City goes cold on hot pools centre

A $2.5 million investment offer in the cultural centre component of the Mount Hot Pools redevelopment has been rejected by Tauranga City Council.
Council yesterday voted 9-1 to decline the offer because it failed to meet what councillors understood would be the basis of the funding deal.
If the undisclosed Maori investor does not reconfigure their offer to meet council's requirements for a risk-free cultural centre funding package, then this significant part of the total $9 million Hot Pools redevelopment looks unlikely to go ahead.
The design calls for the new spa wellness centre to be built above the ground floor Mauao cultural  centre and theatrette.
Council overwhelmingly believed  the cultural centre investment deal brought to them for approval yesterday was not what they had in mind when it approved the Hot Pools two-storey redevelopment option in January.
Councillors' understanding was that the funding for the cultural centre was  to be sourced externally. But staff's interpretation was that external funding could be satisfied by a $2.5 million investment in the form of redeemable preference shares.
It was to be the same arrangement as TECT's top-up loan in Baywave Aquatic and Leisure Centre and Bob Clarkson's loan when he sold Baypark stadium to the council.
The investment term by Maori interests was likely to be five years, with a right of renewal. Dividends were to be based on wholesale interest rates plus a margin.
However Cr Mike Baker said he was not under the impression that council intended to add to its debt when it said that the cultural centre was to be funded externally. "It would appear now that we were talking about two different things."
His understanding was that  Maori would build it and run it at no cost to ratepayers. He said he was now more inclined towards a development that did not include a cultural centre.
Council's treasury manager Mohan de Mel said the business case scenario for the Hot Pools redevelopment was that the cultural centre was not to be built from a grant or free money.
Tauranga City Aquatics Ltd (TCAL) chief executive Tania Delahunty said the $140,000 to $150,000 debt servicing was not a huge funding risk given the very conservative approach taken to projected revenue from the redevelopment: "Bearing in mind it is not rates funded."
She explained that debt-servicing costs were lower because it qualified for tax imputation credits.
TCAL was relying on income forecasts to cover all the risks. She said they should be able to fund the loan from some of the revenue from the cultural centre, with the theatrette a good funding source.
Council chief executive Stephen Town said he could not understand where council got the impression that iwi investment in the  centre would be a grant.
The investor would be involved in the running of the centre and there was an investment attached to that.
Mr Town said the business case was that a 30 per cent occupancy of the spa wellness centre would fund the entire Hot Pools redevelopment cost. "We are saying, that is a sound investment."
Doing nothing would put council back to a declining cash surplus on the existing Hot Pools setup and increase the rates subsidy for the whole of the aquatics network, he said.
The meeting was told that Maori  would fit out the cultural centre and run it as a going concern.
Cr Bill Faulkner was concerned that if things came unstuck, the first port of call for alternative funding would be ratepayers.
Mr Town said TCAL was running the network and the revenue/expense risk was primary carried by TCAL. He said council was picking off a marginal slice of TCAL's activity.
Cr Greg Brownless said his understanding was that an external party would pay the money and take the gains or take the losses.
Cr Murray Guy moved that council not approve the proposed funding arrangement because it was outside the intent and understanding of what he thought it would be.
He said the cultural centre should only go ahead on the basis that it had no capability to impact on ratepayers.
Cr Wayne Moultrie was the lone voice in saying that council staff should be allowed to see what came out the other end of negotiations to arrive at a final business case with the investor.
Cr Brownless said if someone else wanted to take the risk, that was fine. Council was only turning this proposal down.
Cr Rick Curach said it was a purely commercial transaction for the cultural centre and he was expecting to see the other party putting some more heart into it.
Cr Guy said: "Lesson learned - there has been some confusion."
 TCAL member Cr David Stewart declared an interest and did not vote or take part in the debate.