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The Kirkby Paradox

By Colin Fitzpatrick :  07/11/2008 :  Comments (0) :

Perplexing times both on and off the field of play. Despite what has been perceived as a poor start to the season, coupled with the early elimination from two competitions and the delivery of a standard of football that has left many fans wanting, it is perhaps surprising to note that Everton occupy a better league position now (7th) than at the beginning of November 2007 (8th) — the memory of which may have been embellished by the hopes surrounding the Uefa and Carling Cup campaigns to come. The expectations of fans are based on an understandable belief that Everton, as in the past, should once again be in the position to compete with the top teams in all competitions; in this I think we all agree.

Bill Kenwright is no philanthropist, he’s admitted that he doesn’t possess the personal wealth required to move the club to the next level; to many, it has been apparent for years that he has been unable to personally provide or find any tangible investment whatsoever, yet it would be unfair to simply level this criticism at Bill Kenwright alone, none of the Board of Directors has invested in the club; the purchase of shares is a personal investment on which they, or for whom they act, quite reasonably expect a return on their investment either through dividends, unlikely at Everton Football Club in recent years or the near future, or upon the sale of those shares.

The sale of the club would appear to be the only logical solution to Everton’s financial dilemma. It has been argued that an essential element of this selling process is the need to own a modern stadium facility. Clearly this is also an important requirement for the fans. Few could argue that perfect lines of sight, spacious concourses, abundant food and drink outlets and adequate toilet facilities would contribute to a much improved match-going experience over that provided by the investment-starved Goodison.

location favoured by the board is Kirkby, but it is fair to say that any modern stadium in any location would meet these criteria, as would Goodison if a stadium re-development programme had been instigated twenty years ago; unfortunately it wasn’t, so in the absence of any feasible contingency plan, Everton are dependent on their preferred and only solution.

There needs to be a genuine demonstration of a will in the club to make an alternative work, but the will is questionable when attempts are made to convince the fans and shareholders that the redevelopment of just one stand at Goodison, Bullens Rd, would cost in the region of 79% of the total cost of the stadium alone in Kirkby (£90M). Why does opposition to Kirkby continue to grow and what are the short- and long-term implications for the future of the club if this risky strategy were to fail?

The treatment of fans and shareholders alike has been a public relations disaster for the management and the board of the club; that now infamous collection of phrases: “World Class”,  “Effectively Free”,  “The Best Served Stadium”, and the never to be forgotten ”Deal of the Century” and others will forever be associated with Everton’s Kirkby campaign when they were used to influence the fans' ballot. Bill Kenwright has stated that he believes that the fans weren’t misled yet the main opposition group to the stadium relocation maintains that Tesco provided Everton with a fully costed business plan before the exclusivity deal was signed, making these aforementioned phrases disingenuous at best.

The stadium design has been castigated by CABE; using information provided by the Royal Society of Chartered Surveyors, the construction cost to Everton would appear to be have increased significantly and the match-going experience awaiting fans will be manifestly different to that at Goodison due to an explicit lack of transport capacity that is associated with all small towns.

Simply put, a 50,000-seat stadium does not belong in a 42,000-inhabitant town. When presented in isolation, the overall plan for the Kirkby stadium may appear plausible but under questioning, as seen at the EGM, the flaws were evidently apparent and were easily exposed, which resulted in the board having to resort to a poll to defeat the resolution, and later, introduce a change of rules to prevent a shareholders revolt.

Everton’s requirements stretch far beyond the mere physical design of the stadium; with no money, Everton have placed their faith in obtaining enabling funding to subsidise the building of a new stadium. Tesco’s original explanation was that a critical mass of retail was needed to generate a cross subsidy of £52M towards the total stadium construction cost of £130M. It was explained that this was derived from the value of the project as a whole. But there are major problems to overcome.

The first problem is that the project appears “undeliverable” on the basis that the sheer size of the retail development contravenes existing and agreed planning policy, hence the imminent public inquiry.

The second problem is that the projected increase in overall construction costs indicate that the contribution from Everton, previously acknowledged as £80M, is now approaching £100M and their stated plan to raise this figure — the sales of Goodison and Bellefield and the securing of a major stadium naming rights deal — appears somewhat over enthusiastic and would require a significant increase in the level of additional debt finance thereby reducing the level of contribution available each season for team building which was explained to fans as a major benefit and reason for the relocation. 

Diagram 1

The third problem area for Everton is one of capacity, maximisation and sustainability. Everton can clearly demonstrate the need to generate additional revenue but can they demonstrate the need for a 50,000-seat stadium and the ability to fill it on a regular basis in the future? History would indicate that Everton have only once achieved an average attendance over 50,000, this was in the 1962-63 championship-winning season. In the era of the Premier League, with all-seater stadia and higher prices, the average attendances at Goodison can be compared against the average for the Premier League. 

Diagram 2

Everton are some 13,000 short of a 50,000 average attendance level but, whilst other clubs can demonstrate a sizeable waiting list for season tickets, Everton can’t... in fact when Everton were achieving their greatest successes on the pitch, attendance levels (in a higher capacity stadium) were extremely surprising yet understandable when the state of the local economy is taken into consideration.

There could be some validity to the argument that many people stay away from Goodison because of the obstructed views and poor facilities; this may well be the case, it is well documented that the so called “new stadium effect” contributes between 15-30% to the attendances during the first three years after moving to a new stadium. Using the top-end figure, this would increase the average attendance at Kirkby to over 48,000. Looking at the graphs above and considering there are no waiting lists or regular sellouts, is this figure achievable and more importantly is it sustainable?

