Otago Rugby: Last of the big spenders

Ben Smith was one of Otago's few recognised players. Photo / NZPA

The Otago Rugby union's descent into financial failure has been well chronicled. Less understood is why Otago kept spending big money on players when their bank statement should have dictated otherwise.

Even as the debts piled up and creditors were howling for payment, there is understood to have been talk around the Otago Rugby Union board last year they should be trying to lure Carl Hayman home from France.

They never got round to making a formal approach but the fact there was even a suggestion of chasing one of the highest paid players in world rugby is indicative of the mindset that drove Otago to financial collapse. In 2010, they spent $1.55m on player salaries, only $50,000 less than the All Black-laden, star-studded Canterbury team that won the competition.

Yet Otago finished last, winning just two games and did so with a squad of barely recognised players but for Ben Smith and Adam Thomson. Those who have seen the detail of the Otago wage bill are astonished at the amounts paid to players most good judges would say were club stalwarts at best.

Only three were earning more than $60,000 - they were signed before the player collective introduced a maximum spend on any individual of $60,000. But there were significant numbers believed to be up to that number - when players of similar calibre were being paid the minimum $15,000 at other unions.

Otago were $2.35m in debt and forecasting a loss of $750,000 for 2012. Whether it was reckless or incompetent would hardly seem to matter now - but the conclusion being reached is that it was a lethal mixture of both. Not only was the spending out of control but it's understood some of the accounting was muddled - which is why it is believed $400,000 of unpaid invoices were only realised late last year.

"I think there's pretty universal agreement that they [ORFU] cocked up, and they cocked up on a chronic basis. Pretty reprehensible, really," was the conclusion of Dunedin mayor Dave Cull.

No one has been able to gain a clear answer as to what role chief executive Richard Reid played in the past two years or whether he left the organisation voluntarily last year.

It is not clear, either, who was driving recruitment or if the board was unanimous in continuing to spend when the picture was so bleak.

A condition of the restructuring was that the entire board be removed - suggesting those who have come to the rescue weren't interested in a witch hunt. The whole board has been deemed complicit in driving the debt to such disastrous levels and the journey towards self-destruction began some time ago.

WHEN OTAGO and the Highlanders were hot property back in the mid-to-late 1990s, it was a boom time for rugby in the south. Otago were the envy of the nation; they owned Carisbrook whereas other heavyweights were merely tenants at their grounds. The money rolled in from ticket sales and signage and Otago were worth watching. The students had an affinity with the likes of Jeff Wilson, Taine Randell, Tony Brown and Otago and the Highlanders were serious title challengers.

The region became expectant and perhaps a little complacent. When Carisbrook began to fray and lag behind the likes of the newly-built Westpac Stadium, and upgraded venues in Hamilton and Christchurch, it was deemed a relatively simple fix. Otago would borrow against its value. When they needed to bring Carisbrook up to standard to host tests and the Lions in 2005, the board borrowed again.

It was a dangerous path. As Otago increased debt, the landscape changed fast. Otago and Highlanders were no longer loaded with cult heroes. The University was no longer bringing talent South and the region wasn't pouring money in to develop their own.

The price of beer was increased at Carisbrook and the boom times were suddenly a distant memory. A decaying stadium, an average side with little romance, expensive beer, night rugby and tighter regulations that didn't allow for couches to be dragged in and set on fire - it was little wonder that from 2006 crowd numbers at Carisbrook steadily declined.

The situation became dire when Carisbrook was sold to the Dunedin City Council for $7m in 2009, which didn't cover the extent of the money Otago had borrowed. They were expecting a better price and were then hit again. Because they no longer owned Carisbrook, they had to pay rent to play there.

By 2010 their debt was close to $2m yet there was no obvious attempt to reduce their player expenditure. The board, it would seem, were driven by a belief they could alleviate their financial stress by building a better squad.

Not one of them is likely to serve on a provincial board again and the lament by vice-chairman Laurie Mains about the burden of Carisbrook is known to have irritated the NZRU and other creditors.

"It was a huge cost," said Mains recently. "We borrowed money against that asset to make ends meet and the debt just became too great. We hoped to sell it for a figure that would be sufficient to retire debt but that didn't prove to be the case."

The source of irritation has been the lack of admission of culpability and desire to shift the blame. Otago didn't drift into this mess, they were led there by a conscious process of decision-making.