Stadium building: a game where nobody wins

Delays, rising costs, political feuding and a last-minute bailout ... GREGG WYCHERLEY reports on another stadium-building scheme gone horribly wrong.

The All Blacks will play their first test of the season at the new Waikato Stadium in June, and visitors from all over the country will marvel at the new ground and enjoy watching the home side win.

But for the past six years Hamilton people have been watching a game of political football where nobody wins, there are lots of casualties, and nobody even knows what the final price of their ticket will be.

The referee blew the final whistle on that game on Wednesday, at an emergency meeting of the Hamilton City Council, and all that remains is to count the cost of yet another stadium-building scheme gone horribly wrong.

The proposal on the table was simple - that the council step in and take over the final stage of the building of the stadium, guaranteeing payment to Holman Construction for any and all shortfalls.

An amendment to the recommendation argued for a delay in signing the agreement until the final price was known, but all 13 councillors at the table knew this would only delay the inevitable.

After debating the issue for five hours they voted 7-6 to take over the project.

The result of six years of plan changes, funding shortfalls, board resignations, accusations of conflict of interest and council squabbling is that the ratepayers of Hamilton now own half of a new stadium that has cost about $34 million so far, and rising.

Since the meeting the calls for the resignation of mayor David Braithwaite have been getting louder, led by a faction of councillors who are promising to keep the pressure on.

Ewan Wilson is one of the three councillors clamouring for the mayor's resignation, after claims that Braithwaite used the stadium as a tool to get himself elected, and misled the council about the true extent of the trouble behind the scenes.

"This is a man who rode on the back of the kudos that was created by the stadium being built," said Wilson.

"During election time he said it was on time and on budget. He now agrees that he was aware at that time that it wasn't on time and it wasn't going to be on budget."

Making matters worse was the fact that Braithwaite had a financial interest in a company that had contracted to underwrite any shortfall in funding for the stadium.

He was therefore unable to attend the emergency meeting called to resolve the mess that many say he engineered, and is now banned from acting on behalf of the council on any matters concerning the stadium.

Braithwaite agreed to an underwriting deal between his company Sterling Mortgage and Finance, the Perry Group and the Waikato Rugby Union that would guarantee payment of any shortfall.

A further underwriting agreement was entered into between Braithwaite's company and a fellow trustee, Hamilton businessman Brian Perry, as an individual.

This agreement guaranteed that Holmans would be paid for all work on the stadium, and any shortfall would become the responsibility of Braithwaite's company and Perry personally.

Perry will now pay no more than $2 million towards the estimated $6 million shortfall, and may sell sponsorship and naming rights for some stands and gates, which he has been trying to sell for up to $1.1 million.

Braithwaite promised to honour the deal, but said funding would flow in, meaning the underwriting deal would never have to be executed.

He promised grants from district councils, the sale of membership lounges, sponsorship of the main stand, the media centre and its four entry gates would easily cover any shortfalls.

But the extra income either did not materialise or is still in doubt. Last month Fletcher Construction, on behalf of Holmans, demanded payment and the council was forced to step in.

Wilson - who has a highly publicised fraud conviction as former chief executive of Kiwi Airlines - said the council had let Mr Braithwaite off the hook and failed in its duty to protect ratepayers

"Where did this get out of control, has anyone breached the Trustees Act, has everybody acted with appropriate regard to their fiduciary duties?" he said.

"I've run an airline that's got into trouble - at least I knew what I was losing. We pulled the plug at $3.5 million but this thing is spiralling out of control."

He said Braithwaite had clearly breached his campaign pledge to bring rates down and keep city debt stable. "There's been a shortfall, he's walked away from his guarantee, the city's had to jump in and we're having to fund it.

"Clearly that has an impact on the ratepayer, whether it's in the form of increased rates or more debt."

Other councillors have complained to the Auditor-General and the Minister for Local Government asking for a public inquiry.

