The controversial redevelopments of the Allianz stadium at Moore Park and the ANZ stadium at Homebush will deliver negative returns on the New South Wales government’s investment, according to business cases made public today.
This means taxpayers will need to subsidise the stadiums over their life cycle, the documents show.
The analysis also reveals that the financial cases are strongly dependent on increasing the number of major events at Allianz, which runs the risk of cannibalising the revenues of the stadium at Homebush, currently the preferred venue for major events such as finals and internationals.
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The cost-benefit analysis relates only to the financial cost-benefit. Both reports, by KPMG, argue that they will greatly enhance the spectator experience at the venue and provide broader economic and social benefit.
The redevelopment of the stadiums in Sydney has been highly contentious after the premier, Gladys Berejiklian, dumped a plan by her predecessor, Mike Baird, to spend $1.6bn mainly on upgrading facilities in Sydney’s west.
At one stage the likely bill reached $2.5bn but the government has now agreed to spend $2.3bn on its stadium plans, including replacing Allianz in Sydney’s east with a 40,000-45,000-seat stadium at a cost of $729m. Allianz will be rebuilt first. The sum of $810m will then be spent on ANZ at Homebush to make it a rectangular field. There are additional costs plus a new stadium at Parramatta which make up the total spend.
The new policy followed intensive lobbying of the sports minister, Stuart Ayres, by the Sydney Cricket and Sports Ground Trust, which includes high-profile figures such as broadcaster Alan Jones, businessman Tony Shepherd, former News Ltd CEO John Hartigan and businesswoman Katie Page.
Page’s husband, Gerry Harvey, together with John Singleton, have the lease on the Entertainment Quarter next door to the football and cricket grounds, and are also planning a major redevelopment.
The Trust argued that Allianz, also known as the Sydney Football Stadium, is in urgent need of replacement because it is in breach of fire and safety requirements.
But the NSW opposition has queried both the size and urgency of the upgrade and whether spending on sports stadiums is the right priority.
The government has been resisting making the business cases public but relented last week after the NSW upper house censured the government’s leader in the chamber.
The release of a separate report on the business case for moving the Powerhouse Museum to Parramatta is still being negotiated. It could be made public later in the week.
The KPMG report on Allianz shows four options were considered: a base case, involving capital spending $341m to address the fire and safety concerns, versus two different rebuilds costed at between $750m-$775m and an extensive refurbishment which was $714m. The government has opted for a knockdown and rebuild at a cost of $729m.
The analysis acknowledges that the event calendar is the key driver of a venue’s ability to generate revenue and a strong financial performance.
The Allianz rebuild options would attract more NRL games and also some rugby union games to Moore Park, KPMG says.
But the opposition’s sports spokeswoman, Linda Voltz, said there was a real risk the growth at Allianz will come at the expense of ANZ.
The Greens MLC David Shoebridge said there should be common management of both stadiums “ so they don’t end up fighting each other for the same crowd”.
The base case for Allianz, which involves fixing only the safety issues, assumes 10 NRL games will be played at Allianz and no Wallabies games and international rugby league. But if the stadium is knocked down and rebuilt, KPMG says Allianz can expect to host 16 NRL games and up to 4 Wallabies games.
Despite the forecast increased use, all of the options for Allianz were negative on a cost-benefit analysis, with the rebuilds scoring 0.93, compared to refurbishment which scored 0.62. A score of 1.0 or better indicates a positive cost-benefit.
Labor’s sports spokeswoman, Linda Voltz, said the base case for Allianz was made to appear worse than it was because there were fewer NRL games included than the 13 games on average. But KPMG said this was justified due to the poor and declining facilities at Allianz.
The business case for the redevelopment of the Olympic stadium also shows negative cost-benefit. The government’s preferred option of a refurbishment and extension of the roof at a cost of $810m, shows a cost benefit of 0.8. The two rebuild options scored better in the cost benefit analysis (0.91 and 0.89) but involved much bigger capital spending of either $1.29bn or $1.33bn.
“My principal concern is that this report focusses on the value to stakeholders – the sporting bodies, the trust and the Stadium Australia,” Shoebridge said. “The returns to the public are rated a distant second.”
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