The Sky City deal

June 13th, 2011 at 1:00 pm by David Farrar

Lincoln Tan at NZ Herald reports:

The Government is negotiating with entertainment group SkyCity to build the country’s largest convention centre in Auckland despite strong political opposition.

Prime Minister John Key said the project would create jobs, boost tourism and put the country on the map as a “business events destination”.

“An international-sized convention centre is essential for New Zealand to tap into the growing market of high value business visitors we are currently missing out on,” Mr Key said.

He said the tourism industry and business sector had been asking for an international-sized convention centre for years.

I think almost everyone agrees an international-sized convention centre is a good thing, as extra tourism is very positive – improves the current account deficit, creates jobs, boosts the tax take and generally grows the economy.

The proposed 3500-seat convention centre would be built between Hobson and Nelson Sts and is expected to provide an estimated $90 million boost to the economy through new spending by additional international visitors.

It is projected to attract 183,000 delegates annually, adding an extra 101,000 visitor nights and 350,000 additional delegate attendee days in Auckland.

SkyCity will pay the full construction costs for the centre, estimated at $350 million, but has asked that the Government consider alterations to gambling legislation and regulations.

Businesses, unions and lobby groups constantly ask the Government for law changes that they feel are beneficial to them, and New Zealand. This is not unusual.

They key is how reasonable or desirable are the changes, and weigh them up against the projected 1,000 extra jobs.

First lets look at what has been ruled out:

Mr Key said any discussion on reducing the entry age of 20 to casinos, allowing SkyCity an internet gambling licence or additional casino licences had been ruled out.

Personally I think the entry age should be 18 anyway. As much as possible we should have just two ages denoting the boundary from youth to adult. At 16 you should gain some initial rights – sex, driving, etc. And at 18 you should get the rest of your adult rights.

I also think regardless of ’s wishes, we should allow Internet gambling. By banning it in NZ we drive people to use offshore sites which are less safe and may rip people off. Far better to allow it in NZ and regulate it.

But these have been rejected regardless. On the issue of an additional casino license, I agree with the Government that this should not be “gained” in this way. There should be a competitive tender for licenses in new regions. Mind you, I actually would personally allow multiple licenses in cities.

So what is up for consideration:

Areas under negotiation include an extension of SkyCity’s licence beyond 2021 and a proposed increase in gambling tables and machines at its Auckland casino.

I can’t say a licence extension is a big deal. Hard to imagine a scenario where they don’t keep the licence anyway. This is just about having security of investment.

I also have to say I don’t see an issue with increased tables and machines. If the convention centre is going to bring in tens of thousands more visitors and hence casion patrons, then you will need extra capacity for them.

“Any changes to gambling regulations will be subjected to a full public submission process,” Mr Key said.

So people should have their say. I haven’t looked at the exact details, but on the surface it seems like a no brainer. A $350 million construction, an extra $90 million a year economic growth, an extra 100,000 visitor nights and 800 – 1,000 new jobs seems a great deal of benefit, and the changes sought is stuff which generally I think we should be doing anyway.

Yes some people have problems coping with gambling, and they should be given support and tools to help them. But for millions of New Zealanders, gambling is just a bit of fun – whether it be Lotto, Instant Kiwi or a visit to the casino.

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50 Responses to “The Sky City deal”

  1. Manolo (14,044 comments) says:

    Yes, some people have problems coping with gambling, and they should be given support and tools to help them. But for millions of New Zealanders, gambling is just a bit of fun – whether it be Lotto, Instant Kiwi or a visit to the casino.

    Well said, DPF.

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  2. KevinH (1,236 comments) says:

    Auckland has always lacked a decent convention centre that can host premium events and conferences and Sky City are to be congradulated for embarking on this initiative.
    John Key is also on the record for suggesting that Auckland develope as a commercial hub and this new convention centre will go a long way towards accomplishing that, New Zealand can’t rely upon our clean green image if there is no way of entertaining visitors.
    On the subject of internet gambling I would disagree with DPF, to provide gamblers with this sort of access to their addiction would be be a disaster to their families and the communities they live in.

