I thought I had witnessed Otago’s darkest day in rugby. It was 1979 and Steve Marfell the strapping Marlbrough 2nd-five lined up a penalty that would have sunk Otago into the 2nd Division South with the likes of Buller and North Otago. He missed and over the years following Otago built up an enviable record under the likes of Laurie Mains, Gordon Hunter and latterly Tony Gilbert. But now Otago rugby stands on the edge of oblivion- at least in the short term. It is truly shocking for those of us who grew up in awe of the blue and gold.
The truth is that the professional era for rugby has never really been kind to Otago. In the years following 1996 there was a legacy of player strength that carried Otago to an NPC title a couple of years later, but it soon became clear that retaining players was going to be a struggle. As the performances of the team declined, so did the crowds, and no doubt the sponsorship revenue. Player payments went up and up, and the cost of retaining Carisbrook as a facility also grew. That much I can see, what on earth else was going on to see the debt rise so much I have no idea. This must have been some pretty shocking decisions taken in the last few years to see it get this bad.
The NZRU seem likely to ensure club and school rugby will continue, and that as Clare and David have pointed out, must be a priority.
As for the ITM Cup (NPC) team I think it is important that something is done to try to field a team this year. This might well be the opportunity to see the wider community come back in behind the team. With local commercial support as the base, maybe Otago people can be given the opportunity to help get the team on the field. The rest of the year then needs to be spent establishing a more sustainable base for the future.
But the real question that does have to be answered is the sustainability of professional rugby at the provincial level. Chris Laidlaw has made the case that we pretty much can not afford it, and there is evidence to back that up. Many provinces are really struggling, and as we can see in Otago’s case, it can have massive consequences. But what would a return to amateur rugby mean for provincial teams? The looming private ownership of Super 15 franchises will put more distance between local rugby and the professional game, and the chances of money earned professionally coming back to support the game will reduce.
The NZRU urgently need to re-look at the model for the game here to ensure that it survives and thrives at a local level. They tell us that is their goal- now is the time to take stock and make good on that commitment.
I live in Dunedin and frankly we’ve been rorted by rugby over and over again, first with spending millions on upgrading Carisbrook, then we loaned them $2m they couldn’t pay back, then they decided that wasn’t enough and rammed through the stadium costing hundreds of millions of dollars, despite thousands marching in the streets against it, then when they finally figured out that building the new stadium devalued Carisbrook, their only asset, they had the city bail them out by buying it. Now they’re defaulting on the rent on Carisbrook to the tune of almost half a million dollars, and look like they’ll leave the city on the hook for another $40m in money for the stadium as a result.
The local council now has one of the highest debt loads in the country, we can’t afford to fix our aging 100 year old water system (estimated to cost $1billion over the next 50 years) if you guys are in government when it all finally hits the fan and the city has to come crawling please go easy on us, we were lead by bozos who wouldn’t listen
So not a lot of love lost for rugby in Dunedin these days.
Otago has often been able to punch above it’s weight on the field, but in the boardroom it’s been punch drunk, trying to be up there with the heavyweight unions who they were never going to be able to match.
It’s a major issue for Otago, but also a New Zealand wide problem. TV rights rule, and that leaves the local unions and crowds trying to make something of what they are left with.
Sam Hill has a detailed look at it:
New Zealand Rugby: The cold hard facts – part one
The Dunedin rugby mafia won the battle for the new Stadium, and lost the war for Otago Rugby. Brilliant season strategy from the top, that.
I came to post my thoguhts, but it seems Pete George beat me too it.
Would love to hear what Labour think of my ideas..
As a big fan of democracy, as you are CV, I take issue with the tired and boring “mafia” symbolism people who hate rugby use. The Council was re-elected not once but twice and both occasion the public had a chance to send a message they did not want the Stadium built. They did not. Democracy wins. No amount of massaged and poorly constructed surveys by anti-stadium cadres will change that. So you can save that sort of childish crowing and bitterness for the dribbling muppets at the Standard. They are never happy unless they’re miserable The second point, you miss, is that the ORFU has no financial interest in the Stadium, they are a user of the stadium, nothing more.There is an absolute separation between the ORFU and the Stadium.
