SkyCity drops bid for taxpayer top-up — but there's a catch

LATEST: SkyCity: a win-win-lose deal

SkyCity has dropped its bid for taxpayer cash for its controversial International Convention Centre.

The project will now be built within its originally proposed $402 million budget, but there's a catch: the amended design will be up to 10% smaller. A revised plan will be revealed in the coming weeks. Convention centre critic Matthew Hooton (keep reading) is far from satisfied, and still sees a taxpayer handout ahead.

The news was announced at a short-notice press conference called by Economic Development Minister Steven Joyce.

The government ran into heavy flak last week after SkyCity said it now estimated the centre would cost $530 million — and put up its hand for a $128 million taxpayer top-up.

Prime Minister John Key initially seemed to be attempting to soften public opinion for a handout, saying there was a risk of an "eyesore" convention centre if corners were cut to keep with the budget.

But it appears the public backlash has lead to some arm wrestling behind the scenes. As Mr Joyce put it this afternoon: "SkyCity has agreed not to pursue a financial contribution from the government and instead will amend its design to ensure the facility can be completed without financial input from the Crown."

10% smaller okay - but bigger chop would cause concern
"SkyCity will now work on a revised preliminary design in the coming weeks and will submit it on a date that will be agreed by both parties," Mr Joyce said.

"The Crown has also indicated today that it may be prepared to accept slightly smaller NZICC if that is required to meet the agreed total construction cost."

When pressed, he said, the down-sized convention centre may end up being around 10% smaller than previously planned "but no more than that".

"I've indicated that changes in the order of around 10% would not cause the Crown too much concern, but beyond that it would," Mr Joyce said.

Under a 2013 deal, backed by new legislation, the government and Sky City struck a pact for the casino operator to build a new convention centre and hotel in return for gambling regulatory concessions including 230 more pokies, 40 more tables, an increase in the percentage of pokies and automated tables that could accept large denomination bills and an extension of its license (due to expire in 2021) to 2048. Mr Joyce's own independent experts estimated the cost would be within $7 million of Sky's $402 million estimate.

Criticism of the proposed taxpayer top-up came from the opposition and, more cutting to the government, right wing commentators like David Farrar and Matthew Hooton. Mr Hooton saw a sweetheart deal, which grew out of questionably close ties between the PM and Sky from the mid-2000s. A poll found a clear majority of NBR ONLINE readers against a taxpayer top-up.

'Should be abandoned'
This afternoon, as details of SkyCity's climb-down emerged, the Taxpayers' Union was quick to label it a "win for taxpayers".

But Mr Hooton was dubious.

"The project should be abandoned and the government commit to a resumption of rational economics, not neo-Muldoonery" he says.

"Even under its previous scale and design, this was at best a marginal proposition in terms of competing with the likes of Sydney, Melbourne, Brisbane and Singapore — and the Treasury was deeply skeptical it could be a net gain for New Zealand.

"To now downsize the centre, or make it even more of an eyesore as the prime minister might put it, is to undermine further its ability to win business without subsidies."

New questions
"The centre was already expected to make an operating loss every year into the future.  Under the new smaller or uglier proposal, urgent answers are needed about who will meet those operating losses over the next 20, 30, 40, 50 or 100 years," Mr Hooton says.

"Will SkyCity have the right to close it down if it keeps making losses — as they have down other so-called public-good facilities within their operation?

"The best bet is that there will eventually be a call on ratepayers and taxpayers, whatever assurances are given now."

On social media, Mr Hooton picked up on the theme that Sky was getting the best end of the latest development, posting:

"If I contract to build you a 5-bedroom house with a swimming pool for $2m, but then you agree I can build you a 4-bedroom one with only a hot tub for the same $2m, then I have come out better than you in the negotiations. Does our press gallery understand this? Do MPs? I bet @nztreasury does."

The International Convention Centre design originally tabled by Sky allowed for 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. 

LATEST: SkyCity: a win-win-lose deal