Rugby: Southland drowning in debt

Southland celebrate with the Ranfurly Shield. Photo / Getty Images.

The NZRU are keeping a "close watch" on as many as three unions in danger of suffering the same fate as Southland, who are effectively insolvent.

It emerged yesterday that Southland owe creditors $700,000, with no means of paying the money back, on top of a forecasted deficit of between $350,000 and $478,000 for the 2010 financial year.

Most unions are feeling the pinch in a difficult economic climate but Southland have clearly lived beyond their means. This is despite holding the Ranfurly Shield for much of 2010 on top of reportedly receiving $5.6 million from the Invercargill Licensing Trust and Community Trust of Southland over the last five years. They were also given a $1.3 million bailout in 2008.

The NZRU were made aware of the scale of Southland's problems three weeks ago and are now working with the union to help alleviate their issues. They advanced them $150,000 from next quarter's grant, which was not unusual, and the Community Trust of Southland have also reportedly agreed to advance Rugby Southland $126,000 on next year's funding.

NZRU chief executive Steve Tew said it was up to unions to live within their means.

"It's not rocket science. You have to earn more than you spend or you don't survive.

"At the end of last year, we made no secret that a significant number of unions are finding it very difficult to bank the income they require to sustain the business model they have put in place. Some are taking longer to adjust to the new environment, longer than they should have, but they will get there.

"There are two or three others who are on close watch by the NZRU and they will have to be very mindful of how they get through the next couple of months and how they set themselves up for the next ITM Cup."

Player salaries are a big drain and Southland are believed to have paid around $2 million to players of the $4 million they spent overall in 2010. A salary cap of $1.35 million or 36 per cent of a union's revenue has been put in place but provinces could get around that figure last year, with some players still on old contracts.

It's not known what affect Southland's problems will have on their ability to retain and re-sign players, as well as coaches, managers and backroom staff, but New Zealand Rugby Players Association head Rob Nichol said any attack on players being greedy was misguided.

"The player market is not the problem," he said. "Players might have their demands but provinces are only obliged to spend what they can afford. If you spend above that, then you are the problem. Running a provincial union is like any other business. It's not an easy environment but you have to live within your means."

Tew said they were encouraged to hear the local Southland community were looking at ways to solve the dire financial state because it was up to Southland to work their way out of trouble.

A 'change manager' will be appointed, whose task it will be to understand the extent of the financial woes as well as possible ways to rectify the decision. They will be given three months to do that.

This year looms as even more challenging financially than 2010 for provinces, with the ITM Cup being squeezed into a reduced schedule to accommodate the World Cup. They are likely to struggle to attract sponsors, as many put their money into the World Cup.