BRIEFING NOTE for CITY OF HOBART 4 September 2023 – Policy Issues

“Public policy shortcomings of proposed Mac Point stadium”

This is a policy being championed by State Government with very direct implications for Local Government, many aspects of which we are speaking of today.

What is our expectation of good policy at both State and Local level?  It is that governments prioritise according to perceived need, in invariably financially constrained environments, to enhance the long-term well-being and prosperity for the greatest number of their citizens.  And along the way, to engender social cohesion and trust in their institutions.

What is the problem this State-driven proposal for a stadium sets out to address?

• • Activation of Mac Point?
  • AFL pathways for young Tasmanians to aspire to?
  • Increased economic activity?

What are the most commonly identified concerns of communities in Hobart, and elsewhere, that they seek to have their governments address?

• • Affordable housing / finding solutions to growing homelessness
  • Health: access, affordability, pressures on hospitals, emergency services
  • Education
  • Transport / congestion / road infrastructure.

Can it be said that the ‘problem’ to be addressed has been well defined by Government and is broadly acknowledged by the community as a problem they are seeking a solution to?

If not, how can it be justified, particularly when we consider that the State’s capacity to fund other commitments on the Mac Point site (Truth & Reconciliation Park, Wharf upgrades) is completely opaque.

Even if we put aside the complete disconnect between what the community has been demanding for some considerable time and this proposal, it is the case that public policy, not sufficiently well-resourced from the outset, is a recipe for failure.  There is nothing presently in the public domain that gives any confidence that the Stadium proposal comes anywhere close to be properly costed and funded.

We will address the economic shortcomings of the proposal today and even a quick glance at those will make it clear why the State Government side-stepped a critical stage in formulating good practice public policy, an assessment by its own financial management arm of the project’s viability.

“The business case for the proposed Mac Point stadium doesn’t stack up”

1. The State Government’s own Reports demonstrate conclusively that a Stadium at Macquarie Point is not a financially viable project¹ – the business case just doesn’t stack up.

• • The cost-benefit analysis (CBA) ‘base-case scenario’ concludes that the project has a Net Present Value (NPV) of – $301.3 million and a Benefit to Cost Ratio (BCR) of 0.51.¹
  • Every dollar spent on the Stadium Project returns a benefit of just 51 cents.
  • Over its life the stadium delivers to the public a net loss of $301.3 million.
  • State Treasuries insist on a BCR >1 for a project to be considered financially viable.

2. It is very likely that the Stadium Project is even less financially viable than the Reports suggest because the costs of the project are understated and the benefits are overstated.

• • In the ‘worst-case scenario’, the Reports assume the capital cost of the project increases +20% and the demand estimates of the project reduce –20%.
    In this scenario, the Stadium Project has a NPV of – $474.5 million and a BCR of 0.35.
• The ‘worst-case scenario’ estimate is nevertheless very likely to underestimate how loss-making the project is.  The more realistic ‘sensitivity analysis’ would acknowledge that:
  • • +26% is the average cost overrun for ‘megaprojects’ undertaken by Australian governments with a capital value greater than $350 million.²
    • –63% is the actual demand for Hobart AFL matches (5,937/match at Bellerive in 2023) compared to the Reports’ forecast demand (16,100/match for the new stadium).³

3. Furthermore, the Reports fail to factor in costs that are significant for the Hobart City Council – and which Infrastructure Australia’s Guide to Economic Appraisal recommends as standard inclusions for good practice CBAs.

• • The cultural and heritage costs for Palawa and non-Palawa from the Stadium’s overwhelming visual impact on the Derwent River, estuary, the Domain and the historic Cove.
  • The public infrastructure costs for Hobart City Council to integrate the site in the city.
  • The congestion costs from traffic jams on the Davey, Macquarie & Brooker road network.
  • The disruption costs from noise, waste and congestion during the construction phase.
  • The value of land at Mac Point is not accounted for in the quantification of project costs.

4. The Reports ‘base case’ assumes that, without a Stadium precinct, nothing will be built on the Macquarie Point site.  But the ultimate reason the project is so destructive of social and economic value is that a sportsground better sited elsewhere, and inappropriate for this unique harbourside site adjacent to Hobart’s iconic waterfront and the inner city, would prevent this area from being transformed into a visionary and iconic place for Hobart, and for Tasmania – a place that potentially provides for housing, focuses on reconciliation, and celebrates the site’s attributes with its proximity to the river, its mountain views and Aboriginal history.  This is the alternative option that a properly conducted cost benefit analysis ought now to consider.

¹ The State Government commissioned two reports on the Hobart Stadium, PricewaterhouseCoopers Estimating the Economic Impacts (2022) and MI Global Partners Cost-Benefit Analysis Report (2022).

² Source: Grattan Institute.

³ Source: PwC (2022); AFL Attendance Tables (2023).