ACT taxpayers are entitled to a little more clarity on the question of funding the upgrade of Bruce Stadium. Questions arise on several fronts: legal, financial and political.
The Government argues as follows: It wanted to see an upgrade of the stadium so it could host Olympic soccer and other rugby and league games. This, it thought, would be beneficial to the territory, attracting visitors, money and jobs. It would cost, it estimated, $27 million. It thought that the public should put $12.3 million to the cost. It sought and obtained appropriation from the Legislative Assembly for that amount. The rest of the $27 million should come from the private sector. Rather than obtain the $15 million from the private sector upfront, the Government thought it would build first and get the private-sector commitment later.
Financially, that made some sense. There was no point raising money from the private sector and paying interest on it while construction went ahead. However, there was probably nothing to stop the Government organising private finance on a pay-as-you-build basis.
It might also have made some financial sense to get most of the building work done before seeking private finance because that would enable private financiers to see what they were getting and for both sides to know the end cost of the refurbishment with greater precision. However, the downside of doing that is that the risk of any cost blow-out (and there has been one) could not be shared by the pre-paid private financier. And surely this is the very reason for engaging private financiers for such a project. If the refurbishment was to be done with public money first and then the completed project financed by the private sector, there would be no risk element taken on by the Johnny-come-lately private financier. One of the main reasons for governments getting out of commercial deals is precisely because tax money should not be used in risky undertakings. That was one of the main reasons the Government proffered for the sale of Actew. With Bruce we appear to have got the worse of both worlds. The Government has copped all the risk of a cost blow-out and having created the public asset is allowing the private sector to cash in after the event when there is no risk.
As it happens there has been a cost blow-out of about $5.6 million. The private sector financier, most likely the Commonwealth Bank, is coming in after that risk has already been borne by the public sector.
So on the finance side, the Government has an arguable case for doing what it did, but that case is undermined somewhat by the alternatives.
On the political side, this Government, and all the administrations since self-government have been under relentless pressure to deal with less money in direct grants from the Commonwealth and a contraction in the ACT’s main industry – the federal public service. There has been voter demand for the maintenance of government services without any increase in revenue raising. There has been a constant imperative to get things going in Canberra. It is an understandable and laudable objective. Every opportunity must be seized. However, that does not mean it must be seized at all costs. The prospect of the Olympic Games was an obvious one to focus on. Any sensible government would have done its best to capitalise on that opportunity and within reason spent some public money on it if it thought the community could benefit. It was likely that the community could benefit by attracting money to upgrade the main stadium in the territory. Politically, that requires some skill. The benefits are medium- to long-term. The spending required is immediate. Governments have competing claims on their money, particularly form health, education and welfare. The dividing of the cake is a political matter and governments stand or fall at election time on the competence with which they attend to those matters.
But having decided politically that the public investment in the stadium was worthwhile, it then became a matter of how it would raise and spend the money. In this, legal niceties are important.
The ACT works on a net-appropriation basis, as all Australian Government do. It means, for example, that the ACT health system can run a long way over budget during the year, knowing that towards the end of the year that there will be a very large payment from NSW for the treatment of NSW patients in ACT hospitals. That was an example used by Chief Minister Kate Carnell. It was a good example. It shows how governments during the year have to run over spending from time to time as long as they do not over-spend the money appropriated by the Assembly in the long run. There would be numerous examples across the administration. The Department of Education might over-spend in the knowledge that late in the financial year revenues will come in.
However, the question remains whether the Bruce Stadium project is qualitatively the same as most ordinary lines of Government spending in which revenue proven in previous years can be anticipated with such confidence that overspending in first part of the year is of no moment. Or was the Bruce Stadium development of such an unusual character that the revenue was so problematical that earlier over-spending without Assembly approval was unwise at the least if not a possible defiance of the Assembly and the principle that Governments should not spend without specific appropriation?
The danger is highlighted in this case by the fact that the refurbishment has gone over budget. The danger is further highlighted but the fact that the precise nature of the private investment was not known beforehand: is it to be a loan or equity or a combination. If the private financier is to be an equity partner, to what extent is Assembly approval needed for such an asset sale.
That there are no clear answers is seen by the fact the Auditor-General is seeking a legal opinion. As it is, the Auditor is not due to report on Bruce for some months. In the meantime much information is being withheld under the much-misused claim of commercial in confidence.
In all, the Carnell Government is vulnerable to attack on financial and political grounds, and may be on legal grounds. It may rue the day it went near Bruce Stadium, or having gone into it was not more open with the Assembly and the public on each step of the way.