Source : ABC NEWS
The Tasmanian government will resist the temptation of partnering with the private sector to fund and build its proposed Hobart stadium — and instead go it alone via a Macquarie Point borrowings bonanza.
The ABC can reveal the government will fund construction of the stadium via debt obtained through the Macquarie Point Development Corporation (MPDC), on top of $630 million of already committed state, federal and AFL funding.
The decision was rubberstamped by cabinet last week, following a market-sounding exercise and was based partly on advice from Perth consultants Paxon Group and the Melbourne-based Infrastructure Advisory Group.
The government will pivot toward a “design and construct” model and away from a “private-public partnership”, which it determined would carry too high a risk to the state and threaten already tight timelines.
It then intends to sell off parcels of the broader Macquarie Point precinct to private developers and use those funds to pay off the loan — which is likely to be upwards of $200 million.
The proposed stadium is due to be completed by 2029. (Supplied: MPDC)
The parcels would include about 17,000 square metres of commercially zoned space encompassing Macquarie Point’s “mixed use” and Antarctic precinct, as well as the housing precinct at Regatta Point, and an underground multi-storey car park.
Under the plan, those parcels will become available following commencement of the stadium — provided it is approved by both houses of parliament — with the market value of the land expected to rise as the stadium development progresses.
However, those land sales are not expected to cover the full amount of the loan.
The MPDC will use existing funds to pay for the stadium build and, on current timelines, is not expected to borrow until about 2027 or later.
The state government plans to introduce “enabling legislation” to the parliament to progress the stadium, rather than continuing with the Project of State Significance process. (Supplied: MPDC)
The current official cost estimate for the stadium is $775 million but has been estimated by external quantity surveyors to be closer to $900 million.
The state government has pledged $375 million in capital funding, while the federal government has committed $240 million and the AFL $15 million, leaving at minimum a $145 million shortfall, but the loan amount will likely be higher than that.
Public-private partnership would have left state worse off, minister says
Public infrastructure funders from around the world had expressed strong interest in partnering with the government to deliver the stadium and broader precinct, with the ABC confirming Tetris Capital, John Laing Group, Capella Capital and property developer Milieu — which was set to develop the site under a previous master plan — were among those keen.
Melbourne-based Plenary Group, which had assembled a consortium, including a financier and builder, was considered the frontrunner had the government opted to partner with the private sector.
But in a statement, Business, Industry and Resources Minister Eric Abetz told the ABC that the government’s advice was that a private-public partnership would ultimately leave the state worse off.
Eric Abetz says the new funding model will help the stadium be built on time. (ABC News: Owain Stia James)
Mr Abetz said it would “cost the taxpayer more, take longer to implement and take away from the asset being owned by and for the Tasmanian people”.
“The decision to prioritise the delivery of the multipurpose stadium through a ‘design and construct’ pathway provides certainty and confidence in the future of the precinct and the Tasmania Devils AFL club,” he said.
“We cannot afford any delays if we are to meet existing time frames set out in the AFL agreement. Without a stadium, there is no Tasmanian AFL team.“
The government’s deal with the AFL requires a roofed stadium be built at Macquarie Point for the state to get a team. (Supplied: MPDC)
Plenary managing director Damien Augustinus told the ABC he believed a private-public partnership would “deliver greater innovation, more certainty around on-time delivery and costs, and better whole-of-life outcomes than traditional design and construct or managing contract procurement methods”.
Mr Augustinus said involving the private sector would “mean more investment in Tasmania, creating more Tasmanian jobs and permit a cohesive whole-of-precinct approach”.
“In the Macquarie Point precinct, the Tasmanian government has a golden opportunity to partner with the private sector to finance, deliver and manage a world-class sporting, tourism and entertainment precinct.“
A render of a bar inside the relocated and re-imagined Goods Shed, next to the proposed stadium. (Supplied: MPDC)
What’s a private-public partnership?
A private-public partnership (PPP) would mean a public infrastructure firm would fund a shortfall, construct the stadium, and then enter an agreement with the government to maintain, and potentially operate, the stadium and precinct for 25-30 years.
The government would have paid the consortium an agreed upon annual or quarterly fee, and likely a slice of revenue generated by the precinct for that period of time.
Independent economist Saul Eslake said that while tempting, private-public partnerships had their pitfalls.
“Because it’s usually believed the private sector can manage construction projects more efficiently than the public sector, that is assumed to result in a net saving to the government,” he said.
“What PPPs sometimes ignore is that governments can borrow at lower interest rates than private companies, and in many PPPs that have been entered to in other states and in overseas jurisdictions, the private participants often find ways through complex legal contracts find ways to transfer risk back to the public sector.”
Saul Eslake says private-public partnerships have their pitfalls. (ABC News: Daniel Irvine)
Mr Eslake said borrowing through the MPDC would provide the government with some budgetary camouflage — but that ultimately it will still be public money that will be borrowed and needs to be paid back, with interest.
“If the government were to borrow through TASCORP in its own name, that would be reflected in the government’s budget deficit and would add to the government’s net debt,”
he said.
“But if the Macquarie Point Development Corporation were to borrow — they would not appear in the general government’s deficit and net debt, but rather in that of the public and non-financial corporation sector.
“Although that would be disclosed in the budget papers, the borrowings of GBEs [government business enterprises] and other public non-financial corporations don’t get as much attention or scrutiny.”
Crucial independent MLC ‘pleased’ with change in funding
Independent MLC Ruth Forrest, who holds a crucial upper house vote on the stadium, is not yet sold on the project, but said she was “pleased” the government had rejected a private-public partnership and that it would “absolutely” influence her vote.
“It’s critical in my mind,”
Ms Forrest said.
“It won’t cost the state any more, because ultimately, we’d be underwriting any private-public partnership I would imagine.
“It’s more transparent because the people of Tasmania will have more vision of what it’ll actually cost.”
Ms Forrest still wants answers to key questions raised by the Tasmanian Planning Commission as well as surety around the ongoing operating model of the stadium.
“I’ll need to be really clear about the operations of the food and beverage, the hospitality, the venue space, what that looks like. We need to own all of that, operate and control all of that to be assured it can be a sustainable model,” she said.
Greens say government’s taxpayer funding promise is broken
The government has long insisted its funding toward the stadium was capped at $375 million and “not a red cent more”.
The Greens, who have long opposed the stadium, said the decision to switch the funding model signalled a “huge broken promise”.
“The premier said ‘not a red cent more’ than $375 million would be spent on the stadium, but now Tasmanian taxpayers are responsible for many hundreds of millions of dollars more than he promised,” Greens deputy leader Vica Bayley said.
“The Liberal government’s talk of private investment has always been a ploy to mislead the community about the true cost of the stadium to the taxpayer.
“There’s no good model for funding the stadium, which is why the government should scrap it.”
