Eastleigh Councillors will decide tonight whether to use £6 million worth of taxpayers’ money to buy the Rose Bowl cricket ground and fund the building of a £30 million Hotel .
This follows Tuesdays special meeting of the Resources Scrutiny Committee who gave the scheme a ‘thumbs up’ despite warnings from Vice Chair John Caldwell and members of the public and even after considering the financial risks set out in a report from the corporate director Nick Tustian.
At the scrutiny meeting a local hotelier was forthright in his condemnation in the use of public money to purchase and develop the loss making stadium.
Mr Moez Janmohamed, who was one of the local businessmen who had sought ought a Judicial Review last year to try and stop the council building at the Rose Bowl did not mince his words as he blasted the council rescue plan.
Mr Janmohamed , pointed out that the rose bowl was financially struggling yet the council were going to make them tenants at a punitive rent
“The rose bowl is virtually insolvent Deloittes have described them as risky yet you are proposing to make them tenants – a 2.5 million pound a year commitment from a tenant who has a history of non payment of creditors. Major creditors have refused to subordinate their claims on the ground you are proposing to buy so if one of this parties decides to pull the plug on the Rose Bowl you will be exposed”
“ This is a very dangerous course of action that the council is embarking on. The rose bowl has had nothing but year after year of losses, risk piling on risk, leverage on leverage.”
“£28 million only a starting point” he warned and claimed it could end up costing taxpayers over £40 million.
“This money could be better spent – at a time when local authorities are deleveraging, cutbacks everywhere, staff facing redundancies, frontline services being cut I’m sure you could find better projects to invest in.”
“Your net budget is £8 million you are taking your loans up to £130 million – this beggars belief -How do you achieve this level of exposure?”
In responding Nick Tustian agreed with the West End Hotelier’s assessment of the Rose Bowl’s trading position and recognised the risks but he also described the Rose Bow’ls current financial predicament as an opportunity and insisted there be checks and guarantees in place before the council would commit itself to any deal.
Mr Tusitan’s report also revealed the council had already spent £1.9 million in preparing the deal – money which would be written off if the transactions did not go ahead.
The report stated there would be a ‘Guaranteed profit from the Rose Bowl in the first three years”
But a number risks were also identified including the possibility that one of the Rose Bowl’s trade creditors could push it into insolvency and that a letter from solicitors Carter Ruck (readers of this website) indicated an application for a further Judicial review could be forthcoming.
However included in the meetings papers was another, specially commissioned report, by Professor Stephen Wanhill of Limerick University – an expert on tourism.
Professor Wanhill outlined a rosy future for the proposed cricket and leisure complex – and for the general economy too.
The professor said that although the local visitor economy had peaked in 2008 and the recession had impacted on the tourism sector, there had been a growth in ‘staycation’ holidays as people were “not willing to forfeit much needed breaks”.
In his opinion, a re-launch of the Rose Bowl as ‘sports tourism complex’ would boost the region as a tourist destination and soon get local tills ringing.
He claimed the new complex would create an extra 514 local jobs and any detrimental impact on local competitor hotels would be of ‘limited significance’ and described tourism as a ‘resilient industry’ that will bounce back after a few years into ‘long term growth’. Although he explored less favourable outcomes such as a period of flatline growth, such a scenario he said, would be ‘overly pessimistic’.
In the debate that followed Vice Chair Cllr John Caldwell (Conservative) noted that the amount of money the Borough was proposing to invest was greater than the level of investment in similar projects by large metropolitan councils like Birmingham and Leeds who have much larger budgets.
Councillor Caldwell also queried the rental agreement for the ground.
Although the district valued had valued the rent for the stadium to be in the region of £200k- £350K, the council was asking £420k – well above market value -why was that?
Nick Tustian told him it was because the council was in a position to dictate terms.
What would happen if the Rose Bowl did not meet its payments wondered Cllr Caldwell?
Mr Tustian told him there were guarantees in place to prevent that occurring but in the final analysis “The Council could always pull the plug”.
Cllr Caldwell however, did not seem convinced that the council would pull the plug on 500 jobs and a £30 million investment.
Councillor Caldwell proposed an amendment calling on the cabinet to reject the plan. Not because he was against the Rose Bowl he said:
“I want it to succeed, but why should it be the taxpayers of Eastleigh who bail them out?”
With no seconder the recommendation was not put forward and the plan was passed for consideration to the Cabinet with one abstention – Councillor Caldwell.
(Cllr Jenny Hughes, Cllr McNulty and Cllr Peter Hughes were not present.)
The matter will now be discussed tonight by the cabinet at 6.30 pm (Civic Offices – open to public) followed immediately by a full Council meeting during which Conservative Group leader Cllr Godfrey Olson will propose the following motion:
“That the Borough Council does not proceed with the provision of funding for the building of a Hotel at the “Rose Bowl”.
Following the Scrutiny meeting Eastleigh News did some online research into public subsidy of stadiums and discovered it is quite common in the USA where billion of dollars of public money is often lent out by local government – the merits of which is a subject of frequent debate.
In a study into stadium subsidy Professor Sarah Wilhelm of Utah University concluded there were NO benefits to local economic growth by subsiding stadia:
“Often franchises or local chambers of commerce hire economic consulting firms to estimate the economic benefit to a metropolitan area. These studies tend to find positive benefits in terms of the jobs created: personal income increases and tax revenue growth associated with the construction and operation of the new stadium. In response to the recent growth in public subsidies of sports stadiums, many independent, academic economists have also studied the effect on economic growth. The academic literature on the economic benefits of sports stadiums concludes that there is no economic growth associated with professional sports franchises and stadiums.”
Eastleigh News also discovered that Swansea Council largely subsided the building of the £44 million pound Liberty stadium in 2005:
“The £44.8 million Liberty Stadium was largely funded by Swansea Council with the promise of it delivering economic, social and financial benefits and providing a new home for Swansea City FC (The Swans) and South West Wales Rugby Ltd (the Ospreys).
The previous ground “the Vetch”, with a 12,000 capacity was considered dated and insufficient for the aspirations of the clubs which were keen to relocate to a new 20,000 seat stadium (which it has yet to fill to capacity).
Other expected benefits included providing a facility for major sporting events, a major focus for the community, securing hospitality business, enabling a rationalisation of the community sports facilities and to “be a sustainable landmark development and source of civic pride”.
The venue opened in 2005 but SSMC, the stadium management company (a joint venture set up between the clubs and the council), has failed according to an auditors report to pay any rent to the Council to date.
Just before the stadium was completed the Council had to provide a £2 Million loan to ensure that the stadium could be fitted out.
The management company was unable to pay off the loan and the Council secured title of the stadium in order to write-off the money in 2006. There is an entry in the 2010 accounts showing a £2.3 Million transfer of assets to the Council to pay off a loan and it’s unclear whether this is an additional loan.”
Source: Bucks Free Press