UPDATED: Key refuses to rule out convention centre taxpayer top-up

UPDATED: SkyCity Entertainment Group [NZX: SKC] has released its first-half results as freshly stoked controversy swirls around the gambling operator’s deal with the government to build an international convention centre in Auckland, after prime minister John Key yesterday refused to rule out injecting taxpayer funds into the project.

Although this puts Mr Key and his government in a difficult political position – having sold the deal to the NZ public as being cost-and-risk-free for taxpayers – the PM’s statement provided a welcome bump for SkyCity, with its shares advancing 3.5%  to $3.90 at market close yesterday.

The government’s handling of the convention centre deal is tipped to be the subject of heated debate in parliament today.

YESTERDAY: The government is “spinning faster than a roulette wheel” over its controversial international convention centre deal with SkyCity, according to the Taxpayers' Union.

Today Prime Minister John Key declared that if SkyCity were to build its Auckland convention centre for the originally agreed $402 million, it would constitute “an eyesore.”

Speaking to reporters, Mr Key refused to rule out using taxpayer money to plug the estimated budget blow-out of between $68 million and $128 million for the project – first revealed late last year by SkyCity chief executive Nigel Morrison.

At the time Mr Morrison said the ballooning price tag was due to “improvements” in the convention centre’s design, as well as costs being driven up by the nationwide construction boom.

Mr Morrison also said SkyCity was not prepared to pay more than $10 million of the additional cost without shareholder compensation, that he “absolutely” expected a top up from taxpayers and that the casino operator was prepared to walk away from the project.

“If Auckland doesn't want it, if New Zealand doesn't want it, quite frankly that's fine with SkyCity. We don't have to do this," Mr Morrison said.

According to Mr Key today, the more expensive design for the convention centre “is bigger than was proposed and 'flasher' than was proposed,” whereas sticking to the initially agreed upon $402 million – which SkyCity is contractually obliged to cover – would result in “some sort of eyesore constructed downtown".

The prime minister said the government is “working very closely with SkyCity ... to try to see if a deal can be completed” and that no options had been taken off the table.

He did, however, dub Auckland Council helping fund the shortfall – a possibility first floated by Steven Joyce, the minister leading the Crown’s negotiations with the gambling operator – as “very unlikely.”

“But as we always said, the deal was never a done deal until ultimately everything was ticked off," Mr Key said.

That statement is somewhat odds, however, with the prime minister’s public assurance on 19 February 2013 that “New Zealand is getting a new convention centre at no cost at all with the risks taken by the operators.”

Indeed, the first public acknowledgment that “the deal was never a done deal” appears to have been made by Mr Joyce to NBR in late January, when he conceded the project cost wouldn’t be locked in until the building works contract is signed – something that isn’t expected to happen until the last quarter of 2015.

NBR has asked the prime minister’s office for its assistance in tracking down at least one example of Mr Key publicly stating “the deal was never a done deal” or a similar sentiment prior to today, as well as advice on when the prime minister came to the view the original convention centre concept drawings constituted an “eyesore.”

Mr Key’s office has yet to respond.

Meanwhile, the Taxpayer Union’s executive director, Jordan Williams, has urged the government not to repudiate the assurances it has previously made to the New Zealand public about the deal.

"The whole idea of the SkyCity deal was that Auckland would get an international class convention centre, paid for by SkyCity, in return for various concessions to the casino. That’s bad enough but, with Mr Key’s refusal to rule out taxpayer cash, SkyCity appears to have hit the jackpot," Mr Williams said.

"It was never suggested or intended that the taxpayer or ratepayer would have to shoulder any of the burden. If SkyCity underestimated the cost of the centre when it signed the deal, that's its problem. Any taxpayer support is nothing less than corporate welfare no matter how the government spins it.”

“The prime minister looks set to put taxpayers on the hook for a deal that is quickly unwinding. Unless the government learns when to fold ‘em, SkyCity will be laughing all the way to the bank.”

Mr Williams’ call has been echoed by Labour leader Andrew Little.

"They promised us they had got the deal of the century, [but] now it looks like taxpayers are going to be asked to pony up $140 million. They have broken the promise.

“I would like to see what a $402 million eyesore looks like,” Mr Little said. “Taxpayer money should not go into a convention centre that we were promised for free."