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  3. Black with a Vengeance (1,865 comments) says:

    I think almost everyone agrees an international-sized convention centre is a good thing, as extra tourism is very positive – improves the current account deficit, creates jobs, boosts the tax take and generally grows the economy.

    _____________________________________________________________________________

    The why not build it in Christchurch because their convention centre is munted, they could do with the jobs, the tourism and the money ?

    It seems like a no brainer. A $350 million construction, an extra $90 million a year economic growth, an extra 100,000 visitor nights and 800 – 1,000 new jobs seems a great deal of benefit, and the changes sought is stuff which generally I think we should be doing anyway.

    Put that in Gerry’s inbox would ya ? I’m sure he’s got the local connections down there to shave at least a few mill into a hidden trust ?

    Oh because it’s not really about that. It’s about upping the number of gamblers through the door and let’s face it, there’s way more fools willing to part company with their dosh in Auckland than Christchurch.

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  4. Kimble (4,443 comments) says:

    It’s about upping the number of gamblers through the door and let’s face it, there’s way more fools willing to part company with their dosh in Auckland than Christchurch.

    Fucking hell. You cant post a single comment without displaying Herculean feats of stupidity can you?

    YES skycity wants people to come and gamble. Their margin on that is huge! So what?

    This is about increasing the number of people coming to NZ for conventions. More people go to Auckland. Auckland can handle more people. Auckland is bigger. So put the convention centre there.

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  5. BeaB (2,144 comments) says:

    This is an even better than a deal where taxpayers have to stump up some of the costs.

    It would be nice for decisions to be made on the basis of those of us, the majority, who are responsible gamblers, drinkers, drivers etc rather than the hopeless few who can’t cope with normal adult, urban life.

    Interesting that both news channels last night presented it as the govt being in the pocket of big business and mad keen to change the law to help their corporate cronies.

    No wonder we are reduced to the level of shouting racist at each other when that is the best our gormless reporters are capable of.

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  6. mattyroo (1,030 comments) says:

    Build baby build!

    But, before SkyCity embark on this, they better do something about upgrading that shit heap of a hotel they operate.

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  7. tvb (4,501 comments) says:

    ChCh would be all about a taxpayer subsidy. Chris Hipkins of the Labour Party is opposed. Len is in favor. I think if the labour party is going to have some kid respond to this they need tp get him sorted out. I bet the Australian labour party wou
    D support this for their country.

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  8. simonway (387 comments) says:

    It’s good that they seem to have scrapped the idea to build a roof over Federal Street.

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  9. Black with a Vengeance (1,865 comments) says:

    This is about increasing the number of people coming to NZ for conventions. More people go to Auckland. Auckland can handle more people. Auckland is bigger. So put the convention centre there.

    ______________________________________________________________________

    FUCK AUCKLAND !!!

    Christchurch has the greater need, is more conducive to a serene convention experience, it doesnt have a convention center anymore and the South Island is by far the better tourist destination. So put the convention centre there if it’s only about increasing international delegate numbers

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  10. mikenmild (11,701 comments) says:

    Good idea to get a world-class convention centre for New Zealand.

    Bad idea to link this with an expanded casino. DPF supposes that “If the convention centre is going to bring in tens of thousands more visitors and hence casion patrons, then you will need extra capacity for them.” Wrong. The casino is largely for the domestic market. The convention centr eproposal is a convenient peg on whch Sky City can hang an expansion of the casino – vacuuming more cash from locals who can ill afford it.

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  11. mattyroo (1,030 comments) says:

    vacuuming more cash from locals who can ill afford it.

    Is it not their own money to decide to do what they want with it, mikenmild?

    If they are poor and that fucking stupid that they spend their last few razoo’s at the casino, then they can sleep under a bridge for all I care. They don’t have to gamble their money at the casino, they do have a choice, and responsibility – even though you lefties would dearly love to remove that from them.

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  12. Kimble (4,443 comments) says:

    FUCK AUCKLAND !!!

    Nice one. Thats about all you have. Impotent anger. You are a joke.

    The casino is largely for the domestic market.

    You dont think that a convention centre is going to attract overseas casino patrons? Somebody should tell Las Vegas.

    Or maybe you think it will attract overseas patrons but they should all squeeze onto a casino floor which you think is too small for even the domestic market. I mean, you think a larger casino would bring in more locals, so the current size must be too small to fit all the local people who want to gamble.

