[COM] Adelaide Oval Redevelopment

[rogue]

Name a government project that hasn't run over budget,

Northern Expressway. Finished months ahead of schedule and therefore under budget.

Not wanting to be picky, but NExy was originally budgeted at $300m. Blew out by over $150m.

[spiller]

The guy who explained that presentation in the videos posted above said that the reason for the gaps is so to not block the parklands from the playing surface, to enhance the overall experience. Three separate pavilions instead of one stadium. Could be a fancy excuse but either way, this is smashing, it's truly going to be far better than any other stadium facility in the country, maybe bar etihad. Just a shame that the facilities in the outer will probably be better/more updated than in the members.

[stumpjumper]

stumpjumper wrote:
I don't know if use by other sports will definitely not be allowed

So in other words, You're making shit up.

No I'm not, hooligan. The information just isn't readily available.

Speaking of incorrect, I thought that the maximum lease on Park Lands was 21 years. It is, but a 21 + 21 is ok, so 42 years is possible.

After a bit of digging, some surprising facts emerge, which explain some of the recent goings-on at AO.

SACA's financial position is not good, despite SACA President, Ian McLachlan claiming the SACA is ‘completely comfortable’ with its debt obligations. SACA's western grandstand redevelopment blew out 28% ($25 million) over its original budget of $90 million. SACA is presently in debt $85 million, 42% more than SACA projected at the start of the western grandstand redevelopment and after state and federal grants, not loans, of $50 million to help out. The annual interest to be paid on SACA's current debt is about $5.25 million, in addition to an annual $4 million capital repayment with the annual depreciation charge on the assets being in the books at about $5 million.

SACA's situation halfway through its western grandstand redevelopment became so precarious that its bankers, Commonwealth, got cold feet and baled. Westpac took over, but they got nervous when the $25 million cost blowout became apparent and it was only a $30 million loan from the state government that kept Westpac in the game by ensuring that Westpac's exposure didn't go beyond their original $55 million limit. So the western grandstand was completed.

By this stage, completion of the AO eastern redevelopment became virtually a government requirement as soon as it was became obvious that construction of the new RAH would eliminate the chance of building a new stadium on the railyard site (as proposed by the Liberals before the 2010n election). Thus politics became further entwined in the AO redevelopment. Rann did his usual trick of ensuring some Liberal honchos in addition to Maclachlan (eg Olsen) were on side to try to defuse some opposition.

Back to SACA's debt. Careful reading of SACA's accounts indicate that if the western grandstand is completed and an agreement for the new eastern redevelopment is not signed with SMA, then SACA's ability to service its debt will become an immediate and serious problem.

SACA is in a big hurry to get an agreement, because from the moment an agreement is signed between SACA and SMA until receipt of all approvals and a construction contract for the redevelopment, interest on SACA's western development will be capitalised and provided the eastern development proceeds the interest will be assumed by the government.

I have to say that I am still trying to check the correctness of the previous sentence. It is certainly not public knowledge, but if it is true, it accounts for MacLachlan 'feeling comfortable' about the interest portion at least of SACA's huge debt. It will also add years of payments to the Rann government's commitment to the whole AO redevelopment of $535 million plus the $25 million ($16 mill then another $9 mill) grant to SACA plus the $30 million loan to SACA. The Commonwealth government matched the state government's $25 million grant to SACA.

SACA makes an annual cash surplus of about $4.5 million (although it made a loss of $4.4 million in 2008/9, excluding grant income). It needs to find about $14.2 million per year to service its interest, debt and depreciation demands if the western grandstand development doesn't go ahead. Extra memberships are likely to supply about $2 million of that.

Meanwhile, if an agreement is reached, football is guaranteed $8 million per year for its participation without the requirement of paying a cent.

In short, SACA needs another $7 million per year - an increase of about 175% on its average income of the last four years.

[Waewick]

most of your info appears to be pretty accurate to what I have heard.

but 2 things - Are you sure about your figures regarding interest costs and the position of the loan should the eastern grandstand development not happen? I'm not sure the position is as dire as some would like us to believe.

secondly - i'm no accountant, but isn't depreciation a non cash item - that is it is recorded for taxation purposes because it helps reduce your taxable income therefore your tax - in otherwords, you make a book loss for tax purposes but on a cashflow basis your fine.?

[rhino]

secondly - i'm no accountant, but isn't depreciation a non cash item - that is it is recorded for taxation purposes because it helps reduce your taxable income therefore your tax - in otherwords, you make a book loss for tax purposes but on a cashflow basis your fine.?

That's the way depreciation works on my investments.

[stumpjumper]

capitalist - It does depend a bit who you speak to, but I'm fairly sure of SACA's position if the eastern grandstand isn't built. What I'm not sure of is the payment of interest by the SA govt if the grandstand is built.

rhino - I'm not an accountant either. An allowance has to be made for depreciation, so it comes off... revenue? I'm sure it comes 'off' before cashflow or surplus, and it's tax deductible. Maybe an accountant here can straighten that out.

[Waewick]

two things I am pretty sure about

1) the SACA can and will be able to service it's debt
2) there is a Plan B anyway.

[AtD]

I’m not an accountant, but...

Depreciation is only a book expense. It’s basically so you can expense a bit ticket item (a car, a stadium) in increments over its life rather than in one hit to make the Profit/Loss statement reflect economic reality.

