Details of the proposed $220 million, 8000-seat “Boutique Stadium” at Tauranga Domain have been released. The key points are:
* Default option is a $220 million stadium ($192m + 14.6% estimated cost escalation)
* Permanent seating planned for 7000 people
* Temporary seating for another 8000 (15,000 total capacity), including “seating modules” for 5000 that could be transported to other Tauranga facilities.
* Includes a second CBD exhibition centre and a “function centre”.
* Ratepayer funding for stadium operating expenses estimated at around $15 million per year (about $250 per ratepayer on average, noting commercial ratepayers would pay a much larger share and most residential ratepayers significantly less than this).
* The benefit:cost ratio is less than 1.0 – that means you get back less than $1 worth of benefit for every $1 invested.
* Geotechnical investigations have not yet been completed, so engineering costs are still uncertain.
* There are no costs included for relocation of existing sports clubs, even though Tauranga City Council (TCC) has committed to covering those costs.
The following statements come directly from the TCC agenda to discuss the stadium:
“The estimated total project cost for the Stadium is $220,272,000, this figure includes escalation costs to 2026 and a contingency allowance of 20%. From an operational perspective, the Stadium would return a positive EBITDA. However, the preferred option is not projected to return sufficient profit to cover debt, interest payments and depreciation – this is typical of most stadiums.
As a result, most stadiums receive additional funding over time, frequently in the form of operational grants from councils, to remain cash flow positive.
The Preliminary Business Case indicates that, assuming Council decides in the future to support the provision of the preferred Stadium concept design on the Domain, and to provide an annual operational grant to the Stadium to meet the costs of depreciation, interest and debt repayment, the cost of this grant would be approximately $15 million per year. However, there are other alternatives to an annual operating grant, and these are being explored outside of the Preliminary Business Case.”
There was an interesting discussion at the Tauranga City Council council meeting about the proposed stadium on 1st May.
Commissioner Selwood questioned the accuracy of Priority One’s Business Case. He suggested the benefit:cost ratio didn’t show the wider community benefits from the stadium, such as the social and health benefits. He stated it was important to stress those wider benefits when consulting on this proposed stadium.
The Business Case clearly states that the stadium will deliver less than $1 of benefits for every $1 invested. Even that’s a best-case scenario, as it doesn’t include:
– Relocation costs for sports clubs
– Possible further cost escalations in a high-inflation environment
– Possible extra costs depending on results of geotechnical investigations
– The ongoing shortfall in operating expenses
What that discussion at the council meeting highlights is that either this Priority One Business Case is correct and the costs and benefits have been correctly assessed, or Commissioner Selwood is right and the benefit:cost ratio in the Business Case is wrong – which raises big questions.
This is a critically important issue, as the benefit:cost ratio will get worse after the relocation expenses are added. We’d note that if “wider social and economic benefits” are added in as Commissioner Selwood wants, then the wider social and economic costs also need to be added.
e.g. The loss of amenity for athletics, bowls and croquet clubs, the decreased access for community sports teams, the likely increased ticket prices for NPC rugby matches, the extra CO2 emissions for Bellevue Athletics Club members travelling to Baypark (or wherever they end up), travel congestion costs for stadium events, the lack of TCC and TECT investment in other community facilities that results from prioritising investment in this stadium, etc.
That same issue is relevant to all infrastructure projects. There are always wider social, environmental and economic benefits and costs, so we have long called for all direct and indirect benefits and costs, including opportunity costs, to be accounted for in business cases.
We’ve made our views clear in previous submissions to Tauranga City Council, and in this (paywalled) BOP Times article:
Sustainable Bay of Plenty director Glen Crowther said he had concerns about the project’s potential value for money, especially in the context of the other large-scale projects the council was involved in, such as the civic centre rebuild, the wider active recreation masterplan and the Greerton Maraawaewae Study.
“We’ve got to ask the question: is this going to be good bang for buck? Will this help more than if we spend [the money] on something else?”
Crowther said judging from the business case so far, he was not convinced. He believed a public transport lane all the way to Pāpāmoa could have more benefits to more people than the proposed stadium.
Crowther said there were also still unknown elements such as who would pay for the relocation of the existing domain facilities. “We have spoken to enough people in the community to know there are mixed feelings about this. Some people are very concerned at what’s been planned.”
Earlier in the meeting, the CEO of Bay Venues expressed his support for the proposed stadium to be located at the Domain. He said:
“We are probably struggling to accommodate everything [at Baypark]… If we could take some of the business events, some of the concerts, some of those things that normally happen at Baypark, move them to the [Domain] stadium, that will free up space for more community sporting activity at Baypark.”