A plan for a union in the hole to $2.3M.
1. The NZRFU offer the DCC $200,000 for the end of their $400,000 rental dues (Carisbrook) claim on the Otago Rugby Union.
In return the NZRFU guarantees an Otago team in the ITM Cup using the new stadium. And repayment of all existing Otago Union debts to local businesses.
The NZRFU loans the Otago Rugby Union $1.9M for this.
This “interest free” loan to be repaid at $200,000 pa over 10 years. Half of the repayment financed by profit and half by new private sector lending.
So that in 10 years the union has $1M in debt and the established capacity to make profits at $100,000 pa to cover that debt cost.
2. For 10 years the Otago Rugby Union be managed by unpaid amateurs – job sharing part-time where necessary.
3. Using Highlanders coaching staff to also coach the Otago team (no extra pay).
4. The NZRFU talk to the players group about terms for Otago players in 2012 – existing contracts at half payment only – with players free to resign elsewhere (reducing last years wage bill from $1.1M to half this).
Except for the millions Dunedin spent buying Carisbrook off the ORFU’s hands, a deal which was only done as a direct result of this other new stadium being built.
Given this backdrop how can your claim of “absolute separation” hold any water? The ORFU benefitted to the tune of millions because of the new stadium.
How can democracy win when the current elected officers will all move on, saddling the future of that city with debt for the next 20, 25, 30, 35 years?
What kind of “win” is that??? Well, the old boys mafia in Dunedin wins of course, but who else?
On the issue of structure.
The only way to make provincial rugby viable is to make availability to play ITM Cup a condition of Super Rugby pay (unless they go OE). Essentially load the salary costs for some of the provincial players onto the Super rugby revenue stream.
This leaves otherwise the retainer payment for developing players on the books of the franchises to also subsidise the cost of provincial players.
These factors have to be considered when determining on any privatisation of the super rugby revenue stream.
Hawkes Bay is one province that shows the importance of the provincial union retaining the support of local businesses.
Something the NZRFU and Otago Rugby Union should consider before going ahead with any debt default. And also appreciate the local ratepayer debt taken on to provide a World Cup (important) after the Christchurch earthquake) and future international venue.
http://www.stuff.co.nz/dominion-post/sport/hurricanes/6495921/Canes-regions-rugby-finances-in-good-heart
Pete George, that was an interesting article you linked. The idea of making the ITM cup a qualifier for Super Rugby (if teams like the Blues don’t make the top 5, they’re out and whoever did make the top 5 is in) would be entertaining.
The Blues come up to Northland on a regular basis to promote themselves and gain supporters, but I don’t know that its really working. No-one I know supports them, mostly because they’re considered Auckland which is a world away from Northland. The Chiefs are a closer fit for Northland despite being geographically further away.
Dave – you seem to misremember our recent history:
We had ONE local election prior to the decision to build the stadium – the stadium plan on offer at the time was a fully privately funded one, the plan changed to a fully publicly funded one only after that election.
We did have a second election after the decision to build the stadium had been made, the mayor and the two leading councilors who had promoted the stadium were tossed out on their ears.
As a cricket supporter, i am absolutely disguste with the amount of taxpayer and ratepayer money that has gone on propping up a sport (rugby) which is played by a small minority.
In Auckland we cannot even attract international cricket matches any more since there is no suitable venue for a city of 1.5 million(I doubt Eden Park will ever be accepted as a legitimate cricket ground- its just too small)- yet we have government funded rugby stadia all over the place.
Yet cricket pays its way- something rugby is unlikely to do in the foreseeable future.
I have two words to sum this situation up
Richard Reid
Anyone who has followed his “career” will see the mess that trails behind him.