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  13. Black with a Vengeance (1,865 comments) says:

    Impotent anger. You are a joke.

    __________________________________________________________________

    Oh don’t get your knickers in a twist Kimble. It’s just a light hearted attitude we mainlanders have. Maybe you’re right though, Christchurch as Las Vegas of the South Pacific is not a vision i find endearing nor do i think it would resonate with the locals.

    I wonder what Gerry thinks ?

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  14. Elaycee (4,404 comments) says:

    Oh dear, the left troglodytes always seem to have a problem with anything that has a cost benefit ratio attached to it…

    If Sky City is to pay for the cost of construction (rather than a CHC scenario that would have to be funded by the taxpayer), then Sky City needs to have a return that will outweigh the investment. Their current operating licence expires in 2021 (IIRC) and to justify constructing a $350M convention centre, they need to negotiate a new deal so they can get a return on their outlay.

    The increase in the revenue stream comes from revenues generated by the Convention centre / the extension of their current operating licence and an increase in the number of machines and tables on the floor.

    Shouldn’t be too hard to understand the simple economics.

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  15. Manolo (14,044 comments) says:

    The convention centr eproposal is a convenient peg on whch Sky City can hang an expansion of the casino – vacuuming more cash from locals who can ill afford it.

    We ‘re talking about an adult population, so who is forcing them to?

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  16. Kimble (4,443 comments) says:

    It’s just a light hearted attitude we mainlanders have.

    Bullshit. Its a derangement. You have such a strong inferiority complex that anything to do with auckland leads to anger.

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  17. Say Goodbye to Hollywood (563 comments) says:

    I always have a giggle when so called mainlanders have a crack at Auckland. He’s an important fact that they always overlook. We don’t fucking care what you think, seriously I don’t give a shit if someone calls me a Jafa. Actually, I like the name. Now, back to the convention centre, build it, build it.

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  18. KH (695 comments) says:

    I think an international size is a great thing. But those who wanted to build it should do so. Without any special Government favour.

    There should be no connection with this centre and the insidous cancer of gambling.

    1.

    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10731575

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  19. Black with a Vengeance (1,865 comments) says:

    Bullshit. Its a derangement. You have such a strong inferiority complex that anything to do with auckland leads to anger.

    ______________________________________________________________________________________

    FUCK AUCKLAND !!! :P

    Oh dear Elaycee/L.A.C (Limp And Calloused)

    The right troglodytes always seem to have a problem with anything that has a social conscience attached to it. Shouldn’t be too hard to understand altruism.

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  20. Kimble (4,443 comments) says:

    Shouldn’t be too hard to understand altruism.

    Shouldnt be, and yet you try to paint your arrogant selfishness as social conscience or altruism.

    You think that anything you advocate must be right, because you are perfect.

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  21. mikenmild (11,701 comments) says:

    I’m just pointing out that the link to a need to increase the casino size is bogus.

    Whether we should have a bigger casino or a casino at all is another matter. There doesn’t seem to be much doubt that the more pokies we have; the more problems come in their wake.

    But my basic point is that casinos per se are an entirely different argument. I don’t believe that a convention centre would be uneconomic unless it can be subsidised by gambling Aucklanders.

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  22. Black with a Vengeance (1,865 comments) says:

    Shouldnt be, and yet you try to paint your arrogant selfishness as social conscience or altruism.

    __________________________________________________________________________________

    CMB

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  23. beautox (422 comments) says:

    Internet gambling is OK for TAB and Lotto. Why not for Sky City. That could bring a lot of money into the country. Especially if you allowed Americans to participate.

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  24. backster (2,184 comments) says:

    Stockbroker Darren Richards has done research into the economics of convention centres and maintains that none of them make a profit, and Sky City will be taking a big gamble. The reason for the law change trade off is that all the other bidders including Auckland Super Council wanted ongoing Government subsidies whereas Sky City offered to build it without subsidy. Len Brown supports Sky City Northey doesn’t…. Its all there on his blog he is a large shareholder I am a minor one. We will both have to assess whether to remain so.

