Sky City got a quarter of what they wanted

July 18th, 2013 at 11:00 am by David Farrar

Stuff reports:

Documents made public yesterday show officials were surprised in November 2011 when the casino operator suddenly put compensation on the table. It came after SkyCity made a series of ambitious demands in return for building the Auckland facility, including 850 more pokie machines and lowering of the age to 18.

And they got only 230, and no change to the gambling age (I think it should be 18 regardless incidentally).

Here’s a comparison of what they asked for, and got:

  • Perpetual extension of licence, got 27 year extension
  • 853 extra pokie machines, got 230
  • Lower gambling age to 18, stayed at 21
  • 150 automated multi-player gambling tables, got 12
  • $10 million a year to promote the convention centre, got nothing
  • The ability to promote jackpoint draws, not agreed to
  • Cashless pokie machines – agreed to
  • Pokie machines that can take $100 notes – agreed to in restricted areas

I’d say the Government drove a pretty hard bargain. Also kudos to them for releasing all these documents in advance of OIA requests, and not trying to say they are commercially sensitive and unable to be released It is good to have this full transparency.

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49 Responses to “Sky City got a quarter of what they wanted”

  1. greybeard (49 comments) says:

    DPF: you somehow forgot to mention this little gem:
    ” It is also in line for hundreds of millions in compensation if a future government rewrites gambling regulations in the next 35 years or increases casino taxes in the next eight years.”
    And that compensation will be paid for by taxpayers.

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  2. Pete George (22,851 comments) says:

    Peter Dunne has just blogged on his views on this.

    First, SkyCity’s opening bids around the number of additional pokies, tax concessions, and a Wellington casino were just that – starters. No-one could have expected them to be taken seriously or to provide the basis of a deal.

    Second, the deal that was eventually struck now looks far less of the “dirty” deal its critics claim it to be. Their criticism rests on more on social concerns and perceptions of cronyism than the specific details, which given the historically political nature of gambling issues is to some extent understandable.

    This deal also raises questions about how far Governments should go in seeking to regulate people’s lives in areas that might be regarded as socially or physically dangerous. I am not a gambler, but I do not like the idea of moral rectitude interfering with people’s choices.

    For me, the challenge is striking an appropriate balance between social concerns about problem gambling proliferation and commercial opportunity.

    On the whole, I think the current proposal achieves that, which is why I support it.

    http://honpfd.blogspot.co.nz/2013/07/18-july-2013-government-has-just.html

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  3. Sir Cullen's Sidekick (788 comments) says:

    Meteor Tuatara was claiming on TV this morning that John Key was so weak in his bargaining and Skycity has taken him for a ride and they got all they wanted blah blah….

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  4. queenstfarmer (747 comments) says:

    It’s a good deal. I think most people realise that Labour & the Greens are just being typically hypocritical.

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  5. bhudson (4,734 comments) says:

    @greybeard,

    It was well covered at the time that Turei announced that a coalition govt including the Greens would wind back the deal that Sky would be seeking compensation clauses to protect them from such madness.

    It should be no surprise to anybody that they got them.

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  6. m@tt (588 comments) says:

    “protect them from such madness.”
    You mean a future, democratically elected, government doing for the people what they said they would?

    Odd definition of madness you have.

    Here’s a better definition. A current government attempting to directly control what laws democratically elected governments can pass for the next 35 years.

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  7. flipper (3,563 comments) says:

    greybeard (22) Says:
    July 18th, 2013 at 11:07 am
    DPF: you somehow forgot to mention this little gem:
    ” It is also in line for hundreds of millions in compensation if
    <<<<<<<<<>>>>>>>>>>>>>

    Awwww, GARBAGE.

    If you, oh whiskered one, were prepared to put up $400 million to develop a commercial event centre, and you based that investment upon an agreed/anticipated income stream, you would surely wish to protect your investment, would you not?

    I noticed that Vance also made much of this. Pathetic! I guess you are both into lending money to folks wishing to buy houses without having registered mortgages over such properties.

