$50m claim for stadium emerged from unminuted meeting

It started, as it sometimes does, with a press release.

Christchurch City Council’s venue management arm, Venues Ōtautahi, issued a statement on February 8 estimating the province-wide economic impact of the city’s $683 million stadium, Te Kaha, which is expected to be opened in 2026. The figures were “relatively conservative”, chief executive Caroline Harvie-Teare said.

The next day, Christchurch’s daily newspaper, The Press, the front page led with the new forecast, headlined: ‘Stadium’s $50 million boost’. The full economic picture, Harvie-Teare told the paper, included showcasing Canterbury and increasing its international profile.

The assumptions for the stadium were laid out.

It’s expected to host 200 events each year, attracting about 500,000 people who would spend about $28m on accommodation, food and drink, and other activities. The other $22m is spending by Venues Ōtautahi on workers and the supply of goods.  

As the council’s website says, the 25,000-seat roofed stadium, which will be able to expand to 30,000 for big events, is expected to host All Black tests, World Cup football qualifiers, and big concerts, with a capacity for 36,000.

The Press’s story also covered the costs, and introduced doubt about rosy forecasts.

Ōtautahi’s ratepayers will fork out $453m for Te Kaha, with contributions peaking at an average of $4 a week. (The Crown’s contribution is $220m, through the Christchurch Regeneration Acceleration Fund, on top of $10m already paid for site decontamination.)

Even before cost-overruns, the stadium was only meant to return 87c for every dollar spent.

The Press story on February 9 reported: “Economists have said the cost to ratepayers of servicing the debt and running the stadium make it unlikely to create a net financial gain for the city.”

Indeed, the stadium’s financial burden on ratepayers could create political headaches for the council, which is proposing an average rates increase of 13.24 percent, just as a survey, released last week, said 25 percent of residents were dissatisfied with its performance.

How Venues Ōtautahi came up with its economic modelling might take on greater importance, in that context.

(The venue management company runs the city’s town hall, the cricket ground Hagley Oval, the Air Force Museum, the indoor multi-purpose arena in Addington, and the nearby temporary stadium.)

Newsroom started asking questions about the $50m boost on February 8, the day the press statement was issued. We asked to see an economic impact report and assumptions.

Calder Communications, which disseminated the report, provided a response from Harvie-Teare. The origins of the economic benefit were the 2019 investment case – prepared for the council by the big four consultancy EY – for what was then called the Canterbury multi-use arena. It predicted a $20m boost through visitors.

Venues Ōtautahi already delivers 400 events annually, she said, welcoming about 700,000 guests, and bringing an estimated $50m in economic benefit.

“The forecast uplift is due to the assessment of the current environment, the near completion of detailed design, confidence the venue will attract not only New Zealand-exclusive content driving visitation to the region and a greater volume and diversity of event activity but also the consideration of the full ecosystem created by events activity and our Venues Ōtautahi philosophy to celebrate and source local,” Harvie-Teare said.

Newsroom reiterated it wanted to see the economic report, not receive comment.

The five-year-old business case was publicly available, we were told, and “Venues Ōtautahi has updated the estimate based on more recent forecasts”.

The assumed events, which “may not be exhaustive or complete”, were listed as:

• Six Super Rugby (Crusaders) matches

• Four domestic rugby (Canterbury)

• One rugby test (All Blacks)

• Two other rugby content

• One soccer

• One rugby league

• Two other sporting/entertainment events content

• Four large-scale exhibitions

• Three large concerts

• Four small concerts

• 180 flat floor events

• Mega events scheduled six-yearly

Newsroom requested source material from Calder Communications, again.

We were told some data could be found in Venues Ōtautahi’s annual report, assumptions were explained in the 2019 investment case, and “some of the data will be what VŌ knows from events it hosts”.

“There is no published report presenting the updated forecasts and estimates that I can send to you sorry.”

Then, more explanation.

The 2019 average daily visitor spend of $213 had been upgraded to a 2026 estimate of $395. On top of the revised events schedule, figures had been adjusted for inflation, and some actual figures included were described as “the historical percentage based on events held at Venues Ōtautahi venues of visitors attending events from out of town”.

“With the addition of Te Kaha and based on the forecast event schedule, Venues Ōtautahi is anticipating a close to 100 percent uplift in total annual revenue.”

Venues Ōtautahi is a council-controlled organisation, so Newsroom requested source information from Harvie-Teare under the Local Government Official Information and Meetings Act, on the basis the public ought to know who made the forecasts and how rigorous they were.

We exchanged emails with Harvie-Teare over three days this past week.

She repeated the sources for the estimates were the 2019 investment case, data from the latest Venues Ōtautahi annual report, and a public presentation to councillors.

The response repeated the line: “With the addition of Te Kaha and based on the forecast event schedule, Venues Ōtautahi is anticipating a close to 100 percent uplift in total annual revenue.”

But who updated the figures, and where are their workings?

Venues Ōtautahi did, Harvie-Teare said, but the line-by-line workings can’t be released as they’re commercially sensitive. Newsroom had asked for “briefings / presentations / report / spreadsheets / attachments” about the February 8 press statement but Venues Ōtautahi said they didn’t exist, apart from the statement’s draft.

So where did the figures come from?

“The process of Venues Ōtautahi establishing the economic impact number we released publicly was an in-person meeting between myself, our general manager of commercial, and our general manager of corporate services (CFO),” Harvie-Teare said this past Friday.

At that meeting, the execs confirmed the $28m economic impact figure, and “walked through” the Venues Ōtautahi financial model for Te Kaha.