Which made us wonder if swapping venues (moving community sports to Baypark and moving business events and concerts to the Domain) is the most cost-effective strategy? And why wasn’t that part of the benefit:cost analysis?
The TCC agenda document also states: “Community sports representatives were generally supportive, except for some of the sports clubs currently located at the Domain, who raised concerns about their future options if the Stadium proceeds.”
We know several other sports representatives who are not supportive, and we have heard a lot of community concern about the likely unsustainable financial impact of this stadium – including on other sports clubs.
Commission Chair Tolley responded to concerns expressed by Domain sports clubs in the public forum by saying the council want to enhance the greenspace in the centre of the city and made it clear that “this [proposal] is an enhancement of the facilities that are there”.
That may well be so, but it doesn’t change the reality that many current community users will no longer be able to use the Domain as they do now. That is clear from this statement in the Business Case Appendix 8: “One of the reasons play is limited is simply users cannot afford the costs associated with opening a stadium (security, cleaning, administration etc).”
Commissioner Wasley sounded cautious when he spoke, saying this is just the start of the process. Several commissioners suggested this would be a regional stadium, so it needs support from the wider Bay of Plenty, including financial support.
Commissioner Rolleston stressed the need to engage with the wider community, and acknowledged the strong connections that many locals have with the Tauranga Domain.
Commissioner Selwood said addressing the uncertainty for existing users is “a critical need”. He said council supporting relocation of existing users was “a fundamental cost and need and actual moral obligation on behalf of the council and the wider community”. Which was reassuring, but it raised the question of how much many $million it will cost ratepayers to relocate athletics, bowls and croquet clubs to comparable facilities…?
The bottom line is that no matter who pays for any new stadium (TCC, BOP Regional Council, TECT, or a proposed ‘off the books’ levy), local residents will pay – either directly (via TCC or BOPRC rates, or a levy) or indirectly through less funding of other much-needed community facilities.
Which means the key questions remain:
1) Does this proposed stadium give good bang for buck?
2) Would the money be better spent on something else?
The only way to assess that is for:
- Priority One or TCC to provide an accurate, peer-reviewed business case that shows the true and full costs and benefits
- TCC to run an open, transparent, unbiased community engagement process with opportunities for informed community discussion – not just a few rushed 5-minute public forum slots.
You can view the Preliminary Business Case for the proposed stadium here.
The Council meeting agenda (including commentary on the Business Case) is here.
You can view the Tauranga City Council meeting discussing the stadium here: https://www.youtube.com/watch?v=LlSib9HrGqQ
I suggest you refer to page 75 of the business case which sets out the wider economic benefits of the Stadium at an NPV of $778m. The Key Section is extracted below…
Economic Impacts Assessment
The second tool used in the assessment is the EIA, and it is based on a Multi-regional Input-Output table, and the Dollar-values are expressed in 2021-terms. The different components of the facility were considered independently, and include: • The construction effects, • The life cycle costs, • The ongoing and operational effects. This includes visitor spending that is attracted to Tauranga due to the facility. The model reflects the supply chain effects21 and the impacts are reported using Value Added22 and Modified Employee Counts23. The impacts are due to a lift in economic activity in response to new demands generated by the facility. The total impacts include the direct, indirect as well as the impacts. Table 5.17 summarises the VA impacts using a 5% discount rate. Again, the earlier options and the preferred refined option are presented for contrast. The present value of the total VA24 that would be delivered by the different options are estimated at: • Stadium and Fitness $289m, • Stadium and Light Exhibition $369m, • Preferred Refined Option $778m.
Thanks for your comment Stephen. We had noted that in the business case. However our view is that:
1) After mentioning various options, the adopted business case shows a BCR of less than 1. If that isn’t appropriate (as per your comments), then that should go through a formal process of being updated – not just adding in some extra benefits based on the EIA. Otherwise, it should surely mean all other council-funded projects need to go through the same process, to ensure that the trade-offs are done on a consistent basis.
2) If you do go down that track of increasing the BCR by adding indirect socio-economic benefits, then surely you also need to deduct the indirect socio-economic costs…?
We are supportive of a consistent and comprehensive approach, but we do not support cherry-picking only indirect benefits to get a more ‘acceptable’ BCR.
Thank you for your summary Glen
Thanks Glen.
Have Council looked at options for the location of this, including the upgrade of Baypark. If it is going to be a Regional Facility They must do this.
We haven’t see any such detailed analysis, but one would hope they’d at least looked at the possibilities. That seems an important consideration, but so far it all seems to have been about the Domain site, without clear reasons why.
Well written summary and good searching questions of this proposal asked.
