Review finds Hobart stadium costs to ‘exceed $1 billion’
A leading independent economist tasked with reviewing the proposed Macquarie Point stadium in Hobart has found the project is “already displaying the hallmarks of mismanagement” and is likely to cost more than $1 billion.
Economist Nicholas Gruen was commissioned to write the report early last year as part of the minority Liberal government’s agreement with the Jacqui Lambie Network.
The report is a scathing assessment of the proposed stadium and finds the costs are “significantly understated”, benefits “overstated”, and the projected $775 million price tag is unrealistic.
The Tasmanian government says its contribution will be capped at $375 million but the report says it will need to fork out $785 million instead. (Supplied: MPDC)
The Tasmanian government pledged at the last election to cap its investment in the stadium at $375 million, but Dr Gruen said this commitment “cannot be met”.
He estimated the true cost to Tasmanian taxpayers was $785 million, with the remainder of the funds coming from the Commonwealth, the AFL and other sales, for a total cost of $1.096 billion.
The report also suggested the wrong site was picked for the stadium, as other locations that likely had a lower cost and more community support were rejected.
However, the Rockliff government has not been deterred.
Upon releasing the report on Friday morning, Tasmanian government minister Eric Abetz said, “We thank Dr Gruen for his work, and in preparing the report”.
He then said the government was “moving ahead” with delivering the project.
What the report says
The 170-page Gruen report is damning.
It finds fault with the AFL’s agreement with the Tasmanian government, describing it as imposing “needless costs and restraints on the realisation of a Tasmanian team”, argues the timeline for the project is unrealistic and site selection was flawed.
“The site selection analysis released was hasty and partial and gives the strong impression of being crafted to support conclusions already made,” Dr Gruen wrote.
“I think it likely that the site selection process rejected sites that would have generated lower costs and higher benefits while receiving greater community support.”
But it appeared to be the cost of the project that Dr Gruen found most alarming, writing that the project “can reasonably be estimated to exceed $1 billion, with a benefit-cost ratio of 44 cents in every dollar invested in Tasmania”.
“Cost blowouts and unacknowledged costs mean that it is already clear that the government’s undertaking to build the stadium without borrowing more than $375 million cannot be responsibly met, ” he wrote.
The report suggests Macquarie Point might not be the right site for the stadium. (Supplied: MPDC)
He said the government’s insistence that it can meet its $375 million cap is having adverse effects on the project that “will intensify over time”.
“Official reporting on the progress of the project is not candid. This undermines the community’s trust in the process,” he said.
“Various means are being used to disguise the true cost of the project.”
Dr Gruen claimed one of the ways the government was disguising costs was by increasing the estimated value of land sales by over 50 per cent, at the same time as estimated costs of the stadium rose.
“I am unaware of any real developments in the land being prepared for sale or its valuation that would justify such a treatment,” he wrote.
He said the land sale was being used as a “magic asterisk” to bring down the cost of the project.
Other methods included certain aspects of the project being left out of cost calculations, including the relocation of the Goods Shed, and “apparently ignoring the interest that must be paid on the $375 million additional borrowing”.
The report says it will cost $186 million to move and build the Goods Shed precinct, which the government currently excludes from costs. (Supplied: MPDC)
There are other costs that have been left out such as the car park, kitchens and food and beverage facilities and the CCTV system, however Dr Gruen acknowledges that as they will earn revenue, private investors “can likely be induced” to fund them.
But he appeared sceptical about these private partnerships, concerned that as they are being driven by the government’s determination not to exceed its spending cap, it could “force the adoption of inefficient” partnerships that are not in the best interests of Tasmanian taxpayers.
“Here the motive is simply to move these costs off the government’s books,” he wrote.
“This lowers capital costs to the government, but it is likely to do so only by lowering the stadium’s capacity to generate revenue by a greater amount measured in net present value terms.
“In other words, this apparent saving is very likely to be penny-wise and pound-foolish, costing the government more than it saves.”
Dr Gruen wrote that government’s disguising of the project’s “true costs” was “a driver of mismanagement”.
Building the stadium was a condition of the government’s deal with the AFL for a state team. (Supplied: Tasmanian government)
‘It’s not too late’
Dr Gruen made a series of recommendations that he argued would help Tasmania achieve a lower-cost stadium with lower technical risk, and less community division.
- Negotiating with the AFL to extend the timeline, with the Tasmania Devils playing at Bellerive Oval and York Park in the meantime
- Planning for the stadium should consider the future of Greater Hobart, not just the Macquarie Point precinct
- The government should provide an “itemised and candid reanalysis” of the amount the stadium will cost the government. That should be co-signed by the auditor general, with the process repeated regularly
- The delivery of the stadium should be driven by optimising value for money to the Tasmanian community and all private partnerships should meet national guidelines
- The government should introduce competitive tension between projects by committing to alternative unsolicited stadium proposals
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