Bob C – I understand the Eden Trust Board offered several/many millions to Auckland Cricket to relocate. It instead chose to stay and spend money on the number 2 ground. It could have, for instance, used the money to move HQ to Colin Maiden which has one of the best pitches and boundary lengths in the country, and turned it into a decent venue, at least for Test Cricket. It chose not to. Internationals at eden park (1 and 2) are a joke.
Richard Reid??? Wasn’t that the name of the ‘sock bomber’? Or is there another Richard Reid. I’m lost Tracey.
It would seem that the source of the problem is the $5M loss the Otago Union took in 2009, when they sold Carisbrook for below book value to the DCC. Their bank had been lending to them against this asset.
The irony is that the bank is at the head of ther queue for repayment of debt before other creditors. The example of Greece would suggest that the private sector banker of the bankrupt party has to take a hair-cut.
So I would revise what I wrote earlier and advise
1. The NZRFU offer the bank 50 cents in the dollar.
2. Also offer the DCC $200,000 for the end of their $400,000 rental dues (Carisbrook) claim on the Otago Rugby Union.
In return the NZRFU guarantees an Otago team in the ITM Cup using the new stadium. And provides the money to make these two payments and full repayment of all existing Otago Union debts to local businesses.
3. This “interest free” loan to be repaid by the ORU in 10 equal instalments over 10 years.
4. The money to be raised from operating profits, or by raising funds from supporters or other fundraising efforts.
5. The Otago Rugby Union raise money from supporters to finance its participation in the ITM Cup in 2012.
6. For 10 years the Otago Rugby Union be managed by unpaid amateurs – job sharing part-time where necessary.
7. Using Highlanders coaching staff to also coach the Otago team (no extra pay).
8. The NZRFU talk to the players group about terms for Otago players in 2012 – existing contracts at half payment only – with players free to re-sign elsewhere (reducing last years wage bill from $1.1M to half this).
The NZRFU can’t offer ANY funds or loans or 50 cents here or there. They also posted a loss last year (10 mil??) and nearly all prov unions are in trouble.. Counties are staying afloat selling lights given to them by Auckland… it’s recession like at the moment sponsorshipwise. NZRFU in a moment of sanity said ‘NZ has 1 pro league team, 1 pro b-ball team and 1 pro soccer team.. why do we think we can fund 12 pro rugger teams?’. But it’s actually 17 pro teams when you add ITM to super 15 & ABs. Let them fail financially, pay the players less, they’ll go overseas and then FINALLY NZRF-politburo-U will realise they have to pick overseas players… there’ll be an exodus.. who cares .. more bucks for players and I’ll still go and watch the local derby.
ps I LOVE the idea of top 5 teams make the super XV.. make it like champions league football.. blues don’t make it ?? tough!!! Napier or Taranaki would get bigger crowds anyway
Please reward performance.
Most provincial unions are not in trouble. Since they started budgeting, some are now making profits. New arrangments to allocate the super rugby players (and the franchise development players) to provincial unions rather than by contract bids will further help them lower their player costs. We need to load player pay onto the franchise revenue streams.
The NZRFU loss last year was a consequence of reduced revenues during the World Cup year, it’s not budgeted to happen again until 2016 (which is the reason for the dispute with the IRB). And despite it the union does have more than sufficient money to cover a loan to the ORU.
Making the franchise positions competitive means the 5 big unions would hog players and turn the ITM Cup into a mismatch, that would detract from public interest.
A good outcome after a bit of work at it.
Not a good outcome at all, as always the ratepayers are being screwed to feed the rugby machine – reducing the amount the ORFU will pay to use the stadium each time means I have to pay for their games – they should be paying their own way, raising entrance prices to cover their real costs
It’s like dealing with a spoiled child, if the council doesn’t learn to say “no” when the come to us for more money every few years they’ll never grow up and learn to stand on their own two feet
What exactly are the real costs of the stadium hosting Otago games? I would imagine still lower than the entrance prices. The issue is over the amount extra charged on top of this to cover the debt on the building of the stadium – that still remains whether games are played there or not (and larger still if no Otago games were played there).