What I would like to know is who did the peer review of this proposal before it was presented to the meeting on Monday?The proposal was delayed because it was undergoing a peer review but I cannot find out who actually completed this review and where are their comments on what they found.
Also why wasn’t the 2nd Option at Blake Park ever given the same costing as the Domain.TCC at the time according to Council meetings minutes were interested to know more but never took it any further even when it became apparent that the Geotech at the Domain has problems whilst there is none of this problem at Blake Park.It was also said that ‘transport’ didn’t rate as high at Blake Park compared to the Mount citing inadequate bus services.OK parking would be a challenge at Blake Park but nowhere near a problem as the Domain.Also there would have been the opportunity to look at a local public train rail connection from Tauranga to the Mount.Sure development would be required but it is worth considering.The Domain site will not be a community facility especially when you read and take in the final report on the type of grass they are going to lay and then have to maintain.As the agronomist points out a booking arrangement will have to be used as casual play without some control will mean the state of the grass will be damaged if wet weather prevails and then it won’t suit for television viewing plas other factors.
You make some good points Grahame.
We didn’t know about the peer review, so please share that information if you find out more about it.
Secondly, the lack of further investigation for Blake Park (and Baypark) has always been puzzling, especially because of the widespread community support for those options or the racecourse.
The site assessment matrix showed the Domain won out over Blake Park on the grounds (as you said) of accessibility, parking and natural hazards (flooding and slope stability), as well as some other factors. Again, it would be good to understand WHY the Domain scored higher on those grounds, as the scoring is always very subjective.
The ‘peer review’ remains a mystery.The Croquet Club,to which I belong,was told that the Business Plan was to be presented to Council at their April meeting.Almost at the last moment we were told that the Business Plan was being peer reviewed and therefore wouldn’t be presented until 1st May meeting.About a week prior to the Council meeting,Domain users,were invited to a presentation at Trustpower Arena by Priority One of what they were now calling a Preliminary Business Plan.I attended this on Friday28th April but little came out of that meeting.Nigel Tutt said in an email that he would explain how the ‘peer review’ worked if I would care to meet with him.As I am having daily medical treatment it is hard to set aside time for other things and i let that offer pass.I also contacted Steve Bramley who seems to be employed as a consultant by Council as the original message regarding the peer review came from Council.It appears that a ‘peer review’ as one might have expected was not the case.Steve informed me by email that BECA had undertaken ‘a technical review’ and ErnstYoung an ‘operating financial review’Neither reports,which one would assume result from a ‘peer review’,appear to available to the public.Steve suggested that if there were reports from the 2 parties involved they were for Priority One and Visitor Solutions only(engaged by Priority One for putting the presentation together from the start).So it seems like secrecy of whatever has been written will not be made public.I have requested whatever has been written from both BECA and EY but my guess is that they will not provide it to me.There was a 2 point difference between The Domain and Blake Park and although there was some suggestion when that report came out last year that the latter should be investigated in need,nothing ever happened.Perhaps the people really behind this whole idea have great financial interests this side of the harbour than at the Mount?I will let you know if I do get this mysterious ‘peer review’.
I haven’t read the business case but feel that Blake Park would be a good location for a new stadium. It already has international cricket and hockey grounds. A parking building will probably be required, but this could also help with parking pressures at Mt Maunganui beach and township. Park at Blake Park and bus ride to beach and township could solve another problem.
Hi Ross, You raise some good points. We were interested to see that Blake Park scored worse than the Domain when Beca did an assessment of the various options for locating a stadium. Like you, we saw some really useful synergies for a stadium at Blake Park, close to the Bay Oval, with a parking building to serve the sports facilties and the wider Mount, and a shuttle and really good public transport service between the CBD, Blake Park, Mount shopping area, Mount beach, Mauao and Bayfair. Given the downsides of the Domain, we support a review of the top 3 or 4 locations, as there were pros and cons for them all and they all got very similar scores when assessed.
I am astounded to look at this plan and wonder why we need all this expense if we are not going to have an all-weather covered in stadium like Dunedin have. I believe the Domain is the right place for it as it attracts people to the dead CBD after events. The extra exhibition and events centre is not required as there are plans for a new Civic Centre downtown. This also reduces the cost. Lets see a decent proposal that can be used in all weathers. Baypark is too far out of town as is Tect Arena.
Barry, we have been told the events centre and exhibition space is needed to boost the benefit:cost ratio. In other words, although their expensive plan offers a low return on investment, it’d be even worse if it was just the basic stadium. We also note that the council now states the primary use of the Domain is for events, whereas it used to be for sports and public usage.