    Fairy land stuff whiskers…

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  8. queenstfarmer (747 comments) says:

    @bhudson: excellent point.

    NZ has, to date, enjoyed a relatively good reputation for upholding the law and not legislating to overturn commercial contracts and nationalise/confiscate private property. Now, thanks to Labour & the Greens, anyone entering into big commercial deals with the Governement will want extra concessions to compensate for the real risk of a a future Government legislating it away.

    Just like the Mighty River Power minority float, Labour and the Greens are sabotaging NZ’s economy for political gain.

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  9. double d (225 comments) says:

    agree BHudson.

    the simple solution is do not repeal the laws and the taxpayer will never have to pay a cent in compensation.

    The opposition does not have any commercial credibility at all. whay would any business sign a deal that could be unwound at a future date costing that business a lot of money.

    The Greens do not seem to understand that when Russel (give me back my L) and Metiria talk they engender a lot of eye-rolling as they are so loose and fast with facts. Turei’s rant on TV1 news last night even had my wife (who has not interest in politics!!) commenting about the negative tone of her outburst.

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  10. Graeme Edgeler (3,267 comments) says:

    The casino gambling age is 20. Is the Government proposing to increase it to 21?

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  11. virtualmark (1,474 comments) says:

    I suspect the 27 year extension on their casino license is the big money-spinner for SkyCity, rather than getting the extra 230 pokies.

    But then I don’t expect Labour or the Greens are economically sharp enough to work out the time value of money …

    And, can someone confirm, as far as I’m aware the extra 230 pokies is still within the overall sinking lid envelope on pokie machine numbers right? So effectively Sky City is getting some extra pokie machines but over time the total number of pokie machines in Auckland will still fall.

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  12. Pete George (22,851 comments) says:

    And, can someone confirm, as far as I’m aware the extra 230 pokies is still within the overall sinking lid envelope on pokie machine numbers right? So effectively Sky City is getting some extra pokie machines but over time the total number of pokie machines in Auckland will still fall.

    Yes, that’s right. Dunne has assured a downward trend will continue. And…

    Nelson MP Nick Smith today justified his vote in support of the SkyCity convention centre deal that will provide an extra 230 pokie machines as a pragmatic one.

    A sinking lid policy would see the overall number of pokie machines in Auckland reduced by about 300 a year, he said.

    http://www.stuff.co.nz/nelson-mail/news/8906094/Pokies-bill-balanced-trade-off

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  13. flipper (3,563 comments) says:

    DPF said….

    “**** And they got only 230, and no change to the gambling age (I think it should be 18 regardless incidentally). ****”

    Come on GE, DPF had it covered.

    Lighten up old chap :)

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  14. sparky (235 comments) says:

    @ Sir Cullen’s SideKick

    Meteor Tuatara, wouldn’t know what a good deal was, she just like’s to hear her own voice, and put down John Key. Tuatara opens her mouth, and talks dirty little ditty’s.

    The Government struck a very good deal. Sky City are the one’s that had to give in.

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  15. OneTrack (2,613 comments) says:

    “greybeard (23) Says:
    July 18th, 2013 at 11:07 am
    DPF: you somehow forgot to mention this little gem:
    ” It is also in line for hundreds of millions in compensation if a future government rewrites gambling regulations in the next 35 years or increases casino taxes in the next eight years.”
    And that compensation will be paid for by taxpayers.

    Once the future government gets in in late 2014 you will be paying so many extra taxes that compensation to Sky City will be just a drop in the bucket.

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  16. rouppe (916 comments) says:

    I’m not happy with a guaranteed compensation valid for 35 or 38 years into the future. Ngai Tahu are benefiting from such clauses now to the tune of hundreds of millions that no-one thought would get triggered.

    And good old muggins that had nothing to do with Ngai Tahu’s grievances gets to pay. Just like good old muggins that never goes to a casino will pay Sky City in 15 or 20 years time. Not happy about that.

