Alarm bells are ringing around Tauranga City Council's controversial deal last year to buy Baypark off Bob Clarkson for $12 million.
Financial disclosures yesterday show Baypark is losing $1.1m more than the amount on which council based its decision.
Prior to the October 1 purchase, council was told Baypark would run up a deficit of $77,000 for the first nine months of council ownership, followed by a $28,000 lossfor 2008-09.
Instead, Baypark lost $480,000 up to June 30 this year and was expecting a $760,000 deficit for the current financial year.
Community suspicions about the viability of the deal arose prior to the purchase, when councillors were forbidden to take home Mr Clarkson's financial statements. They were only allowed to view the accounts and other related documents the day finance issues were debated at a meeting from which the public were barred.
Deputy Mayor David Stewart said the situation was alarming and disappointing. He urged yesterday's council meeting to take urgency over the situation.
"It's quite unsettling _ when do we start seeing light at the end of the tunnel ... it is a very worrying trend."
Yesterday's disclosures have thrown new light on the recent appointment of Mayor Stewart Crosby to the board of the council-controlled organisation which runs Baypark, Tauranga City Venues Ltd. Board chairman Grant Seagar said the killer was the dividends payable on redeemable preferential shares _ totalling $380,000 to June 30 and $500,000 for thecurrent year.
The financial arrangement between council and Mr Clarkson saw him get $10 million of redeemable preferential shares in Baypark.
In effect, council financed most of the acquisition by borrowing money from Mr Clarkson in return for shares. Council benefited by receiving tax imputation credits.
The remaining $2 million of the $12 million sale was paid to Mr Clarkson at settlement date last year. The deal calls for the remaining $10m to be paid off in $2m annual instalments starting June 30, next year.
Mr Clarkson told the Bay of Plenty Times that the redeemable shares was a way of securing the $10 million council owed him.
Baypark traded at an operating surplus of $210,000 for the first nine months of council ownership, but was offset by the $380,000 dividend, the $64,000 Blue Chip naming rights write-off and $245,000 of depreciation. The failed property investment company company held naming rights to the stadium.
Baypark's budget for the current year anticipates an operating surplus of $185,000 offset by the dividend $500,000, interest $140,000 and depreciation $300,000.
Cr Mike Baker feared that ratepayers could face a tax increase of 1 per cent to offset the losses being run up byBaypark. Council business services manager Malcolm Gibb will prepare a report on how best to make Baypark sustainable over the long term.
Mr Gibb said if they were unable to make Baypark sustainable, then his thinking was towards council internally funding Baypark rather than a ratepayer bailout. Council chief executive Stephen Town insisted they would have met forecasts if Baypark had not lost its naming rights sponsor and if the 10 corporate box holders had renewed their leases.
The loss from these sources amounted to $300,000 including $170,000 to $180,000 from the corporate box holders.
Mr Seagar said they had not found a new sponsor for the naming rights and were now looking at 10 people signing up to become Friends of Baypark.
The issue for corporate box holders was that there were not enough events with speedway and rugby, so the focus was on getting other events, he said.
There was a fear that the economic recession would have an impact on the numbers of events and attendances.
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