The numbers plugged into the model came from figures in prior annual reports, its statement of intent, and actual numbers for “local procurement”. Then, adjustments were made for the new forecast event schedule, stadium operating model, and forecast revenue.

“We agreed the economic impacts numbers to be included in the media release at this meeting based on these figures,” she said. “There are no minutes of this meeting.”

According to LinkedIn, Harvie-Teare, the chief executive, has a human resources qualification, Venues Ōtautahi’s commercial GM Danny Schroder is a commerce graduate, who was South Island sales director for media company Stuff, and Dale Andrews, the corporate services general manager, is an accountant and financial controller.

Updating financial modelling was part of Schroder’s and Andrews’ role, Harvie-Teare said. However, neither appear to have a background in economics.

The chief executive pledged to provide more information on the trio’s professional backgrounds but then, on reflection, decided not to.

“I have been the chief executive of Venues Ōtautahi for the last four years which along with my broad range of executive roles not only in HR but in corporate services, business development, change management including delivering the transition recovery plan for CERA [Canterbury Earthquake Recovery Authority], strategy and transformation and so on confirms the breadth of my background.”

The actual and forecast figures, using an independently reviewed financial model, “means the numbers referenced are an indicator of what the region should expect to see when the venue opens”, Harvie-Teare said. 

“Venues Ōtautahi has been in business for over 25 years, have intimate knowledge of how the new venue will operate based on the intensive engagement in the project to date and the successful operation of the five venues we have under our portfolio as well as what makes up the financial model, so to your question as chief executive I have confidence in the numbers we have forecast.

“This is a wonderful and positive outcome for our city and highlights the genuine benefit of Te Kaha and the positive social, cultural and economic impact it will deliver post its opening in 2026.”

How did we get here?

The city’s previous stadium, historically known as Lancaster Park, was wrecked in the 2011 earthquake. The former rugby league stadium in Addington then underwent a $30m upgrade so rugby, at least, and some concerts, had a home.

But it was meant to be temporary.

That meant when news came through, in 2022, of a $150m budget blowout, and some councillors became nervous about covering it, the city’s business and sporting elite lost patience, and launched a public campaign to put pressure on them.

Ultimately, the campaign was successful, but the financial chickens are now coming home to roost, with a fair chunk of the council’s proposed rates increase being attributable to the stadium.

That’s a twin problem for Mayor Phil Mauger who, on the campaign trail, promised to keep rates rises low, and pledged the stadium would not to be a burden on ratepayers. Only recently has he approached other councils to ask for help covering Te Kaha’s operating costs.

Sam Richardson is an associate professor in economics, and associate head of school, at Massey University. He says stadium funders – the ratepayers and taxpayers in this case – are entitled to question the basis for claims of economic impacts.

“There’s no evidence in New Zealand that a city’s economy enjoys a net benefit by building a stadium (and hosting events). Research I published in 2016 indicated exactly this.

“There’s also widespread scepticism of the claims of net economic benefits from stadiums among independent researchers globally. There’s really no evidence that stadiums pay their own way – they generally end up costing cities money.”

Richardson says a better description of the $50m “economic boost” is the economic activity associated with the facility. It’s not necessarily an increase in economic activity. 

“The reasons for the lack of realised impacts in Christchurch’s case are likely to be due to the fact that of the projected 200 events per year, most of these (I suspect) are likely to be already taking place in the city in another facility, and the associated activity is therefore already in the city.

“The true economic boost from the new stadium will hinge on the ability of the stadium to attract events that would otherwise not have come to the city (and the number of people from outside the city or region that these events attract).”

For example, if events held at the temporary stadium in Addington are simply transferred to Te Kaha, then there’s no net benefit to the city, Richardson says.

“What Te Kaha gains is the temporary stadium’s loss. 

“In summary, the economic impact argument for stadiums is not strong. I agree that there’s probably more prestige in building a stadium than dollars generated.”

This gels with comments made weeks ago to The Press by Gareth Kiernan, an economics forecaster at Infometrics, who said it was “hard to make the numbers stack up” for a new stadium based purely on the finances.

“If Christchurch didn’t have a facility for major sporting events and concerts it might struggle to attract more residents. People look at what sort of experiences a city can offer.”

EY’s 2019 investment case for the stadium put the cost-benefit ratio at 87c in the dollar. That means for every dollar invested the return to the city is lower than that. And that was before a $150m cost blowout.

But you can’t just rely on numbers, the EY report said. Some benefits and costs can’t be quantified, and others were “conceptually compelling and based on strong theoretical grounds”, such as large events at the stadium improving “subjective wellbeing”.

“This means that qualitative factors and the overall strategic environment must also be considered when making an investment decision.”

Harvie-Teare agreed, according to the February 9 story in The Press, that Te Kaha’s most significant impact would be on quality of life.

There’s a consensus, it seems, the economics of stadiums are weak – or at least, the largest return isn’t an economic one.

Indeed, the five-year-old investment case by EY predicted the stadium would run at a $4.2m operating loss.

Further details about Te Kaha’s costs are found in Venues Ōtautahi’s statement of intent from 2023 to 2026. There’s $4.8m of “pre-opening operating support” for Te Kaha. Operational and capital costs in the council’s 2021 10-year plan were listed as $4.3m a year. (This year’s draft long-term plan will be released later this month.)

• This story has been corrected to state only 25 percent of Christchurch residents are dissatisfied with the council, according to a recent survey, not 44 percent.