When the Claudelands Events Centre was built, it was never envisaged that the biggest entertainment it would showcase would be the controversy over its budget.
But that has proved to be the case. The event centre’s declining financial situation has been a consistent headline grabber in the Waikato Times since the centre attracted an estimated 12,000 residents to its opening day on June 18, 2011.
The independent Horwath report into the centre, released in early February, 2012, showed unrealistic forecasts for business, revenue, pricing and operating costs at the events centre. This bad news was surprisingly conveyed in the council’s staunchly partisan City News publication in March 2012.
The latest financial figures, released on May 3, 2012, and reported in the Waikato Times, forecast a $1.881 million operating deficit in the events centre’s first year. This came about from forecast revenues of $1.55 million, direct costs of $2.03 million and administration costs of $1.401 million.
This was significantly worse than the figures released to councillors at a meeting at the end of March 2012, which forecast a $1.528 million operating deficit. The difference was due entirely to administration costs, which had only been forecast to be $1.048 million in March 2012.
But that is not the only bad news for Claudelands. The $1.881 million operating deficit is only part of the picture. It doesn’t include internal corporate overheads, depreciation and financing costs. These are significant. Because council didn’t have sufficient cash on hand to build the events centre it funded the entire project from borrowed money.
In October 2010, then deputy chief executive officer, Blair Bowcott, revealed that interest alone would cost $3.93 million a year, as from the completion of the events centre’s building project.
Sadly, this figure hasn’t been updated in recent Waikato Times news stories about the events centre, particularly after the Horwath report was released. But it could be regarded as a ballpark figure of what the council might be paying at the present time.
If you add $3.93 million to the forecast $1.881 million operating deficit, it gives a loss during the council’s 2011-12 financial year of $5.811 million.
That’s a significant financial setback for an events centre that cost $70.2 million to build.
The Horwath report forecast the net cost of keeping the centre operating. In 2011-12, it was $1.5 million. For 2012-13, it would be $1.37 million. For 2013-14, it was forecast to be $1.24 million. For 2014-15, it would be $1.19 million.
Given that the May 3 forecast for operating costs was 25 per cent higher than the net cost predicted in the Horwath report three months earlier, the prospects don’t look good for Hamilton ratepayers. No matter how you look at the figures, it seems likely that ratepayers will still be hit with more than $5 million a year in costs by June 30, 2015.
In a city of 52,000 ratepayers, those with averaged-priced properties will be paying more than $100 a year to fund Claudelands’ costs for quite some time.
That doesn’t include their admission charges to shows, sports events, conferences or exhibitions. That’s if they can still afford to attend events at the events centre after paying their quarterly rates demands.
Tainui Group Holdings Ltd was particularly vociferous about the Claudelands Events Centre when the company’s representatives fronted up to a hearing on the council’s 10-year plan on Wednesday, May 16, 2012. Councillors were told to sell the events centre and limit council spending to core business.
Tainui Group chief executive officer Mike Pohio signed the company’s written submission, which says: “Currently Claudelands drains a significant 8 per cent of the rates revenue, as much as council spends on wastewater and more than spending on stormwater. Under the local government reforms, it is clear that Claudelands is not a core council service and would clearly be better utilised and more cost-effective in private ownership.”
Councillors were reportedly upset at the company’s comments.
This financial sideshow looks like producing plenty more drama, comedy and tragedy over the next 20 years, as the council struggles to pay off the building costs of the Claudelands Events Centre.