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  17. swan (659 comments) says:

    I would like to see more details around treasury’s advice. I have heard the benefits are worth hundreds of millions to Sky city. The government could have auctioned these rights on the open market, but instead they gave them away, in exchange for the dubious public benefit of having sky city build its own convention centre.

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  18. queenstfarmer (747 comments) says:

    @swan: ” The government could have auctioned these rights on the open market” – what rights? The deal is that Sky City gets limited concessions relevant to its existing operation. How would those rights be relevant to someone else?

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  19. jakejakejake (135 comments) says:

    yes kind of like a rapist only putting the tip of his dick in :D

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  20. Pete George (22,851 comments) says:

    Greens have found an interesting part of the agreement – National’s veto power makes SkyCity deal dirtier

    he final agreement gives the Government a veto right over events at the NZICC that it considers could be “materially prejudicial” to New Zealand’s international relations or national security or the NZICC’s brand, or are simply deemed not to be of a suitable “type and style” for the NZICC.

    I have mixed feelings about this. It could be a way of ensuring inapproriate events wouldn’t be held, but could also be misused.

    I take it from this that Greens would not object to any event being held.

    Details:

    7 Cancellation of Events

    7.1 Where the Crown Liaison learns of an Event enquiry:

    a) by being notified by the SKYCITY Liaison of an Event enquiry in respect of which SKYCITY has doubts as to its suitability (in accordance with the Event Appropriateness Guidelines section of the Booking Management section of Appendix B (Operational Obligations)); or

    b) from a source other than from the SKYCITY Liaison, and notifies the SKYCITY Liaison that the Crown Liaison has a concern,

    SKYCITY will not accept any booking for that Event without the Crown’s approval, such approval not to be unreasonably withheld or delayed.

    Event Appropriateness Guidelines

    · In considering the acceptance of bookings for Events to be held at the NZICC, SKYCITY must use good judgement in considering first the type and style of Events that are best suited to the NZICC and secondly Events that would not reasonably be expected to be materially prejudicial to international relations or to national security interests of New Zealand and would not reasonably be expected to materially affect the reputation or brand of the NZICC.

    · Where SKYCITY has any doubt as to the suitability of an Event (including where the NZICC brand, or New Zealand’s international relations, could reasonably be expected to materially and adversely be affected by the subject matter or any sponsor of the Event) the SKYCITY Liaison may consult with the Crown Liaison as soon as practicable, in advance of confirming the business, to seek the Crown’s approval to such Event.

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  21. swan (659 comments) says:

    queenstfarmer,

    I am sure a new operator would love to bid on rights to pokie machines and gaming tables etc.

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  22. unaha-closp (1,112 comments) says:

    If I were building a windfarm for the good of the country (obviously), I might request the next Green/Labour government guarantee to buy power at a sustainable price in perpetuity, be able to build 853 turbines and have noise abatements raised by 10%. As long as the guarantee is for 35 years only, the number of turbines 230 and noise levels remain the same – it is obvious the windfarm will be welcomed as perfectly sane deal by DPF.

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  23. queenstfarmer (747 comments) says:

    @swan: what other operator would that be?

    Are you seriously suggesting that someone might want to open a new casino (which would have to compete with Sky City btw), with only 230 pokie machines and nothing else, and in return provide a $400m national convention centre in the middle of Auckland??

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  24. swan (659 comments) says:

    queen st farmer:

    They also got additional gaming tables I think.

    No what I am saying is that a new operator would be willing to pay for those rights. And I am questioning whether the value of what the market would be willing to pay is well spent as a subsidy for a convention centre. Effectively we are subsidising the convention centre by hundreds of millions? of dollars. Is that money well spent?

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  25. flipper (3,563 comments) says:

    Say folks, we could nick pick or comment this all day.

    Korda M did a bennie analysis and concluded it was fair. I/we could argue it was a “hired friendly (aka Fisher on Binnie) analysis”, but it is not worth the time or trouble.

