the business case for the stadium – does it stack up?

A letter sent today to the Cabinet members from GASP Chairman Gary Nuttall, explaining the problems with the business case…

12th July 2011

To: WDC Cabinet
CC: WDC Councillors

Proposed Stadium project and IPW/WDC Strategic Outline Business Case

The recently published report on Swansea Council’s Liberty Stadium by Price WaterhouseCoopers LLP for the Welsh Audit Office makes sobering reading. I repeat below an extract from a South Wales Evening Post report (June 11th 2011):

“THE way the Liberty Stadium is financed is unsustainable, according to a report into the way it is funded.
The home of the Swans and the Ospreys was opened in 2005, at a cost of £44.8 million, largely funded by Swansea Council.
The facility is run by the Swansea Stadium Management Company, (SSMC) which is made up of representatives from Swansea Council and the two sports clubs, but a Wales Audit Office study, dated from January this year, concludes the “financial position of SSMC remains precarious and the current revenue sharing arrangements are considered unsustainable”.

It also reveals that Swansea Council made a further loan to the SSMC in 2005, for £2.6 million, which it later wrote off, even though auditors “were not aware of any reason why such a loan could not have been sought from a commercial lender”.

The report also reveals that, to date, Swansea Council has not received any repayments from the SSMC — despite additional, well attended concert events from artists such as The Who, Rod Stewart and Pink.”

There are many parallels to what is being proposed by Wycombe District Council and I would urge Cabinet members to consider its findings in deciding what the real risks the Council would be exposed to by a sports stadia project. The Liberty Stadium is cited in the IPW Business Case as a great example of a “success” because they, like WSDL, have measured success solely in terms of attendance and haven’t considered the rather more important financial side of the equation.

I’ve previously written to Cabinet members identifying other recent stadium project failures – such as Darlington in February (“Chairman Raj Singh has said that he may walk away from the club after the holding company that owns the club’s Northern Echo Arena stadium and the surrounding land was placed into receivership”) and Doncaster’s loss-making Keepmoat stadium. Combined with the latest news from Swansea it shows that stadia project are high risk ventures that do not offer the right risk versus reward balance.

Looking more closely at the IPW/WDC Strategic Outline Business Case, it is clear that many of the stated benefits are either unachievable or unrealistic and I have summarised a few of them below:

Economic benefit
CLAIM: “Project ‘base case’ minimum will deliver additional annual economic impact of £2.9m per annum (Socio-Economic and Community Needs Assessment – Savills, 2010)”
The Savills report actually states that there’s the potential uplift of £2.49M economic benefit providing attendance at both rugby and football matches at least doubles. IPW’s assertion elsewhere in the SOBC is that expected attendance increase are between 36-46%. IPW is therefore claiming a potential economic benefit that is dismissed by their own analysis elsewhere in the document.

A recent WDC report (Savills?) also suggests that the failure of other stadia projects to deliver benefits has been when an out of town site has been used. As the primary means of access to the stadia is either directly by car or via park & ride facilities, then there is no prospect of visitors spending money with local shops except for those located at the stadium complex. The proposal will not therefore provide the claimed economic benefit to the area.

Financial benefit
CLAIM: “the Council would receive an annual rental payment for the stadium and wider site, and would benefit financially from higher attendances at the stadium”

Elsewhere in the document this rental is shown as £520,000 per annum but checking the table in the annex (Table 3.3 – WSDL rental payments) shows that the Council would be guaranteed to receive just £100,000 p.a. Any other amounts would be dependent upon a training academy being established (something that the document suggests would not happen initially), a share of the naming rights (although it doesn’t explain who else receives a share and what the apportionment would be). Finally, and critically, the remaining £320,000 would be based on attendance. This therefore places the risk element for achieving increased crowds upon the Council.

There is a comment made that the Council would cap its spending at £25M (and yet the estimated project costs show WDC’s contribution as £31M). Irrespective of any proposed cap, there is a very real risk that the Council could be exposed to the need to supply additional funding lest the project is not completed or doesn’t achieve the desired outcomes. Swansea, Doncaster and Darlington all show how it is that to avoid a “White Elephant” it has been necessary to provide additional funding above what was originally agreed.

Social and community benefit
No consideration has been given to the adverse effect on local business that the increased traffic congestion from locating a stadium, sporting facilities, sports village and several hundred houses at the Air Park would be. The aim of the stadium is to attract more people to the area but traffic jams and queues will lead to the opposite as people choose to instead shop in Reading, Uxbridge, Maidenhead, Oxford, etc.