Even last year it was no secret that the project was in serious trouble, facing huge cost overruns and the likelihood that the stadium would be unable to meet its August 24 completion deadline, or $28.6 million budget.

Hamilton quantity surveyor Tony Gemmell was commissioned by Wel Energy Trust, a major funder of the project, to make monthly reports on it last year.

But he claimed his work was hindered by the stadium trust, which refused to provide him with information.

His report, detailing the problems with the stadium, was leaked last May.

It said the whole project had been "badly organised and managed", and delays to the deadline would result in further cost overruns.

He said work at the park stopped altogether for two months because materials were not ready and the trust acted too slowly when it could not get steel for the new stand.

"It astounds me that it took so long for this problem to come to light," his report said.

Wel Energy Trust, which had pledged $6 million to the project, demanded an urgent meeting with the city council and the stadium trust.

Braithwaite told it the concerns were unfounded and denied any further cost overruns.

Former mayor Russ Rimmington, who was deposed by Braithwaite in the election last September, believes his opponent used the stadium as a campaigning tool.

Rimmington, now Wel Trust chairman, said the council should have heeded Gemmell's warnings when it had the chance.

"We had Mr Gemmell, probably one of the most eminent quantity surveyors, checking it through ... they laughed at him, scoffed at him and threatened him legally."

He laid the blame squarely at Braithwaite's feet, and joined the chorus of those calling for a ministerial enquiry.

"He's got himself into dreadful strife, I think his credibility is absolutely shattered," said Rimmington.

"It demands an inquiry now, the dollars are so big it really is a national scandal." He said the guaranteed maximum price agreed by the stadium trust should not have been exceeded, and the trust had authorised extras without the approval of the council.

"I chaired the meeting where any variation had to be signed off," he said. "Who authorised another $5.3 million of extras?"

He denied claims that he had stifled the project in order to reduce its effectiveness as a weapon to win the mayoralty.

Rimmington said he raised 90 per cent of the money for the project, and pushed for a referendum that gained public approval for the council to put $9 million towards the stadium.

In May 2000, after four years of debate, he pushed through a referendum asking electors and property owners if they wanted to fund the stadium.

The referendum found that 61.2 per cent were in favour of funding a $25.8 million redevelopment of Rugby Park and a $4.5 million upgrade of Westpac Trust Cricket Park.

Of those who voted "yes", just over 63 per cent also believed the council should contribute $9 million towards the plan.

Braithwaite said he was too busy to talk to the Herald yesterday, and laughed off suggestions that he should resign.

He said he could not comment on whether the hoped-for funds he had been promising from other councils and trusts in the region would materialise because the council had banned him from any further involvement in the stadium project.

Sources close to the project told the Herald that the fiasco was far from over, and costs could go much higher yet.

They said the $5.5 million shortfall was an early indication based on quantity surveyors' figures and the final price would not be clear until all the subcontractors had submitted their accounts.

Because Perry and Braithwaite underwrote any shortfall, the guaranteed maximum price lost its contractual strength.

The stadium trust was never able to peg down a final cost because the underwriting agreement effectively contracted it out of the guaranteed maximum price.

Some say the real story behind the stadium is the mayoral power struggle between Braithwaite and Rimmington.

Braithwaite, an accountant and property developer, is the son of Roderick Braithwaite, mayor of Hamilton for two terms from 1953 to 1959.

His mother, Kathleen, was a councillor from 1962 to 1974 and served as deputy mayor.

In 1998 he failed in his bid for the mayoralty, garnering only about 2500 votes, more than 9000 fewer than Rimmington.

But when Braithwaite took over the Waikato Stadium Trust in November 1999, Rimmington feared it was a precursor to another tilt at the mayoralty.

He was correct, and for the next two years the stadium became a tool in the struggle between the two men.

Rimmington has no doubts that his rival's stadium campaign was purely political.

"It was a very devious manipulated campaign to unseat me as mayor, which they achieved - of course they've ended up with egg all over their face," he said.

"The honourable thing for him to do is resign ... he really has to pay up or move out."