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  25. Elaycee (4,404 comments) says:

    Tanned With a Crap Attitude – you’ve demonstrated again you’re a total moron.

    Your ‘logic’ is that it’s OK for the taxpayer to fork out $350 Million for a Convention Centre in CHC (with the taxpayer taking the risk) but not OK for a listed Company to invest the same amount (at their risk) for a convention centre in Auckland.

    What a complete and utter moron. Little wonder that no-one wants to employ you.

    Even McDonalds would be a step too far for you – after all, they have standards.

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  26. bchapman (649 comments) says:

    Its a shame the two stories (convention centre and licence renewal) have become linked, because Auckland desperately needs something like this. I suspect the Sky City proposal was the only financially viable one since a lot of conention centres around the world end up being government owned white elephants. Melbourne’s government subsidised (and now little used) World Congress Centre comes to mind.

    The other problem with these centres is that they build them too small. I can guarantee they will be asking to expand as soon as it is opened.

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  27. MikeMan (173 comments) says:

    @Black with a Vengeance

    So with today’s quakes again are you still advocating for CHCH?

    Yeah lets put the new national convention centre in a city that has not stopped shaking for 6 months.

    That will bring them in I am sure :P

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  28. Black with a Vengeance (1,865 comments) says:

    So with today’s quakes again are you still advocating for CHCH?

    ________________________________________________________________________________

    Even more so.

    Build it and they will come :)

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  29. OTGO (560 comments) says:

    Perfect timing to add on to the gaming floor. There is another wave of Asian immigration on the way (see last weeks paper NBR) so build it I say. You gotta launder all that cash somehow.

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  30. Nick R (508 comments) says:

    I reckon this is a good deal for Auckland. But I really hate the quid pro quo. It’s a bad look selling policy concessions or law reform to large corporates, whether that is Warner Bros or Sky City. Still, at least we now know the Government’s price. And it’s a nice change to hear that the Government won’t be putting through law reform under urgency. Although quite what the point of “public consultation” is I don’t know. The deal has been done.

    And the argument about big overseas gamblers is a joke. Sky doesn’t want extra tables of pokie machines for the whales – it will always find space to accommodate them, it can’t afford not to. No, the extra licences will be for the locals.

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  31. Mick Mac (1,091 comments) says:

    Yep, again it’s all bullshit from Key.
    The high rollers would come anyway as they can be catered for already if the pot is high enough.
    He’s not stupid and he knows it’s for the locals, just as he knows the 1000 jobs are for the build and not ongoing each week.
    The tax from the employees won’t cover the social costs either, he doesn’t need Gluckman to work that out for him, between Paula and the sallies they can inform him.
    But as you say the deal has been done.

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  32. mikenmild (11,701 comments) says:

    Mick Mac

    Like your reference to Gluckman – chief scientist in charge of investigating the bleedin’ obvious.

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  33. Nookin (3,462 comments) says:

    Everyone is using some really technical terms here and it is all getting so emotive. I thought I might try to define some of these terms so we know where we stand. Giving examples seems appropriate

    “Selling policy”
    Dear Labour Government,
    So long as you maintain a steadfast course of passing pro-union legislation, we will continue to fund the Labour Party by forcibly extracting money from our members and passing it over, no questions asked.

    Love and Kisses, CTU.

    “Corporate Welfare”

    Dear Michael. We have this screwed up business which we have bled dry and have decided to jump ship. Why dont you buy it for the princely sum of $665m. We know that this is a bit over the top but, hey – we’re friends remember. While we are at it, we are gathering in a whole lot of trucking companies. We know you don’t give a toss about NZ companies so why don’t you give us free depots in prime locations and stuff the competition?

    Love and Kisses, Toll NZ

    “Common sense”

    Dear John

    We want to spend a shitload of money that will create 1000 jobs during construction and 800 permanent jobs thereafter. We will attract overseas corporates with big budgets and fat wallets. There is no risk to you – we will put up all the dosh and take the business risk. We just need some security, such as – we need to know that our core income will not come to a summary end in 5 years and we would like to expand on that with more tables and stuff. So, waddaya think, John

    Sky City.

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  34. Kimble (4,443 comments) says:

    Stockbroker Darren Richards has done research into the economics of convention centres and maintains that none of them make a profit, and Sky City will be taking a big gamble.

