Former All Black Josh Kronfeld says he is concerned about the fate of other rugby unions in New Zealand, as the Otago Rugby Union goes into liquidation.
The union announced at a Dunedin press conference last night it was buried in $2.2 million of debt and will stop trading on Friday.
Kronfeld, who played for Otago in the early 1990s, said he thinks there are a lot of clubs heading for a similar fate.
"They are managing to cover their debt, but each year they incur a little bit more and they get further along, I guess like Otago has found themselves in," Kronfeld told TV ONE's Close Up tonight.
Kronfeld said the New Zealand Rugby Union (NZRU) should be offering guidance so other unions do not end up in the same position as Otago.
"You've got a big parent in the name of the New Zeland Rugby Union, they are our biggest role model for how we run each of our smaller little children," he said.
"I don't know if they have to step up and put the funding but they have to play a major part in making sure this doesn't happen again.
NZRU chief executive Steve Tew told TV ONE's Breakfast that despite there being a lot of hurt in the community, the NZRU will not be intervening.
"Where do you draw the line? Which creditors do you help? As we've reported the accumulated debt is $2.3-2.5 million. "We actually don't have the balance sheet that could write a cheque for that amount."
"And if we did it here frankly we would be going back and revisiting all the other loans we've got because the other provinces would simply say, 'well if you bailed out Otago why should we pay you back?"
The union is now relying on community spirit to raise more than half a million dollars to field an Otago ITM cup team in 2012, but even if the money's found, the cost of playing at the Dunedin Stadium could rule it out as a home base.
Offer of help
The former head of the NZRU David Moffett has offered his help to save the union from liquidation.
Moffett, who was in charge of the union between 1995 and 1999, says a repayment plan needs to be worked out so Otago can survive.
"I offered to help when I first came back (from being CEO of the Welsh Rugby Union) six years ago, and I'm still prepared to help," Moffett told ONE Sport.
He said he was involved in saving the Wales Rugby Union from oblivion and is well placed to save the regional game in New Zealand.
Reasons for collapse
Tew said a culmination of factors led to Otago Rugby Union's shock announcement.
"So the Otago Union owned Carisbrook obviously for a very long time and had a valuation on its book, borrowed money against it to update the ground from time to time and also to run its business as it turns out," he said.
"And so that valuation actually wasn't matched when it sold so they were left with a very large debt unsecured.
"They've been running their operations I think a little optimistically so they've been spending more than they have earned and that's accumulated some more debt and in the end that debt hole now and the gap in funding this year is too great and we've said look we're not prepared to keep funding you."
However, Moffett said the inflated salaries of players has been the biggest problem for provincial sides.
His view is backed up by former Otago player David Latta who played 161 games for Otago.
"Is it sustainable to run a professional game at the ITM Cup level? I think that's a question a lot of unions will be asking themselves," he said.
It's understood that most of the 14 provincial unions are financially unstable, with the blame being laid on an initially high salary cap of over $2 million dollars for the ITM Cup. That figure has since been lowered to $1.3 million.
"No one is compelled to spend up to the salary cap, no one should be spending more on players than they can afford," Tew said.
Some provinces are also blaming a lengthened Super 15 competition, which they say has hit their gate takings and sponsorships by as much as 50%
Tew admitted there is a lot of rugby played in the season.
"We know rugby starts too early in New Zealand and goes on too long but we need to balance that with the need to generate the income to fund the game from community level up," he said.
Impact on ITM Cup
Otago Rugby chairman Wayne Graham says local intervention and funds are needed to stage a campaign this season.
The ITM Cup may be forced to go ahead with just 13 teams following the collapse of the union.
The NZRU is assessing the viability of entering an ITM Cup team from the region in the 2012 competition, which gets around $900,000 a year from the NZRU.
Tew said the draw for this year's ITM Cup inter-provincial competition has been held back for a fortnight to see if Otago can field a team.
"We brought some time because we've delayed the draw that should have been put this week for the ITM Cup, we've asked for some patience from the other unions so we can give this community a week or two to rally around and see if it really wants to be in this competition in 2012.
"That will require it raising some fund and proving its financially viable for the next 12 months."
Tew would not put a date on when a decision would be made about this year's ITM Cup: ''Sometimes it's better not to... but time is very urgent.''
"This will need to be self-funding beyond the normal NZRU
contribution if any plan is to be viable. We will be urgently
discussing this with players and potential sponsors to see if we
can achieve this."