The council had to balance getting games at the stadium and getting revenue in for debt repayment.
New Zealand and the South Island has reason to be grateful this stadium existed for the 2011 World Cup when the Christchurch stadium was taken out, so it is reasonable that some effort was put in now to sort the Otago mess out.
Personally I think the arrangment should be extended to include two of the 6 home tests each year being played in the South Island – that means one in Dunedin every year and two in the years until Christchurch has a suitable ground.
RT1
Richard Reid was the CEO of Otago Rugby and Canterbury Cricket before that and somewhere else before that. Most places he has gone ask him to leave even if that is not the official reason given. He has an appalling record in this role and it continued with ORU. IF I know all about his history so did those at ORU befoe hiring him.
two things strike me about this mess.
1. It is an historical and ongoing problem, particularly amongst male administered sports to have great ideas and then work out how to pay for it later. I say mens sport because women administered sports have almost never had money so have always had to be prudent about what they spend what they have. I speak from over 20 years experience int he sports industry. and over 30 years in sport. NZ Rowing did the same with a person at the helm (not CEO) who basically said don’t worry about the money I will take care ofit and voila! A million dollar hole.
Sport, particular rugby and mens sport seems to be exempt from the prevailing economic thesis, don’t spend what you haven’t got. This government has been very silent on this issue… at least they haven’t committed tax payer funds to it yet… but I bet they discussed it
Second point and most appalling is not that ORU ran up debts BUT they ran up debts well beyond the point they knew they couldn’t pay it back. This has impacted many small business owner sin Dunedin. This new deal DOES NOT pay them back. It’s one thing to think you can trade out of trouble, it’s another to know you can’t but keep sucking the local businesses dry.
The NZRU also has a bigger responsibility than it is accepting, imo. Unions outside the main centers have been buying players they can’t afford to ensure they remain competitive with the large main unions (Auckland, Canterbury). This benefits NZRFU by ensuring players stay and are playing. It’s not sustainable.
“two of the 6 home tests each year”
Dunedin is student based. How many will be able to afford these two tests? What happens to the other venues who have managed their finances, when they lose those test hosting opportunities? How many people actually go to North South games? Dunedinites are being asked to repay themselves by attending games and paying… and still those creditors around the region won’t get paid.
If New Zealand was really grateful for the stadium they would have kicked in a little more money, as it is my grandkids will be paying for it 40 years from now – $250m is not something a city with only 50,000 ratepayers can afford, the interest bill alone means $300 a year each, Dunedin has an aging population, lots of people on fixed incomes who just can’t afford to subsidise other people’s rugby.
The answer is simple, charge more for using the stadium than it costs to run, just like any other business – that’s about $20m a year (the mortgage plus the operational cost) – 10 games a year, 20,000 attendees that’s only $100 a ticket (plus whatever ORFU wants to charge on top) – if we don’t charge that much my Nana has to pay for it from her rates bill.
Anything else results in circuses but without any bread for the masses
Tracey,
1. the businesses are being paid back.
2. Christchurch games going to Dunedin does not impact on other venues any more than if Christhcurch and Dunmedin were both available as normally.
People in Christchurch, Timaru and Invercargill etc could travel to Dunedin to games.
SPC
Can you clarify for me where the remaining money for the creditors is coming from?
$450k forgiveness by DCC in return for 3 yr highlander agreement and fund raising game takings, $500,000 loan from NZRFU for future operating costs…
Fair comment about the shift from CHCH to Dunedin.
I am wondering, with about $6m from the sale of Carisbrook to Council, and still a debt over $2m… how bad was this union really????
Tracey: actually the city paid $7m for Carisbrook, but $1m of it was spirited off into a secret trust, presumably the ORFU could use that to pay off the small debtors