    Which is why the expanded casino and the license extension are so important. There is a reason Vegas is the convention capital of the America, and it has little to do with the profitability of the convention centres.

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  35. mikenmild (11,701 comments) says:

    Unlike Las Vegas, the gamblers in Auckland are not predominantly tourists.

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  36. Kimble (4,443 comments) says:

    The high rollers would come anyway as they can be catered for already if the pot is high enough.

    High rollers? What? Who said anything about high rollers? High rollers are not the justification for the convention centre. Never have been. Why did you bring them up? It looks like your argument is so thin you are desperate to fill up comment space with any old rubbish.

    If you guys were honest you would admit that you hate all gambling (because poor people do it, and you dont think they should) and you would be calling for the casino to be closed down.

    So stop objecting to this deal, as if it the specifics of this case you have a problem with.

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  37. mikenmild (11,701 comments) says:

    Well, I don’t hate all gambling – I enjoy going to the casino. What I object to is linking the convention centre proposal to expanding the casino. A larger casino will exacerbate the issues associated with problem gambling, simple as that. Why should further harm be the prince of a convention centre? If there is a sound business case for the convention centre then let’s have it. It’s as if Sky City were to say we’ll build a convention centre, but to make sure our operation remains profitable we’ll open some stores specialising in selling RTDs, spray paint and glue to teenagers.

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  38. Kimble (4,443 comments) says:

    Unlike Las Vegas, the gamblers in Auckland are not predominantly tourists.

    And when Skycity tries to do something to bring in gambling tourists, you object because locals also gamble?

    If a larger casino floor would be filled up by locals, then that shows that locals want to gamble there.

    Why dont you just front up and say that you think the casino should be closed, or that no local people should be allowed to gamble there, or that if they do gamble there, they have to get the permission of some dowdy scarftugger like yourself?

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  39. Kimble (4,443 comments) says:

    A larger casino will exacerbate the issues associated with problem gambling, simple as that.

    So you have a problem with gambling. Simple. As. That.

    Your argument is also completely non-sensical.

    You dont want a bigger casino floor, because some people have a problem with gambling. Of course, that assumes that problem gamblers are not already gambling. Not much of a problem gambler if they arent gambling, are they?

    So what would be the marginal increase in problem gambling because of a larger casino floor? Fuck all. A larger casino floor would not lead to an equivalent increase in the number of problem gamblers. But it would employ more people. The social benefit will outweigh the social cost, because a lot of the cost is sunk.

    Your problem gambler argument fails because it is an argument against having any casino.

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  40. mikenmild (11,701 comments) says:

    As I said above, I don’t have a problem with gambling, I enjoy it. I do have a problem with the scale of the gambling industry. You assume that a larger casino would not increase the social costs. I don’t know how you worked that one out.

    As I said, my argument here is not really about gambling per se, but about the shonky arguments advanced for the convention centre proposal.

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  41. Kimble (4,443 comments) says:

    You assume that a larger casino would not increase the social costs. I don’t know how you worked that one out

    I explained it quite clearly. The incidence of problem gambling will not increase by the same proportion as the increase in the size of the casino floor. Especially, since there is a goal of increasing the foreign patronage. Twice the casino, less than twice the problem gamblers. (If you want to argue against this, then go ahead. I dont believe you can do it, but to make your case, you have to try.)

    On the other hand, the number of people employed would increase proportionally. Twice as many tables, twice as many croupiers. This shows the cost:benefit ratio will decrease.

    If your objection is that there will be an increase in the absolute number of problem gamblers, then you must think that the current number is optimal. How did you arrive at that opinion?

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  42. mikenmild (11,701 comments) says:

    Yes, it is my opinion that a larger casino would increase the number of problem gamblers. On your logic, which seems to depend on the proposition that increased harm is justified by increased employment, the size of the casino should be unlimited.

    As for the present number of problem gamblers, no I do not think that is optimal (please don’t try to guess what I “must think”). More could be done about problem gambling, but I certainly don’t think increasing the casino size is a helpful development in that regard.