You do not pay for depreciation. It has nothing to do with cash flow, ever (the cash flow is the purchase of the asset at the beginning). It does not have to be "covered" - no one can be "bankrupted" by depreciation.

I would also guess that a big chunk of the depreciation would be for buildings and equipment that will be torn down or replaced with the development.

[stumpjumper]

Fair enough. Depreciation is obviously a bit of a red herring here. Leaving it out of calculations, SACA still has to find about $10 million per year to pay interest and principal on its existing debt. SACA looks like making about $4.5 million 'profit' or surplus each year for the next few (non-Ashes) years plus the extra $2 million (my estimate) from the 5,000 new members who have signed up. That leaves about $3.5 million to be found.

Two questions, then:

- Is it true that the SA govt will take over SACA's interest (only) payments of about $4.5 million if the eastern development is a goer?

- What is the likely contribution of SANFL/AFL? Andrew Demetriou says that footy will pay something, but how much? If West Lakes is rezoned for housing, they should pay a decent amount. Maybe the AFL's contribution should be applied direct to SACA's debt.

More on SACA's alleged debt position after lunch. Damn all this secrecy.

[worldfooty]

Hi all,

First time poster.

Totally confused. Is the scale model in the photos the same as the design we saw in fly throughs last year? Is it the same but simply the roofing removed on the model so we can see the interior?

I'm keen to know, as I'm a Crows season ticket holder and sit in the outer under cover, and it's bloody cold in winter but under the low roof at least the heat is trapped somewhat - I suspect it makes several degrees difference. And unless the rain is whipping in then we're dry.

But the AO design appears to have very high roofs that I imagine trap no heat and block very little rain as it drifts or pelts in on angles. So from that point of view I think this stadium could be far inferior to Footy Park.

I'd be very pleased to be shown to be wrong since I do plan on going to it!

Cheers.

[stumpjumper]

The bottom line, even on the hazy figures it's possible to get hold of, seems to be that SACA must increase its income by a significant amount in order to make the job affordable.

But questions remain - will the government, having donated its $535 million, really subsidise SACA's ongoing costs, as has been suggested? If the cost blows out, as the western redevelopment did, will the government pay up again to avoid a part-built project, or will the AFL put up any money? Will the AFL get its guaranteed $8 million return? And where will everyone park? And so on.

Mr MacLachlan won't be drawn on the question of membership costs and benefits, other than to say that SACA membership and benefits will always represent excellent value. He also says that the rights of existing members will be upheld. What of future membership?

It's probably too late to ask this, but is there a business case to support the gift of half a billion of public funds for this project when the state has many more pressing demands for funding than AO?

[jk1237]

But the AO design appears to have very high roofs that I imagine trap no heat and block very little rain as it drifts or pelts in on angles. So from that point of view I think this stadium could be far inferior to Footy Park.

is this a joke?

[ricecrackers]

It's probably too late to ask this, but is there a business case to support the gift of half a billion of public funds for this project when the state has many more pressing demands for funding than AO?

i'm wondering this too, particularly since cost of living is spiraling and worsening economic times are on the horizon.
however given sports are the opiate of the masses, particularly in this sports crazed country, i suspect the government believe the half billion is money well spent. hopefully they've taken out these loans in US dollars and with any luck such debt will be much reduced in coming years

[mattblack]

The bottom line, even on the hazy figures it's possible to get hold of, seems to be that SACA must increase its income by a significant amount in order to make the job affordable.

But questions remain - will the government, having donated its $535 million, really subsidise SACA's ongoing costs, as has been suggested? If the cost blows out, as the western redevelopment did, will the government pay up again to avoid a part-built project, or will the AFL put up any money? Will the AFL get its guaranteed $8 million return? And where will everyone park? And so on.

Mr MacLachlan won't be drawn on the question of membership costs and benefits, other than to say that SACA membership and benefits will always represent excellent value. He also says that the rights of existing members will be upheld. What of future membership?

It's probably too late to ask this, but is there a business case to support the gift of half a billion of public funds for this project when the state has many more pressing demands for funding than AO?

You just cant help but speculate can you. Im sure that you dont know half of the financial agreements that are in place between the SACA, SANFL and Gov. and will probally not be known for some time due to sensitivity of such matters. What it comes down to is that an extensive business case was performed by the SACA (and probally the SANFL aswell) and the joint venture will be profitable for both parties otherwise they would never of even sat down together. Yes public money is being used but the overall financial benifit to the wider community will be such that I personally see it as a whorthwile investment by the government for the people.

As to your questions, most again are suggesting that the project is doomed. Cost overruns and extra subsities already?, one of the major reasons the western stand went over budget was because of the extensive foundation works that were needed and were not able to be assesed until demolishon took place and that $17m was used to keep heritage structures. It was never going to a smooth and easy transition to a joint use facility, i think that all parties have done extremely well to keep this project moving with a vision for a well integrated and utilised facility. BRING IT ON !!!

[Pants]

It's probably too late to ask this, but is there a business case to support the gift of half a billion of public funds for this project when the state has many more pressing demands for funding than AO?

Now I know you're more intelligent than the "put the money into hospitals, nurses, schools, roads, police, why give the money to sport?" brigade.

You don't think there'll be broader economic flow-on benefits from putting money into this thing?