The New Zealand Rugby Union will provide immediate assistance to New Zealand’s 26 Provincial Unions in response to the worsening economic conditions and the strong financial position it has built up, including an estimated surplus in 2008 in excess of $7.5 million.
In providing the assistance, the NZRU has also signalled that the cost base and rugby structures in New Zealand need further work.
The announcement of a three-pronged financial assistance package follows the final NZRU Board meeting of the year on Thursday 11 December at which the Board was presented with an update on the financial health of Provincial Unions and the NZRU’s projected 2008 results.
NZRU CEO Steve Tew said the NZRU was in the fortunate position of recording a surplus for the 2008 year which, while not finalised, is likely to be in excess of $7.5 million, helped largely by favourable foreign exchange movements during the year.
“We have been successful in managing our costs in 2008 to ensure we have achieved a small operating surplus. On top of that, we have had significant gains as a result of the falling New Zealand dollar which will add to our strong reserves position and also makes good on the losses recorded in 2006 and 2007.”
Mr Tew said the NZRU had received requests for financial help from a number of Provincial Unions, particularly at the Air New Zealand Cup level, and as a result of the NZRU performance in 2008 was in a position where it could provide assistance.
However, he noted that the Provincial Unions and their communities would need to work hard to raise the necessary funding to sustain them in this competition.
“At a meeting of all Provincial Unions and Rebel Sport Super 14 Franchises last week in Auckland, options were discussed as to how and in what circumstances the NZRU could or should provide assistance to Unions.
“Based on those discussions and the Board’s consideration we have put in place a package of assistance which is substantive, targeted and relative to the current environment, while recognising that there is more work that needs to be done to address the cost base of the Air New Zealand Cup competition and its participants.”
Assistance Package
The assistance package for Provincial Unions comprises:
1. An immediate one off payment to all 26 Provincial Unions equal to the amount of one quarter of the annual core grant distribution with a minimum payment to Air New Zealand Cup Unions of $150,000;
2. The creation of a provision of $1.2 million representing 75 percent of All Blacks player payments contained in Provincial Union contracts (subject to a pro rata reduction based on games played in the 2009 Air New Zealand Cup by those players); and
3. The creation of a Support Fund of $1 million to assist Provincial Unions in addressing the cost base/structure of their organisations to achieve a more appropriate and sustainable level.
Under the current NZRU funding model, Provincial Unions receive their annual grants through four quarterly payments. In effect, the immediate special distribution payment (point 1 above) is equivalent to one additional quarterly payment for the 2008 year.
The All Blacks player payments, which will be paid in 2009, will help recognise the limited role that All Blacks play in the Air New Zealand Cup and that the cost of paying those players is better met at the national level. This initiative is consistent with some of the discussions which have taken place during the Air New Zealand Cup, Franchise Structure and SANZAR Competitions reviews.
The third initiative is the first step by the NZRU to work with Provincial Unions on structuring Provincial Union and competition structures to achieve a more sustainable platform for Provincial rugby.
“It is now clearly obvious to everyone that we as a sport are struggling to sustain the cost base of this competition in its current form so we have signalled that we want to work with our Provincial Unions to address this,” Mr Tew said.
Tasman and Northland
Mr Tew said the specific conditions with respect to Tasman and Northland’s inclusion in the 2009 Air New Zealand Cup had also been reviewed by the Board. Northland has made progress in meeting the conditions which formed part of its submission to the NZRU Board in September and their participation has been confirmed.
The Tasman Rugby Union had made progress on some of the objectives, including a re-commitment to the Union from its two sub-union partners. However, the NZRU has received a request for additional time and additional financial assistance from Tasman so it can meet the financial conditions it submitted in its case for remaining in the Air New Zealand Cup.
“Under the financial assistance package announced today, Tasman will be eligible for the immediate additional payment and will also accrue some additional relief through the All Blacks payment provision in 2009.
“However, the NZRU Board does not believe it is appropriate to provide any further funding assistance. The Tasman union and its partners and communities need to demonstrate that they can operate at the Air New Zealand Cup level under their own steam, and on the same basis as the other Provincial Unions in that competition.”
Tasman have been given until Wednesday 17 December to respond to the NZRU on its submission for entry to the 2009 Air New Zealand Cup.
Future risks
Mr Tew said while it was envisaged that the special package announced today would help address some of the immediate financial risks being faced by Provincial Unions, the NZRU was aware that the economic environment may yet worsen before it improves.
“We have tried to take a prudent and pragmatic approach in providing help and in terms of the budget we have set for the NZRU in 2009, while recognising that there may be further challenges in the year ahead.”
Mr Tew said it was also hoped that Provincial Unions would use the special distribution to improve their financial situation and not make decisions which might add to their cost base.
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