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