Hamilton Council told V8s could cost $27.7m, letter shows

The promoter estimated the total cost of the event for the city was $27.7 million. Photo / Paul Estcourt

The Hamilton City Council was told by the original promoters of the V8 Supercars street racing event that the total cost of it could be about $27.7 million, a letter has revealed.

The letter, which the Herald has seen, was written in January 2006 by Steve Vuleta, director of race promotor Elephant Management - later to be known as Caleta Streetrace Management - to the council's then general manager of marketing and communication, Philip Burton.

In the letter, the promoter estimated the total cost of the event to the city would be about $27.7 million.

The breakdown included $5.77 million for the track and $2 million for civil works to set up the event, as well as an additional $2 million to $2.5 million a year for civil maintenance and the host fee.

But a few months later, then Hamilton mayor Michael Redman said the cost of the event to the city would be $7 million plus an annual sponsorship fee for the seven years.

The council's 2006-16 long-term plan also said ongoing costs and the sponsorship fee would be covered by its event sponsorship fund.

The sponsorship fee was kept confidential but is understood to have been $1.65 million a year.

Asked about his earlier statement in light of the letter, Mr Redman said at the weekend that the costs were very clear and the $7 million referred only to the cost of infrastructure and civil works.

He said the council was always aware it was kept separate from the resource consent and the confidential event sponsorship fund.

"My assessment of that is that the year one figure [$10.27 million] included what they were hopingthe annual sponsorship amount would be.

"Go back to that letter, the infrastructure was made up of two amounts, the HCC assets at $5.775 million and civil works at $2 million, and anything else is extra -the resource consent, which is always extra, sponsorship fee which is always extra, evaluation costs - but they were reasonably minimal.

"I don't think you are comparing apples with apples."

"Staff have taken those costs in good faith at the beginning there and put that up and the initial capital cost and I think that letter supports that." He added that Audit New Zealand also did not challenge this point in its report last month.

Mr Vuleta, who was co-promoter of the event for the first two years before it hit financial turmoil, said he was unable to comment because he was bound by a confidentiality agreement with the city council.

Councillor Ewan Wilson said the letter from Mr Vuleta showed the project was going to be "well in excess of $27 million".

"Despite that, Mr Burton in a presentation in early 2006 said to the elected members simply $7 million, plus host fees and it's clear council management, by splitting up the cost components into three parts, was able to conceal the true costs.

Not only did it get past the elected wing it would appear it got past Audit New Zealand."

Mr Wilson was referring to correspondence from the council to Audit New Zealand explaining it did not activate its significant project policy - where projects of more than $13 million require public consultation - because the event was $7 million, plus $2 million a year for operating costs. The rising cost was also overlooked in subsequent Audit New Zealand reports of council despite the infrastructure cost ballooning to $18 million.

The chief executive at the time Tony Marryatt, who now heads the Christchurch City Council, could not be reached for comment.

CORRECTION:
On 14 November 2011 under the heading "Council told v8s could cost $27.7m, letter shows" we published comments from a Hamilton City Councillor which indicated that statements about the cost of that event had been made by Philip Burton in a presentation to Council members in January 2006. The story was not intended to suggest that Mr Burton had acted improperly in any way. Mr Burton says that at no stage did he present information to the Councillors on the cost of the v8s and we accept his advice on this.