    To repeat, again, my point is really aimed at the fraudulent logic linking the convention centre with a desire to increase the casino size. This is as shonky as the shabby Hobbit deal.

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  43. Kimble (4,443 comments) says:

    Its called a cost benefit analysis. Adults use them to decide whether it is worthwhile to do something. If the casino increases in size by 100%, and employment increases by 100%, but problem gambling only increases by 5% …

    On your logic, which seems to depend on the proposition that increased harm is justified by increased employment, the size of the casino should be unlimited.

    No, there are other reasons to limit the size of casinos. Problem gambling just isnt one of them.

    Problem gambling is a reason not to have a casino in the first place. Casino size will only have a significant impact on problem gambling when the casino is very, very small. Skycity isnt.

    my point is really aimed at the fraudulent logic linking the convention centre with a desire to increase the casino size

    Actually, if you have a convention centre connected to a casino, you will have more people attending the casino. The link is right there. You also have a casino that is willing to foot the bill to build the convention centre (the benefit of which is not in dispute) if they can gain from the additional adults voluntarily gambling on their premises. There is the link.

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  44. mikenmild (11,701 comments) says:

    So we’re getting back to the point. Sky City claim they can only build the convention centre if they can subsidise it with a bigger casino.

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  45. Kimble (4,443 comments) says:

    Stockbroker Darren Richards has done research into the economics of convention centres and maintains that none of them make a profit, and Sky City will be taking a big gamble.

    And you are saying what, exactly? That they CAN make money from it if they dont expand their casino? I havent seen any analysis like that from you.

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  46. mikenmild (11,701 comments) says:

    I don’t know anything about the economics of convention centres, but I find it a little hard to believe that Sky City want to make a $350 million investment that would be unprofitable.

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  47. Kimble (4,443 comments) says:

    I don’t know anything about the economics…

    But then you go on to express an opinion on the economics. So… why should we listen to you?

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  48. mikenmild (11,701 comments) says:

    All I’m noting is that apparently Sky City believe that the convention centre is an economic proposition. I think the casino expansion is just an extra they’d like to force through at the same time.

    I’ve enjoyed this debate, but must go now.

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  49. Elaycee (4,404 comments) says:

    mikenmild says: “I find it a little hard to believe that Sky City want to make a $350 million investment that would be unprofitable”..

    Jeez – you really need to buck up. Of course they won’t. Sky City will receive the revenue generated by the Convention Centre. They will have done the business case thoroughly and if it didn’t stack up, they wouldn’t be wanting to proceed. Besides, as a listed Company, their decisions are subject to scrutiny and they would be slammed by the shareholders (and the SX) if they got the numbers wrong.

    The ‘trade off’ for SCEG making the $350M investment will not be driven by the possible expansion of the number of machines and tables on the floor, but the extension of their operating licence beyond (IIRC) 2021.

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  50. Owen McShane (1,226 comments) says:

    What is the Green Vision for Auckland?
    Before I develop this idea further I tested this plea for a Green and Blue Auckland as opposed to concrete tunnels and canyons on Frog Blog. It was not well received. So what do they want? A concrete jungle with distance grass?

    Submission

    There are limitations to developing a compact city because of Auckland’s geography. If we want the world’s most liveable city we should exploit the green and blue spaces that penetrate and punctuate its distinctive form. Rather than urban containment we favour development that recognises the linear nature of Auckland’s setting, its extensive rural hinterland, dramatic coastal and bush-clad edges, and the desire of some residents and businesses to locate ‘outside the city but not too far’. A combination of low impact development and decentralised intensification allows growth while respecting the physical setting.

    Green urban form could provide entrepreneurial and economic opportunities and make Auckland more attractive. Respecting geography and committing to a green city can lead to an indigenous urbanism not beholden to Europe. Auckland’s design should be about space, sea and sky; weather and vegetation; and openness. We don’t need the tight, stone-paved spaces of a Siena or Salzburg.

    The CBD will only be distinctive if we create more green space, and highlight our indigenous, settler, and Pacific cultures. Public investment and design should focus on spaces of merit and accessibility. The amazing thing about the CBD is that wherever you are, nature is there – through views and proximity to volcanoes, harbours, beaches and parks, and in constantly changing weather.

    Let’s not block them out!

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