Tuesday, 24 June 2014

Stadium exam questions

We still don't know whether Christchurch will get a big covered stadium.

Meanwhile, in Dunedin:
The idea of mothballing Dunedin's Forsyth Barr Stadium might raise eyebrows, but it is officially on the table for the Dunedin City Council.
The move was confirmed by council staff yesterday, even as Mayor Dave Cull said it was not a ''particularly constructive'' idea and was unlikely to solve the council's stadium-sized financial headache.
''My personal view is you can mothball the stadium but you can't mothball the debt, so you may as well have the stadium,'' Mr Cull told the Otago Daily Times.
His comments came after council chief executive Dr Sue Bidrose said mothballing the venue was one option among many being considered as part of the stadium review.
The review, which aimed to address $3.79 million of losses forecast by Dunedin Venues Management Ltd over the next three years, was announced in January and due to be completed by early August.
I really don't know whether mothballing helps: it depends what portion of the ongoing losses are sunk for the Council and what part are operational losses that could be stemmed by shutting down.

I do expect that Dunedin stadium's financial prospects are worsened if Christchurch gets a big new stadium that would draw acts that might otherwise go to Dunedin, though there aren't many going there now.

I also expect that somebody in the Otago Econ department could set a fun intro micro exam question hitting the usual firm shut-down point problem using Forsyth Barr as set-up. If I were setting it up, I'd specify that I was using made-up numbers, and set the solution such that the stadium is worth keeping open, but only because the main debt costs are sunk. In part (b) I'd then ask whether the next city up State Highway 1 should build an even bigger stadium that would have similar finances. Ideally, the students would recognize that it's better to avoid sinking the costs in the first place.

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