Questions swirl around Ateed, the standalone tourism, events and economic development unit of Auckland Council, more than a week after its much-criticised recommendation to councillors to spend more than $10m of ratepayers' money wooing the V8 Supercars to Pukekohe.
The Auditor-General is investigating councillor Cathy Casey's complaint that Ateed
hid a secret report from our representatives before the vote. Other councillors condemn Ateed for withholding due diligence and risk assessment reports from them. They are angry they were given less than 48 hours' notice of the vote.
Conspiracy theorists have been handed ammunition with revelations the council official in charge of bringing the V8s to Pukekohe, Jennah Wootten, has connections to the petrolhead fraternity. Her family has a racing business and her brother Alastair's website listed her as sponsorship director - until yesterday, when her name and details were removed. See here.
Following last week's reports, event organisers around the region have contacted The Aucklander to describe their experiences with Ateed and its processes, compared with previous councils and other state funding agencies. Because they depend on the organisation for support and marketing, they have requested anonymity.
This is a typical comment from an organisation that has been running a well-known gala for a decade, with support from several former councils, because events and participants are staged from Rodney to Franklin. All went well until November 1, 2010, the day Ateed became the umbrella body for regional events.
"We've had very little success in attracting interest or support from Ateed, which is a problem because they're the only game in town for big events.
"You have to compare them with NZ On Air, the Film Commission, Creative NZ. They're all very open and transparent. They explain who they fund and for how much on their websites. That allows us to compare our event with others and to make our pitch on an equitable and professional basis.
"You would have to say that, as the biggest provider of 'state money' in the region, Ateed is very short on information and management procedures compared with other providers.
"We - and many organisations like us - are a charitable trust. We have a track record over a decade, we can account for every dollar of public money that we have ever received.
"We're a free event, and that seems to be a major stumbling-block for them.
"All they are interested in is creating a case around so-called economic activity stemming from an event. That argument is crucial to them."
It is also, as this column pointed out last week, a flawed theory rejected by every major economist who's researched it. Victor A Matheson's 2006 study is a plain-language exposition of the weaknesses in economic impact reports presented before major events such as the Rugby World Cup.
Its overview may sound familiar to Aucklanders: "A typical predictive economic impact study of the type used by event promoters estimates the number of visitors an event is expected to draw, the number of days each spectator is expected to stay, and the amount each visitor will spend each day.
"Combining these figures, an estimate of the 'direct economic impact' is obtained. This direct impact is then subjected to a multiplier, usually around two, to account for the initial round of spending recirculating through the economy. This additional spending is known as 'indirect economic impact.' While such an estimation method is relatively straightforward, academic economists have been quick to point out the failings of such studies as they often rely on poor methodology and also suffer from several theoretical problems...
"First, many booster estimates are wildly optimistic about the number of potential guests and their spending habits. In other cases, the size of the estimates themselves strain credulity...
"Most researchers find no correlation between economic growth and the presence of new sports facilities, franchises, or events, suggesting that the intangible value of these events tends not to translate into any measurable benefits to the host cities... In addition, if the lion's share of the benefits of an event is intangible, this is a significant cause for concern since this type of benefit is most likely to be based upon assumption and guesswork.
"Even when [pre-event] studies are done in a carefully and considered manner, they suffer from three primary theoretical deficiencies: 'The substitution effect occurs when consumers spend money at a mega-event rather than on other goods and services in the local economy... the local consumer's spending on a sporting event is not new economic activity, rather a reshuffling of local spending. For this reason, most economists advocate that spending by local residents be excluded from any economic impact estimates.
"Even including only out-of-region visitors in impact studies may still result in inflated estimates if a large portion of the non-local fans at a game are 'casual visitors,' that is out-of town guests who go to a sporting event, but are visiting the host city for reasons other than the sporting event itself.
"Crowding out is the congestion caused by a mega-event that dissuades regular recreational and business visitors from coming to a city during that time.
"A third source of bias comes from leakages. While money may be spent in local economies during mega-events, this spending may not wind up in the pockets of local residents. The taxes used to subsidise these events, however, are paid for by local taxpayers."
Conclusion: "There is substantial reason to believe that during mega-events, these multipliers are highly overstated, which overestimates the true impact of these events on the local economy."
Here's a recent local example: when next year's Pride Festival was announced, the Mayor quoted Ateed as saying it would return $7 for every $1 of public money spent. There's been no similar festival since the financially fraught Hero Parade, so where did they get those 'economic activity' figures from?
Perhaps this email from Ateed's communications manager, Grant Jenkins, to an applicant provides the answer: "My recollection of the major events funding application process, is ... that the applicant events needed to provide the economic impact data as part of their application. So the assessment of contribution to the regional economy is based on what the events provide as detail themselves and not on the basis of separate work we commission against each application."
* Ewan McDonald is the founding editor of The Aucklander.
ATEED OPENS THE BOOKS
We put these questions to Ateed:
Where can we find a list of events / organisations that have received grants / funding from Ateed since 1 November 2010?
Ateed provided a list. See it here.
Where can we find a statement of the moneys paid and audited economic return from these events / organisations?
The Ateed financial year ended 30 June. Work is now underway to evaluate the success of the 2011-12 major events portfolio.
Where can we find a statement outlining the process for events / organisations to apply for grants / funding, and the financial reporting standards required?
The criteria for major events sponsorship is outlined within the Major Events Strategy.
We understand applicant events provide the economic impact data as part of their application. There is no independent assessment, by Ateed or another body?
Applicants are required to submit a range of details associated with their events - including economic impact data. All information is then used to inform Ateed's assessment. Ateed commissions independent economic impact reports as required. In the case of V8 Supercars, the independent assessment was undertaken by Covec.
TIMELINE
3 July Mayor's office announces V8 Supercars' return to Pukekohe at a cost of $10.6m to ratepayers, on Ateed's recommendation. Councillors given 48 hours' notice of vote; Ateed will not provide detail, only a summary claiming $7m a year in economic benefits.
4 July Councillors concerned about lack of information and rushed decision, given scathing audits on V8s in Hamilton, Canberra, Sydney.
5 July Council votes 9-5 to spend the money; CEO Doug McKay admits the risk review "did not exist as a single document"; Ateed may share due diligence report with selected councillors; Minister Steven Joyce promises $2.2 million from Government to upgrade Pukekohe.
6 July Auditor-General to investigate councillor's complaint that Ateed hid a secret report from them; Mr McKay admits neither he nor the chief finance officer saw the report before Thursday's vote.
9 July Mayor supports vote and Ateed's process - but has not seen due diligence report or risk review. Ateed says its figures came from an economic impact report by Covec consultants, using figures from the 2011 event in Hamilton, statistics from other events, interviews with V8 Supercars and conservative assumptions.