APPENDIX 10
Supplementary memorandum from Wembley
National Stadium Limited
1. SUMMARY OVERVIEW
OF THE
SOURCES OF
FUNDING OF
THE PROJECT
Project expenditure to date has been £139
million. £106 million of this relates to the purchase of
the stadium site and is secured by Sport England's rights under
the staging agreement between WNSL, Sport England and the FA.
A further £3.5 million was spent in process of stadium acquisition.
Of the remaining £29.5 million needed to support that project
to date, £10.5 million is the remaining grant funding, £4
million is funding from the operating surplus of the stadium (operating
profit of circa £15 million net of write-offs, redundancy
and other company costs) and £15 million is funding directly
from the FA.
The initial project costs prior to the stadium
purchase showed a project with 37.5 per cent public funding (through
the National Lottery grant) and 62.5 per cent private sector funding.
Whilst total costs have been revised from time to time, the proportion
of public funding has never been higher than this at any point.
As currently planned, private sector funding will account for
80 per cent of the total project cost.
2. CALCULATING
COMPARABLE STADIA
COSTS
Over the last three years the projected cost
of the new Wembley stadium has frequently been compared to other
recently completed stadia. However, the figures used have seldom
been compiled on an accurate like for like basis.
The most recently published figure for the total
project cost of new Wembley is circa £715 million in the
interim Carter report of December 2001. Although Multiplex have
held the price of the construction contract since that date there
will still be some variation to that figure given that it includes
many items other than the basic construction cost of the new stadium.
Broadly, that £715 million includes the following: land purchase
and associated costs, design development, finance costs (including
rolled up interest), Section 106 payments, legal fees, all company
running costs 1998 to 2005 (including the closure of the original
stadium), contingent cost, pre-opening costs, demolition, construction,
fit out.
Figures quoted by the media and others in comparison
tend to be simply for the main construction costs of other stadia.
There is seldom any attempt to compare location costs, source
of funding (state or debt finance), inflation or even capacity.
In an effort to present comparable information,
the stadium industry tends to compare cost per seat. Even this
figure has an innate complication as costs do not grow in a linear
fashion, rather they grow exponentially as the cost of building
a seat 50 metres above ground level, along with the volume of
supporting space, is obviously far higher than building a seat
five metres above ground level. Hence, although Wembley's costs
are less than 4,000 per seat, the final 10,000 seats—those
furthest back from the pitch and highest from the ground—will
cost well over £5,000 per seat to build (ie add circa £50
million to the price. [WNSL figure]).
Also important is the form of funding. A substantial
government grant towards construction will limit financing costs.
Wembley, for example, will carry rolled up interest (interest
on the private sector loan that cannot be paid until opening and
hence rolls up to opening appear as a circa £50 million capital
cost). The stadium will also carry a high debt burden for a national
stadium as no grant will go directly onto construction costs.
The current international model of stadium finance
is to provide generous facilities for premium seats as these contribute
substantially more income than general admission seats. A stadium
with a higher number of premium seats will inevitably carry a
high construction cost as such seats demand a far higher quality
of facility than general admission seats. Importantly this higher
construction cost is allied to the likelihood that the stadium
will become self-supporting. WNSL, and by extension the FA, cannot
afford to create a cheaper, loss making stadium.
It is worth noting that it is very unlikely
that many of the newly constructed World Cup stadia will be self-supporting.
Almost all will rely on some form of state support for continued
existence. The stadium in Oita, for example, has basic running
costs of 300 million yen per annum but only 50 million yen was
expected in revenue in its first year of operation.
The Cyril Sweett report made alterations to
costs, adjusting for inflation and location (building costs in
Australia, for instance, are far lower than the UK).
The Cyril Sweett report described the Wembley
Stadium design, "value for money both in terms of the market
price for the scheme as designed, and in terms of comparison with
stadia of similar standing".
"Undoubtedly Wembley is of a higher quality
than most other stadia, firstly as this befits a national rather
than a club stadia, but also as a requirement of the lottery funding.
The national stadia appear at the higher end of the cost range
of costs per seat. Wembley falls into this category, and compares
favourably with other national stadia."
Cyrill Sweett makes clear that Wembley appears
as good value when compared to other stadia with a similar business
model, most notably those in North America. The most expensive
new stadium currently planned is the new Soldier Field Stadium
in Chicago, estimated to cost will cost $9,854 per seat (ie with
an exchange rate of £1 = $1.45, £6,796 per seat).
The new Wembley is also particularly good value
in terms of cost per square metre.
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