Auditor general reveals Adelaide Oval hotel loan risk
The authority in charge of the Adelaide Oval has twice asked the government to slash its hotel loan amid fears coronavirus could leave it unable to pay taxpayers back tens of millions of dollars.
SA Business
Don't miss out on the headlines from SA Business. Followed categories will be added to My News.
- Adelaide Oval in line to host two AFL prelim finals
- How to get the most from your Advertiser subscription
The affect of the COVID crisis on the Adelaide Oval’s operations could present a risk to it repaying its loan to the State Government, which ignored internal advice suggesting a higher interest rate for the $45m oval hotel, according to an Auditor General’s report into the hotel project.
The report details Stadium Management Authority letters to Treasurer Rob Lucas in March and June unsuccessfully seeking a further reduction to its 4.5 per cent loan rate, and expressing concern about its trading capacity.
“The COVID‐19 pandemic has impacted AOSMA’s ability to hold events and significantly
reduced its ability to earn income,” the report tabled today says.
“The ongoing impact of COVID‐19 on AOSMA’s operating position is currently unknown due to the highly uncertain economic environment and may present a risk to it being able to fulfil its loan obligations.”
The State Government in 2018 agreed to underwrite a $42m loan towards the $45m hotel build cost.
The Government approved a 4.5 per cent interest rate but Auditor General Andrew Richardson’s report notes that the SA Financing Authority had recommended “preference for a commercial rate of between 5 and 5.5 per cent”.
“We found that agency documentation was not maintained explaining the reasons for not using the commercial rate as advised by SAFA or analysing any potential risks introduced by adopting the lower lending rate,” Mr Richardson said.
“For future proposal evaluations, we recommend the SA Government document the basis for not following specialist advice provided by agencies.”
MORE NEWS
What the recession means for you?
See which MPs are staying silent on ICAC investigation
Maserati and a mansion: Aussie aged care owner quits
But SAFA had told the Auditor General that the project “may not be commercially viable with a financing cost above 4.5 per cent”.
In his report Mr Richardson said his agency had not identified improper or inefficient use of public money for the hotel development.
At June 30 this year the SMA drawn down $28.8 million in loan funds for the 138-room hotel which is scheduled to begin operating from September 25.
Mr Richardson noted that SMA has advised that “no material defects” have been identified in the design and construction of the hotel.
