*Stadium lending not “100% safe”
*No independent decision-making increases risk
*2018 Gibraltar FA announced £30 million not £100 million cost of stadium build
*No business plan or feasibility study published by anyone
*Whole risk ratio and expected returns render ‘investment’ questionable
*GSB lending equates to camouflaged government financing says GSD
*Huge differences today from 2018 Gibraltar FA statements
*Any Development Aid would amount to taxpayer subsidy in breach of no tax support promises
*£55 million GSB surplus could have been used for social purposes to alleviate strain on taxes
*Recent GSLP-Liberal public involvement indicates mixing of sports and politics for electoral gains
NOT “100% SAFE”
It is wrong, not to say misleading, for ‘No.6 Convent Place’ (in effect the Chief Minister/GSLP-Liberal Government), to insist that the ‘investment’ of the Gibraltar Savings Bank [GSB] in the Gibraltar Football Association [Gibraltar FA] stadium project is “100% safe for depositors”. Any dilution to reserves of the GSB reduces the safety margins of depositors’ money in the GSB against investment losses.
Absent independent decision-making and assessment of the viability of the Gibraltar FA stadium project, which is currently non-existent as far as the public knows, the choice that the GSB buys about £100 million secured loan notes from the Gibraltar FA to fund the stadium project is misconceived and high risk.
In 2018 the General Secretary of the Gibraltar FA announced on GBC that the cost of construction of a stadium would be £30 million at no cost to taxpayers, as is promised today by the GSLP-Liberal Government. One imagines that incudes no taxpayer subsidy through the medium of Development Aid. He also gave the impression that UEFA and FIFA would only “contribute” to that cost.
HIGH RISK, SMALL RETURN
As Roy Clinton, Shadow Minister for Public Finances and the GSB, has said, “The Government or Savings Bank should publish the business plan for the proposed new stadium project and financial feasibility projections and payback period that underpin the loan notes that will be issued.”
Further the huge size of the loan in comparison to amounts invested by the Gibraltar FA (85.84% as against 14.16%) is unacceptable. It would not be countenanced by a commercial bank as supporting a commercial lending as it renders the lending hugely risky.
The lending is made even less appropriate as it has been said that the GSB would make only a small but reasonable return on its investment, is that not political? The maxim is “the bigger the risk, the bigger the return”, but not for the GSB it seems.
HIDDEN GOVERNMENT FINANCING
The GSD’s reaction to the GSLP-Liberal Government’s defence of the GSB stadium lending is right. It has said “Rather than this being a good investment it is free cash being given away by the Government to others” in the context of the Gibraltar FA not being required to pay a premium for the permission to allow construction of residential and commercial units.
The lending is the use of the GSB by the Government to disguise that it is “stumping up the cash for the development, not charging the right value for the land, and allowing another entity to keep the profits.”, as the GSD have also said. That of course if there are profits and not losses which losses would fall on the GSB and so undermine the security of depositors in the GSB.
Unfortunately, the GSD do not trumpet the basic wrong that encompasses the proposed lending by the GSB to the Gibraltar FA. Those are explained in depth in previous blogs. In essence the major criticism must be the very wrong of politics being involved in sport.
The GFA has been totally sidestepped. It has been taken over by the current GSLP-Liberal Governments who have monopolised the defence of the proposed lending. The Gibraltar FA remain silent, as if it were not a party to the transaction, as if it was non-existent, as if it was not the borrower. What a sad situation for football, and sport in general.
GIBRALTAR FA 2018 ANNOUNCEMENT
Not only has the Gibraltar FA been sidestepped now by the GSLP-Liberal Government, but it is also being shown to have changed its position since its General Secretary, Dennis Beiso, was interviewed on GBC on 21st June 2018.
In that interview he confirmed that the £16.5 million cost of purchasing the Victoria Stadium site had been met by UEFA and FIFA, and that discussions were advanced with both organisations on the financing of the building costs of the proposed new stadium.
Yet today we are told by the Government only that the Gibraltar FA will use funds received from various UEFA/FIFA programmes towards aspects of the financing of the cost of the new stadium. There is a marked uncertainty that such funding will be forthcoming in that statement.
£30 MILLION COST THEN
In that interview Mr. Beiso revealed that the cost of the construction of a UEFA Category 4 stadium would be £30 million which would not be funded by taxpayers. The intention was to seek planning consents in September that year, which was done, and for construction to start in early 2019, with completion in 2021.
The construction did not happen, with no reason being given for that. Today we are told a completely different story, without explanations. The cost of construction has jumped from £30 million to £100 million, again without any justification being made public.
No doubt the inclusion of hotel, commercial and retail units is one reason, but what is a football association doing engaging in property development and exploitation? Or are others going to engage in that? No doubt at some point we shall find out any other details.
NO COST TO TAXPAYERS
The promise that the stadium would be built at no cost to taxpayers was made back in 2018. It is a promise that is being repeated today by the GSLP-Liberal Government about the Gibraltar FA.
One imagines that includes no taxpayer subsidy through the grant of Development Aid to the developers, the Gibraltar FA or whoever else may get involved in any aspect of the proposed development.
Development Aid is a system by which approved projects are entitled to tax relief, import duty relief and rates relief. Accordingly, if any part of the new stadium project is granted Development Aid, then the Gibraltar taxpayer will be subsidising the project.
In that eventuality the ‘no cost to the taxpayer’ promise will prove untrue.
MONEY COULD HAVE BEEN USED FOR SOCIAL HOUSING
Further could the £55 million that is available in the GSB not be used for social purposes, like the construction of more social housing? Its use to finance the building of a luxurious development, which includes a football stadium, means that taxpayers will not get the benefit of that money to fund taxpayer projects to help the less well off. Any such help will need to come from tax revenues.
It is especially galling when taxes and other government fees and levies have just gone up, and are expected to increase further over a short period. In that sense the taxpayer is indirectly funding the construction of the new stadium, despite GSLP-Liberal promises to the contrary.
MIXING POLITICS WITH SPORT
In 2018 the Gibraltar FA was keen and made all statements connected with its proposed new stadium and the financing of its construction. Today that has shifted to Sir Joe Bossano and the GSLP-Liberal Government making all the announcements connected with the newly announced stadium project.
The question is why that shift which attempts to give the impression of that the whole project is a GSLP-Liberal Government inspired development, when they have nothing to do with it? The financing is coming from an independent statutory body, namely, the GSB.
Could it be a strategy motivated by politics, contrary to the Gibraltar FA rule to stay out of party politics, just before a general election to give the GSLP-Liberals favourable publicity? If so, it seems to have backfired spectacularly. Public opinion seems to be running high against the stadium financing and so the GSLP-Liberals.