    As for Treasury and Min EC Dev (or whatever they now call themselves). Arse covering bullshit. For coin formation look at the Dumbonian-Post crap headline this morning.

    When in negotiations, if you want a deal, concessions flow both ways. If one party gets screwed….. well revenge is best served cold.

    A third party will come up with a better offer? Yeah right. They had previously made unofficial bids, all of which required us to cough up large spondolicks, so come back from the stars.
    Praise the Lord and pass the pokie. :)

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  26. mikenmild (10,744 comments) says:

    An interesting story here about the Treasury’s warnings agasint this deal:
    http://www.stuff.co.nz/national/politics/8931969/Officials-SkyCity-warnings-ignored

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  27. Pete George (22,851 comments) says:

    Dunne on the Treasury contribution:

    I discount the Treasury’s analysis – its advice has seldom proven to be reliable in these areas, and I laugh out loud at those now lapping it up, as they are very ones to attack its advice on other areas of social concern and spending!

    http://honpfd.blogspot.co.nz/2013/07/18-july-2013-government-has-just.html

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  28. dime (9,442 comments) says:

    To sum up:

    Less pokies in auckland, but more at the one place who really has strict laws to protect people.. from themselves. sky city who are either using or about to use facial recognition to keep self banned people out.

    im pretty sure the local pub doesnt do any of that.

    auckland get a convention centre.

    its just win win all round.

    @ matt and creepygreybeardwithalisp – fuckin a they should get compensation. why should they invest 400 mill knowing that in 3 years it could be overturned by politics.

    @pg – no one cares what some disgraced backbencher thinks about it.

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  29. Keeping Stock (10,100 comments) says:

    @virtualmark – you’re quite correct. Since National came to office, the number of pokies nationwide has DECREASED by 2483 (to December 2012), and that decrease will continue, albeit at a slower rate when SkyCity finally gets its additional machines.

    Interestingly, pokie numbers peaked at 25,220 in June 2003, having increased by 82% in Labour’s first four years in office. It’s odd that you don’t hear them mention that now so much.

    There’s more detail here for anyone interested, including links to Internal Affairs figures and a graph

    http://keepingstock.blogspot.co.nz/2013/05/chart-of-day-15-may-2013.html

    It’s also worth noting that whilst DIA estimates that at any time problem gambling affects between 0.3% and 1.8% of the population (10,000 to 60,000 people), the Ministry of Health’s statistics suggest that 19% of New Zealanders have “hazardous drinking patterns”; food for thought…

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  30. queenstfarmer (747 comments) says:

    @swan: I think you are confused – Sky City is building the whole thing with no taxpayer funding required.

    Will Sky City benefit from it? Of course – they will charge people for using it, put in restaurants, hotel bookings, etc. So it’s a win-win.

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  31. swan (659 comments) says:

    queenstfarmer.

    I am not confused sir! I understand the government is not handing over actual cash. It is handing over licence for 200 odd machines, a few gaming tables etc. That licence is worth x dollars (I have read that it is worth hundreds of millions, but that is only an estimate). Therefore the government is subsidising the casino by x dollars. It could have alternatively auctioned off the rights and collected the x dollars to spend on whatever. In an open market Skycity itself may well have been the highest bidder, but that is neither here nor there. Therefore there was a subsidy because the government has forgone revenue by giving away the licence. Essentially equivalent to directly giving cash.

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  32. dime (9,442 comments) says:

    swan – i let a guy park in my driveway. it was just the same as giving him $20.

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  33. Pete George (22,851 comments) says:

    dime – the vote of the backbencher you’re referring to allowed the SkyCity deal to go ahead.

    And I believe that same MP and his party played a significant role in ensuring sufficient controls, addressing harm from gambling, and ensuring the numbers of gaming machines would keep reducing as per Keeping Stock’s chart with their involvement in the Gaming Act 2003.

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  34. swan (659 comments) says:

    dime,

    If you live in Mt Eden and a test match is on – exactly right!

