The questions arising from the funding for the Bruce Stadium upgrade get ever more complex.
When the upgrade was announced in late 1996, it was costed at $27 million. The ACT Government has consistently said that its input would be limited to $12.3 million, plus some financing costs and that the rest would be funded by the private-sector.
The aim was twofold. First, to make the stadium suitable for Olympic soccer. Second, to prevent the exodus of the Brumbies rugby union team and the Raiders rugby league team which was threatened at the time. The upgrade was to bring the stadium from 11,000 seats to 25,000 with additional temporary seats to accommodate 40,000 for special occasions.
The project was ambitious, but worthy. Indeed, some form of upgrade was necessary to hold the two main sporting teams.
Several questions arose immediately. Should the ACT be funding a stadium owned by the Commonwealth? Was 40,000 too ambitious? Would an upgrade necessarily require a rectangle-only format thus excluding Australian rules? Was the costing realistic?
As the project went forward new questions arose. Was the private sector locked in? Would the ACT be able to hold its exposure to $12.3 million?
For example, in June , 1997, the chair of Estimates Committee Roberta McRae, queries the funding. “”I always believed that there was a $27 million guaranteed project and that the Government had committed only $12.3. Today I hear that is going to be renegotiated after all these initial negotiations with [project manager] CRI Ltd are complete. . . . We’d love to see Olympic soccer here, but it can’t be at great public expense.”
That alarm bell was not followed through.
Put bluntly, Ms McRae was saying something like: “”I thought the Government was putting in $12.3 million and the private sector $14.7 million and with the cash in the pot, building would begin. But I now find the private money is not in the pot.”
And two years later it is still not in the pot. An agreement in principle has been worked out, but not finally signed. Moreover, the total cost looks like being something like $40 million, according to Labor Treasury spokesman Ted Quinlan.
If that is the case, how on earth can the Government limit its exposure to $12.3 million, as it initially guaranteed? Further, if the private sector money has not actually been put in the pot, how has the now-completed stadium upgrade been paid for? Who wrote the cheques out for the concrete, the steel and the wages? On who bank account were those cheques drawn? And were the drawings properly authorised by law given the Assembly has agreed
The Government is still confident ultimately it can hold the cost and meet its initial commitment not to spend more than $12.3 million. Further, it says it has done its funding in an appropriate way. It says that to the extent it has spent more than $12.3 million that has only been on a temporary basis, and that the net spending will not exceed the $12.3 million. That assertion has been contested and a flurry of legal opinions has been sought on it. Certainly there has been a technical breach of the Financial Management Act which requires Assembly appropriation of all expenditure. But virtually every government department in a western world finds itself in deficit at some time through the year while it awaits recurrent revenue to come in. The question with Bruce will be whether a capital outlay large enough to upgrade the Stadium and large enough to require an overnight loan on June 30, 1998, will be seen by a majority of the Assembly as a merely technical breach.
The Government says also that – Assembly approval aside — it was a sensible approach for the Government to get on with the building and only when the costs picture was solidified should it seek a private sector deal.
Even so, the Government would still not be out of the woods. It still has to convince the Assembly and the people that its financing deal quarantines the taxpayers’ total exposure to $12.3 million plus financing costs, or whether the financing deal leaves the taxpayer exposed to more than the $12.3 million. That will depend on two things: first the nature of deal with private financier and second the efficacy of the business plan for the stadium.
On the first leg, the Government may be in trouble. The finance deal explained by the Government this week was described by Opposition Leader Jon Stanhope as looking like a map of the Cayman Islands. Its complexity may be excusable. The various ebbs and flows of money and property rights are merely a way of giving the Commonwealth Bank a better tax result. The deal is a typical cost shift between the territory/state level and the Commonwealth level of government. But the underlying nature of the transaction is a difficulty. If this private-sector financing is to quarantine the ACT taxpayer, surely it must be a purchase by the private sector of all but $12.3 million of the ACT owned equity in the Bruce asset. (The Bruce asset being the ACT interest in Bruce; its sub-lease from the Commonwealth.) With the equity comes the risk. But this deal is not only a purchase of equity. It involves a loan to the ACT as well. If the loan, with its attendant repayment obligations, exceeds $12.3 million worth, it means the ACT Government is financing the deal beyond the promised limit of $12.3 million. At present, it is difficult to say if that is the case.
On the second leg, it is fairly apparent not enough bums will go on seats to make the deal a financially sound one. That is not a hanging offence. Moreover, it may take some years for it to become apparent. But it is a matter voters can make their own judgment about at the ballot box.