The city council yesterday agreed to a multimillion-dollar, three-year injection of funds into the company that has run Baypark since the council bought the stadium off Bob Clarkson for $12million in 2007.
It was a near-unanimous vote with Mayor Stuart Crosby abstaining because he is a director on the council-owned company, Tauranga City Venues Ltd (TCVL).
The $5 million equity injection into TCVL by ratepayers, effectively reducing a crippling debt burden that threatened to overwhelm the business, now goes out for public consultation as part of the council's 2012-22 draft plan.
Councillor Terry Molloy said TCVL had been under-resourced and almost set up to fail.
Councillor David Stewart was grateful that TCVL chairman Graeme Elvin, appointed to the board 15 months ago, had put the cards on the table.
"Good on Graeme for coming along and saying we have a dog and here is how to address it," he said.
TCVL predicted a dire financial scenario if the council had not agreed to the cash injection staggered across the next three years. The $5 million will be raised as rates-funded loans, with the total annual repayments the equivalent of a half-per cent rate rise by the third year when final million-dollar instalment was raised.
If TCVL did not shed $5 million of the $7 million it owed the council, the debt would have risen to more than $9million by June 30 and $14 million by 2014. The company was not generating enough revenue to meet its loan repayments to council and was instead on the slippery slope of rolling its repayments into the capital of its loan.
There was criticism of the rose-tinted financial reporting to the council from TCVL before the arrival of Baypark general manager Ervin McSweeney and Mr Elvin.
"Going forward, we need to hear the bad news and the real picture ... we expect reports to be factual and projections accurate," Mr Stewart said
Councillor Catherine Stewart said she was in a bit of a quandary because the forecasted favourable cash flow arising from the $5 million injection was a best-case scenario.
Mr McSweeney reassured her that Baypark was run as a business and was "not frivolous in any way, shape or form".
He said they were praying for a series of fine Saturdays for the rest of the speedway season after being hit by the aftermath of the Rena disaster and the weather. Two meetings had been rained out and two other meetings went ahead on days in which it had rained everywhere except Baypark.
Councillor Murray Guy argued it was not TCVL that had created the debt. It was caused by the decision of the council to transfer the loans to buy the stadium to the new company. It became a flawed business case once the recession hit.
He was not aware of any business case for a council-controlled organisation (CCO) that had evolved in the way it should have. Mr Crosby said the business case was built around more sponsorship and corporate support but that money had turned off literally overnight. Council chief executive Ken Paterson said they were trying to get the CCO on to a good business footing.
Councillor Larry Baldock said it would be an enormous task to get TCVL back into profit and he hoped that the council would not be grumpy if the company came back to the council.
Councillor Tony Christiansen said he would be grumpy if TCVL came back to the council for more money, adding: "I don't want to be put in this situation again." He recalled when TCVL was getting revenue of $200,000 a year from the former speedway promoter Willie Kaye, before the company bought him out and took over the running of speedway.
Mr Crosby jumped in, saying that this was private information and that $200,000 was a highly inflated figure.
Mr McSweeney said that when Baypark was turned into a special use zone last year, the hearing commissioner had not been prepared to extend the noise limits.