement for Athletic Park.

  3. Paul, as far as I know the Westpac Stadium Trust has never paid a dividend to its owners and so it's rate of return is zero. If you mean how much economic benefit is being created from spending $123m to build it, then there is a 2010 economic impact report (summary) at the trust's website, but I would stick with what Sam said because he recognizes that it was a replacement for an existing facility.