SkyCity: a win-win-lose deal

The latest development in the convention centre saga is "a win-win-lose deal," politicial commentator Bryce Edwards tells NBR ONLINE.

"Clearly it’s a "win" for both SkyCity [NZX: SKC] and the politicians, while being a "lose" for the country," the Otago University political science  lecturer says.

And he's got a simple solution for how New Zealand can win*: if SkyCity builds a convention centre 10% smaller than promised, it should lose some of the gambling consessions it was handed to build the centre for "free."

This morning, Prime Minister John Key indicated his government won't alter the regulatory terms of the deal. "You've got to go back to Parliament to do that and we don't want to that," he said on Breakfast.

On Sunday, Economic Development Steven Joyce said SkyCity was no longer seeking a $128 million taxpayer top-up to build the International Convention Centre in Auckland. But the catch was it would be smaller to keep within the original $402 million budget. Mr Joyce said the government would not be comfortable if it was more than 10% smaller; Sky won't present its revised plan for several weeks.

"SkyCity wins from this deal, because it has managed to hold on to everyone of its regulatory concessions in this re-worked agreement. It didn’t have to concede any of the gambling wins it had originally made back in 2013, while now having to come up with a cheaper and inferior national convention centre," Dr Edwards says.

"National politicians – John Key and Steven Joyce, in particular – definitely win through finding a way out of the severe hole that they were in. They were in deep trouble with a public mood that was strongly against more taxpayer funds being given to SkyCity. If National had decided to subsidise SkyCity’s convention centre, this would have dogged John Key for the rest of his days. Having strongly promised a ‘free’ convention centre, a backdown on SkyCity’s demand for more money would have been very electorally damaging."

The country as a whole loses because it is now getting much less out of the deal than the public was promised, Dr Edwards says.

"Not only are we getting an inferior national convention centre – and one that could be an ‘eyesore’ – but we are still paying the same high price through the regulatory concessions that Steven Joyce negotiated."

Smaller centre should mean fewer pokies
The logic of the proposed deal, whereby the government accepts that SkyCity builds a smaller centre, should naturally lead to SkyCity being afforded a smaller regulatory concession, Dr Edwards says.

"So, if the centre is now going to be 10% smaller, then obviously the concessions afforded to the casino should be 10% smaller. For example, the increased number of pokie machines should be about 205 instead of 230, the increased number of large tables should be 36 instead of 40, and the increased length of the gambling license should go down by about five years."

In comments to NBR and on social media, convention centre critic Matthew Hooton mined a similar theme, posting: "If I contract to build you a five-bedroom house with a swimming pool for $2 million but then you agree I can build you a four-bedroom one with only a hot tub for the same $2 million, then I have come out better than you in the negotiations. Does our press gallery understand this? Do MPs? I bet @nztreasury does."

National caved more than Sky
The fact that National hasn’t negotiated these parallel reductions suggests that it’s the government that has caved in more than SkyCity, Dr Edwards says.

"So it’s somewhat bizarre to see that much of the reporting on the latest announcement makes out that National has stood up against SkyCity. It certainly suits National for the story to be sold like this.

"What is surprising is the opposition parties are also endorsing the same line."

"Labour, for instance, is celebrating the latest announcement as a win for the public. This seems disingenuous. Clearly the parliamentary parties are simply seeking to convince the public that they themselves have all had an impact and therefore a ‘win’. The reality is that the rest of us are all losers from the deal."

The International Convention Centre design originally tabled by Sky allowed for a main exhibition hall capacity of 3500 conference attendees (up from 1750 with its current convention centre). Although the amended, downsized design has yet to be revealed, Mr Joyce repeated today that the new convention centre will add 800 permanent jobs and $49 million to GDP. 

ckeall@nbr.co.nz

Follow @ChrisKeall

* At least in terms of negotiating gamesmanship. I'm not sure you'll find Bryce marching in any pro-convention centre rallies.