Part 7: Our conclusions

Auckland Regional Council: Management of the LA Galaxy event at Mount Smart Stadium.

Mount Smart Stadium is, in our view, something of an orphan in the Council's structure. Although the Council recognised the need to run the facility on a commercial basis, at the time it had not put in place an appropriate governance structure for a commercial operation.

The Council's lack of attention to Mount Smart Stadium, and the reality of running a commercial operation, is reflected in:

  • the unclear governance structure for the stadium – it sat uncomfortably in the Parks Department, and the Stadium Advisory Group was advisory only, rather than a governance body;
  • the inadequate attention to planning in relation to the stadium:
  • the Council failed to review the management plan continuously as required by the Reserves Act (the current management plan dates from 1990, and a review of that plan initiated in 2005 remains incomplete);
  • the draft business plan/strategy remained a draft; and
  • the failure to appreciate that the Council's business-as-usual processes were inadequate to support a major event such as the LA Galaxy event.

Mount Smart Stadium essentially operated with insufficient Council oversight.

As a consequence, the Council was not best placed to consider and approve the LA Galaxy proposal. Although there might have been a general view among councillors that Mount Smart Stadium needed commercial, profit-making events, the Council had no clear framework in which to assess the proposal. There was no formally adopted plan that would have guided the Council in deciding, for example, what sort of events it wanted to attract, its desired business model for events, how much risk it was willing to assume, and how it would balance commercial interests with the public good.

The Council took on the role of promoter of an event for the first time. The Council understood the nature of the business risk – that all profits or losses would accrue to the Council, but underestimated or even discounted the possibility of there being a loss.

We spoke to managers of other stadiums and similar facilities, mostly in public ownership. We noted different business models, but common to all was a clear appreciation of the risk involved in events promotion, and a preference to avoid that risk as far as possible.

Public versus private or commercial risk

We have one final comment. Mount Smart Stadium is distinguished from the rest of the Council's business by its predominantly commercial nature. We acknowledge the difficulties that public entities face in carrying out commercial activities, particularly where, as here, there are mixed commercial and public good objectives.

There is a tension inherent in operating commercially in the public sector. Public officials must ensure that publicly owned assets are used effectively and efficiently for the benefit of the community (which might include earning income from those assets) and without waste or extravagance.

The obligation to use the facility efficiently means that the entity cannot decline to carry out commercial activities. Yet business opportunities rarely come without risk. The public sector commercial manager needs to balance the need to exploit business opportunities and take on business risk with the obligations of being a steward of public assets.

In our view, the problem is exacerbated by there being several competing facilities in Auckland, mostly also in public ownership – a state of affairs described to us by one councillor as a "beggar thy neighbour" approach.

We note that the Government has proposed that a new council-controlled organisation be established to operate major facilities and events in Auckland.

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