Based on Everton’s own figures, used at the recent EGM, this increase would yield an additional £4.5M of gate receipts during each Premier League season. However, it is also known that these increases can rapidly drop off and it would be misleading not to take into account some negative aspects that could affect the sustainability of these higher attendances. Those fickle fans that stay away at the moment could rapidly lose interest when faced with extensive delays to travelling, particularly after the game. Of course fans staying away will make getting home easier for the remainder but lower attendances are not the aim of the move.

The increasing influence of Sky TV, emerging Internet sites and pubs and clubs showing the games could all be detrimental to future attendance levels at any new stadium, but, most importantly, it should be remembered that it was specifically the Kirkby stadium that over 10,000 Evertonians voted against. After the reality of the move was revealed, it is the Kirkby stadium that encourages a growing number of Evertonians to openly admit that they won’t attend that stadium... and it is the Kirkby stadium that nearly 80% of shareholders, in the room on the night of the recent EGM, were vehemently against. 

Of course, a football club does not receive all its income from supporters alone; the corporate market is very important and remains a lucrative source of income. Hospitality boxes at Goodison are allegedly over-subscribed and on that basis an increase in their number should generate some additional and much needed revenue. At Goodison there are presently 12 boxes, each costing £45k a season, which would imply that these would potentially generate £540k but, in line with many stadia, the catering and hospitality business has been outsourced which means that the club only receive a fixed income in accordance with their contract.

The Kirkby application indicates that 38 boxes are planned; if sold and priced at 20% higher than Goodison, these would collectively generate an impressive £2M every season for Everton and their hospitality and catering partner to share. The lounge memberships appear to be less in demand if the rows of empty seats that can be seen at nearly all home games in the hospitality areas are anything to go by. This is surprising when you consider that Sodexo Prestige, the provider of catering and hospitality services for Everton, deliver an award winning service at Goodison, as seen at the recent Football Hospitality Awards.

Apart from the top class food and service, visitors watch the game from some of the best seats in the house, no obstructed views or inadequate facilities here... yet they remain under subscribed; the obvious question is why? Perhaps it is the present location of the stadium in Walton... yet Liverpool, who reside in a similar location and intend to stay there, are so over-subscribed that they wanted to use Everton’s marquee to meet their demand.

Turnover (19 Games)


 

Current Stadium

Kirkby Stadium
(Avg 48,000)

Kirkby Stadium
(Avg 38,000)

Gate Receipts & Programme Sales

15,000,000

20,000,000 +33%

16,000,000 +6%

Media

26,000,000

26,000,000 +0%

26,000,000 +0%

Sponsorship & Advertising

5,000,000

6,000,000 +20%

6,000,000 +20%

Merchandising & Catering

1,000,000

3,000,000 +200%

2,000,000 +100%

Other

1,000,000

2,000,000 + 100%

2,000,000 + 100%

Sub Total

48,000,000

57,000,000 + 17%

52,000,000 + 8%

Gross Increase in Turnover

9,000,000

4,000,000

Additional Finance (£60M x 25 @ 5%)

(4,250,000)

(4,250,000)

Net increase in Turnover

4,750,000

(250,000)

The above is merely an illustration to highlight that, if Everton were to move to Kirkby tomorrow, the two most important issues would be the attendance levels and the amount of debt finance required to build the stadium. Many other factors could come into play — new owners could subsidise the project or even pay for the whole construction by way of a loan or the ticket prices could be increased by 30% to make up any shortfall — but of course this would probably initiate a further loss in attendance as fans question whether they’re prepared to pay increased prices for better facilities inside the stadium with poor facilities outside.

Additional costs aren’t yet established, for instance the ongoing cost of the controlled parking zone isn’t included, thought to be approaching £1M a season. Nobody can accurately predict anything other than there will be at least 19 occasions on which Everton will have the opportunity to generate sufficient turnover for the club to remain competitive.

In the end, the decision on Kirkby now rests with the secretary of state, the inquiry will determine if there is a need for the development and whether that need is sustainable without having a detrimental effect on other local retail centres in Liverpool, Sefton, West Lancs, St Helens and ironically other areas of Knowsley. The battle lines have been drawn and the early skirmishes between proponents and opponents have begun. Everton, Knowsley and Tesco have refused to reveal their exclusivity deals and business plans, citing "commercial sensitivity".

Even more bizarrely, Tesco’s lawyers, in a technical planning manoeuvre, now claim that the retail element, whilst still delivering the cross subsidy, is no longer reliant on the presence of the stadium to achieve regeneration! They now claim that the sheer size of the retail is necessary to attract major retailers and jobs and as such conforms with planning policy and warrants approval. Expect more smoke and mirrors as the inquiry unfolds...

The paradox here is that, whilst Kirkby has been portrayed as the only opportunity to further Everton’s ambitions, it may well impede its development for years to come. If you would like to understand more about this important issue, and have your say, I’d suggest that you try and get along to KEIOC’s meeting at noon on the 15th November at The Casa on Hope St. There are many aspects of the relocation project that are confusing — even for those with the intimate knowledge that is denied to the opponents of the scheme.

“Clearly it’s possible to lift the stadium design for Kirkby (or one like it) and drop it onto Goodison or the loop site – and in my heart as a fan, it looks nice. But unless the club is offered a concrete proposal to own a £150 million stadium for around £35 million investment by Everton, and delivered by 2010-11, then I’m afraid it is not a realistic option.”
Terry Leahy, August 2007

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