Footing the bill for Eden Park

The redevelopment of Eden Park, Auckland's iconic stadium, will cost an estimated $320 million.

Remember the buzz when we awoke last November to the news that we had pipped Japan for the rights to host the 2011 Rugby World Cup?

Remember how Tana Umaga tossed aside his script and spoke from the heart in front of the International Rugby Board suits about what the game meant to him as a Samoan New Zealander, to both of his countries and to our Pacific neighbours?

Remember how he said it was time rugby returned to its mecca, to its most passionate and knowledgeable fans, to a country which was "a stadium of four million people"?

Remember how Prime Minister Helen Clark flew around the world to pledge the Government's backing, the first leader of a country to lobby in person at an IRB meeting.

Then remember the debacle last time, when New Zealand was dumped as co-host because we didn't get our act together?

New Zealand and Eden Park - where many matches including the final will be held - has to be ready. The favoured redevelopment of Eden Park is estimated to cost $320 million.

How that will be paid has generated much debate. Already squeezed Auckland City ratepayers are panicking that it will mean another hefty imposition, other councils in the region are not clamouring to assist, the Government is so far unwilling to confirm a contribution beyond the $20 million it committed as part of the joint Government-New Zealand Rugby Union bid; likewise for the NZRFU and the $10 million it pledged.

So how might it be paid for? There are ways to fund a transformation that will make Eden Park a modern world class complex without sending the ratepayers broke.

Sydney's iconic Opera House was funded by a series of lotteries which saw it paid off two years after it opened in 1973. A more recent example of the use of lotteries is Britain's Olympic Lottery which follows its successful bid to host the 2012 Olympics.

The lotteries began last year and aim to raise £1.5 billion ($4.45 billion) during seven years.

Britain's Government and its lottery operator, Camelot, accept there will be "cannibalisation" from existing lotteries but believe the target is achievable.

Trevor Mallard, wearing his new hat of Rugby World Cup Minister, gave little away when the Weekend Herald raised the lottery idea last week.

"It [a lottery] is an interesting idea but I'm not commenting on funding issues for Eden Park beyond what I've already told the Herald."

What the minister had earlier said was that the Government was in for $20 million regarding costs, plus an undertaking to foot the bill of tournament losses two to one with the rugby union.

The costs were to include the temporary part of upgrades of Eden Park but the Government is happy for it to go towards permanent improvements.

The plan, as it stands, is to use the opportunity of the World Cup to make a permanent transformation of the stadium - what the operators call the "legacy" option - the rationale being that a world-class ground will attract more top events, and proportional money and kudos.

The redevelopment is going to require help at local, regional and national government levels but that doesn't necessarily mean it goes on the rates or tax bill.

"We are not running around with our hands out," says John Alexander, chief executive of the stadium owner, Eden Park Trust Board.

"We are being as creative as we can."

Options used overseas include levies on hotels, rental cars and casinos, using the stadium for compatible businesses and imaginative debt structuring.

Eden Park has an unusual set-up. Unlike other major stadiums in New Zealand, it is not owned by a local public authority, although its operator - the Eden Park Trust Board - is bound by law to use and enhance the facilities for the benefit of cricket and rugby and has a duty to provide adequate accommodation, comfort and convenience for players, spectators and the public.

Perhaps because of this ownership structure, it hasn't been much of a drain on the public purse. In 1999 it got a $3 million grant from the ASB Trust (the trust's money derives from the sale of the bank to Australian interests) and a $10 million loan at commercial rates from Auckland City Council.

The trust board has $15 million of its own available for redevelopment which, with $20 million from the Government and $10 million from the NZRFU, leaves $275 million to find.

Say goodbye to Eden Park. That name will make way for the moniker of some big company. The sale of naming rights is expected to reap big money for a stadium with its history and international renown, and there will be the usual revenue streams from sales of corporate facilities.

Alexander has seen some novel ideas used overseas. New Orleans put a stadium infrastructure levy on hotel rooms and rental cars, thus reaping some of the costs from tourists.

Ricoh Stadium, built on the site of a gasworks in Coventry, England, designed its corporate rooms to double as hotel rooms, and the complex includes conference and exhibition facilities and an office block. The bulk of the £113 million of the new stadium was lent by the council (which itself raised most of the money by selling land and borrowing) with the stadium to pay it off over 10 years from income from its businesses.

The £320 million Emirates Stadium in the London borough of Islington received large sums from its naming rights sponsor and from its resident football club, Arsenal. But the local council helped considerably by gifting land around the stadium and rezoning, which enabled the stadium company to build apartment blocks which it then sold or rented.

Alexander says this served Islington Council's objective of rejuvenating what was a disused industrial area.

The Queensland Government borrowed the total cost of the A$280 million redevelopment of Suncorp Stadium.

It used a levy placed on gaming machines to service 84 per cent of the loan with the remaining A$45 million serviced from stadium income. The loan will be paid in 20 years.

Alexander does not believe there is a risk of a redeveloped Eden Park becoming a white elephant. It has done a business plan, with the help of accountants PriceWaterhouseCoopers, covering the World Cup and the following 10 years (which includes a co-host role for the 2015 Cricket World Cup) which suggests the stadium would be able to meet its operating costs.

As for the one-off redevelopment cost, the next step is for the trust board to take a funding proposal package to the Auckland City Council, Auckland Regional Council, the Government, charitable trusts and a number of big companies.

What is needed, then, is sufficient goodwill and innovation to make it happen in a way that doesn't cause unreasonable burden.

Alexander seems upbeat, despite noting how we "squawked like hell" when we were sacked last time as co-host and how there's premature squealing now we've won this one.

He's confident about the $320 million estimate, which is adjusted to 2011 dollars and includes $45 million for contingencies. As trust board CEO, it's no surprise that it makes sense to him to use the opportunity to make a stadium to be proud of, but he backs it with good reason. A redeveloped Eden Park was part of the bid, it has the space, it's in the country's biggest city - a city dedicated to improving its infrastructure.

Comparative construction costs

Eden Park Upgrade
Owner: Eden Park Trust Board
Seats: 60,000
Estimated cost: $320m
Funding: Eden Park Trust Board, $15m; central Government, $20m; NZRFU, $10m
Balance required: $275m

Millennium Stadium, Cardiff, Wales
Owner: Welsh Rugby Union.
Seats: 74,500.
Opened: for 1999 Rugby World Cup on site of old national stadium.
Cost: £126 million ($374.5 million).
Special features: World's biggest stadium to have a retractable roof.
Funding: National lottery (£46m), debentures (offering guaranteed tickets in exchange for interest-free loan) and loans. The development left Welsh Rugby Union heavily in debt.

Suncorp Stadium, Brisbane (formerly Lang Park)
Owner: The Major Sports Facilities Authority, a Queensland state owned enterprise
Seats: 52,500
Opened: after redevelopment on June 1, 2003.
Cost: $280m ($335.5 million)
Funding: Queensland Government borrowed total cost of the redevelopment. It services $235m of that loan from a levy on gaming machines, remaining $45m serviced from stadium income.

Telstra Stadium (formerly Stadium Australia)
Opened 1999, main stadium of 2000 Olympics
Seats: 83,500
Cost: A$690 million
Funding: Public and private, including sale of public unit trusts which gave holders stadium membership and tickets to Olympic events. State Government contributed A$151 million.

Sydney Opera House
Opened: 1973, 19 years after design concepts were called for.
Funding: Dogged by delays and mounting costs. The Opera House Lottery, which ran for a decade, collected $101 million from 496 lotteries covering almost the total cost of the Opera House, which was fully paid off in two years.