Sporting benefit
The document describes synthetic turf pitches, a 3G football pitch, three grass football pitches, two 4G rugby pitches and five a side pitches. It appears therefore that the proposal is to primarily increase the number of rugby and football pitches and yet WDC’s own assessment of existing sports facilities shows that the District already has plenty of pitches (more than the national average).

Strategic Need
These are compliance requirements as the Council is required to ensure that any project aims and benefits are aligned with the appropriate Council strategies. There is no evidence of how this project delivers against SMART objectives (Specific, Measurable, Agreed, Realistic and Timely – as defined by OGC) and it simply lists various strategy documents without identifying specifically how the project would deliver benefits, how they would be measured nor what plan would be put in place to ensure their delivery.

Enabling Development
Whilst not identified as a benefit, I felt it important to review a few of the claims regarding the potential housing development.
The business case states that there would be 506 houses built, of which 20% would be affordable. This goes against WDC policy which suggests that 40% should be affordable. One should question therefore what the impact of this variation would have – either on the fund raising potential or on the need for additional housing (and the additional impact on roads and infrastructure).

On Monday 11th July, WSDL issued a statement that was reported in BFP which said that “These homes can only be developed because of the Sporting Village – as they are a development than “enables” community benefit”. This raises serious alarm bells because the business case suggests that the sporting village could be a possible future phase (i.e. not guaranteed) and that the facilities would need to be funded by amateur clubs. Yet WSDL is now stating something completely different.

I hope that I have provided sufficient information for you to now make a more considered decision about the proposal. I would urge you to weigh up the possible benefits (which don’t seem as good as initially proposed) against the very real and very serious risks – both to the Council and ratepayers, the community and the countryside.

Kind regards
Gary Nuttall
Chairman – GASP (Groups Against the Stadium Proposals)

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3 Responses to the business case for the stadium – does it stack up?

  1. Jeff says:

    Gary,

    you come from a position of being against a stadium and sporting village. I do not know your real reason and motivation for this, so that concerns me.

    It does excite me that we can potentially drive forward a major asset for Wycombe and South Bucks that delivers so much. Yes, we need to ensure that it is sustainable; Yes we need to make sure that the different aspects are explored well. But can you use your analysis and research to look at some of the positive aspects of a sporting village and work on how we might overcome the concerns you have raised. After all this will be a development that does deliver back to Wycombe. If we always say no to something new and exciting we will always be what we always were. That is unless we slowly get left behind as others seek to move forward, and that will be elsewhere so we all have to go further away, rather than have the assets on our doorstep.

    I understand you manage and run successful commercial ventures – does that make you a fat businessman lining your own nest. Or does that make you a wealth generator that benefits your employees and those around you? I do admire people like Richard Branson, he invests and succeeds more times than he fails. That means he is a net gain and wealth and job generator. I believe that Wycombe Council invest and succeed more times than their projects fail and that gives net gain to us all. So let’s help this succeed by working together and using your business skills and background to help mitigate the downside and deliver a partnership venture that benefits us all and contributes to a bright vibrant community that is of benefit to us all.

    By working together we may well succeed in delivering a great asset that benefits many in our district with spin-off benefits for us all.

    Jeff

  2. Gary Nuttall says:

    Jeff, at no point have I said that I am against a stadium or a sports village.

    On the sports village I have stated repeatedly that there are potential benefits but that the business case being evaluated DOES NOT INCLUDE A SPORTS VILLAGE. It simply states that there is a POTENTIAL for a sports village. It also states that any facilities provided for amateur clubs would need to be self-fiunded (i.e. by the clubs) and wouldn’t be paid for by the Council. WSDL has admitted that the reason for including the idea of a sports village is that it would allow the enabling development process to be used to fund a stadium.

    I also have no objection to a stadium as long as it does not impinge on existing amenity, is supported by the ratepayers, and is funded by the clubs themselves. Adams Park seems perfectly suitable and the Clubs should invest in what they have instead of expecting the ratepayer to pay by forcing the sale of land that was bought by the Council (or rather its predecessor). There’s no need to sell off the family silver!

    I agree that it is better to work together in order to provide benefit to the District. Unfortunately however, paying for a rugby/football stadium is not the way to do it. Check out the failures at Swansea, Darlingingon, Doncaster, Colchester, Oxford, etc. if you need proof as to why councils shouldn’t engage in this sort of activity.

  3. R Lawton says:

    Re The case does it stack, it may have ounce but takes no account of future trends

    The reason why rugby and football gates are declining is that fans are deserting the games at stadia is because they do not like the costs involved in journeying to a venue the cost of entrance and the inconvenience. They want the game delivered to them as it can, so easily be done and at a lower price than the price they can no longer afford.

    Technology is the answer to all the problems besetting these clubs, if only they’d address their future to accommodate the changes in culture that are happening.

    Regards all

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