$89K loss on festival defended

Competitors and spectators during the Slopestyle competition. Photo:Stephen Parker

An $89,300 payment by the district council to Crankworx Rotorua organisers is an investment in the city's future that will be repaid, the council's chief financial officer has said.

Thomas Colle's comments came in light of a report, recently made public, that reveals Rotorua Lakes Council agreed in December 2014 to underwrite festival organisers Mountain Bike Events (MBE) for up to $500,000.

The report shows MBE predicting an $89,300 loss from the event, a 6.7 per cent deficit of the $1.328 million it spent on Crankworx Rotorua that ran from March 25 to 29 this year. An independent report has estimated the city's economy received a $3.7 million boost during the festival. While the $89,300 shortfall will initially be covered by the council, MBE expects to be in a position to pay back the money when Crankworx returns to Rotorua in 2016 and 2017, in line with its business plan.

"In the long term, it's anticipated there will be no underwriting cost to ratepayers," Mr Colle said.

Information surrounding the agreement had previously been kept confidential so as not to impact on commercial sponsorship negotiations.

Funding for Crankworx Rotorua 2015 included a $420,000 grant from the Government's Major Events Development Fund and $200,000 from the Rotorua Energy Charitable Trust.

The district council considers its direct spend on the festival to be limited to the underwriting payment, while Destination Rotorua, the council's marketing arm, also spent $75,000 on promoting Crankworx.

A report carried out by APR Consultants, yet to be made public, suggests that Crankworx Rotorua 2015 injected an estimated $3.7 million into the local economy, and the council estimates around 1.8 million people worldwide watched the event online.

Mr Colle said the value in hosting the world's largest mountain bike festival was clear. "The benefits for Rotorua have been widespread, and are likely to increase even further in the coming years as Crankworx Rotorua becomes more established." Tak Mutu, event director for Crankworx Rotorua, said the underwriting agreement was far from unusual when it came to organising large events in New Zealand. He was confident that MBE would be able to cover the shortfall over the next two years, perhaps even by the time of next year's event. "It's not like the council just said: 'Here's $89,000, go and have a party," said Mr Mutu. "The reality is, we pay that underwrite back. It's part of the business plan. If you look at what has been spent by council compared to what has come back into the economy, that return is far bigger."

Mr Mutu said there were a number of commercial sponsorship deals and grants already agreed or in the pipeline that would help achieve a budget surplus. He also shared financial information with the Rotorua Daily Post which showed he had helped fund Crankworx 2015 with money from his own company, Multi-Day Adventures, taking a significant personal pay cut in the process.

Rotorua deputy mayor Dave Donaldson, who is also an MBE director, said the positive economic effects of bringing the "pinnacle mountain bike festival on the planet" to Rotorua clearly justified supporting the festival.

Mr Donaldson was also clear there was no conflict of interest between his position on the council and his role with MBE, as he did not vote on issues relating to Crankworx.