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  35. dime (9,442 comments) says:

    “the vote of the backbencher you’re referring to allowed the SkyCity deal to go ahead.”

    just him huh. the fucking arrogance.

    how about the 50odd national guys? they also allow it?

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  36. Pete George (22,851 comments) says:

    They wanted the deal. Banks and Dunne ended up supporting it and voted for it. Take from that what you like.

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  37. dime (9,442 comments) says:

    “Banks and Dunne ended up supporting it and voted for it”

    slightly different to

    “dung allowed the deal to go ahead”.

    king dung. so gracious is allowing things to happen. after all, he is the elected official of buttfuck somewhere

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  38. queenstfarmer (747 comments) says:

    @swan, but that’s the point you are missing. There IS no other casino operator, and certainly none with a track record and operation, and capable of started right away on the national convention centre. That is the reality.

    Also, it is logical and inevitable that the convention centre would have to be in the CBD, which means that your hypothetical new casino operator would also need to be in the CBD, which means going head to head against Sky City, but with much greater restrictions.

    You are also assuming, wrongly, that the value of a particular concession to Sky City would be worth the same to someone else. That is not so.

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  39. unaha-closp (1,112 comments) says:

    @queenstfarmer : “…it’s a win-win.”

    How much is a gaming monopoly license in NZ worth?

    Sky City has pretty much got the gaming license monopoly in NZ (and Adelaide & Darwin). Sky City Ltd shares are worth about $2.5 billion in total. Knock off some money for Adelaide and Darwin (and a tiny bit for the cinema business) to estimate a market value of $1.5 billion to $1.8 billion for the NZ monopoly gambling license.

    Even if this convention centre deal is a dead loss for Sky City (and it won’t be, because part of the rail loop deal is to connect to the convention centre/casino and Sky City is getting 230 pokie machines) it seems we have sold something worth $1.6 billion for $400 million.

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  40. swan (659 comments) says:

    Queen st farmer.

    Of course there is currently no other casino operator. The DIA isnt issuing any new casino licences! In any case there is a market value on this licence should it have been auctioned. Forget about the convention centre for a second! There is no reason for the licence to be tied to the convention centre! Quite the opposite. The government can elect to sell a casino licence any day of the week and pocket the proceeds. The question of whether or not to subsidise a convention centre is a totally different question.

    Doing it the way I have suggested, the government could have made the subsidy monetary and therefore been able to have a competitive process (if in fact it can be justified that a convention centre is worth subsidising).

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  41. dime (9,442 comments) says:

    why cant sky city set up internet gambling? that could be a big money spinner for NZ.

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  42. lastmanstanding (1,204 comments) says:

    As an IPO investor in Sky City I say bollocks to the ill informed comments on this site. Gambling is legal. End of story FULLSTOP. My Directors and Management engaged with the Government of the day and did a very good deal for me and the other shareholders. And the citizens of New Zealand have got a $400M convention centre for free that over the years will bring BILLIONS of dollars into the economy from overseas attendees who would otherwise have gone to OZ or elsewhere for their conference.

    BTW If you are in a Kiwi Saver scheme that is NOT a cash only fund or an overseas investment fund you will be a benefical shareholder in Sky City.

    Reason Your fund manager will hold a percentage of your Kiwi Saver funds in that share along with most if not all of the rest of the NZX 50 top shares.

    So get over it. Probably the Pollies bleating on about Sky City if they are in a K/Saver fund are shareholders in the company.

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  43. unaha-closp (1,112 comments) says:

    Dime,

    The tax disadvantages basing an internet gambling venture in NZ as opposed to the Isle of Man or Antigua & Babuda are insurmountable.

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  44. dime (9,442 comments) says:

    unaha – yea that makes sense!

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  45. Pete George (22,851 comments) says:

    “BTW If you are in a Kiwi Saver scheme that is NOT a cash only fund or an overseas investment fund you will be a benefical shareholder in Sky City. ”

    No, my Growth Kiwisaver scheme doesn’t have any shares in Sky City.

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  46. itstricky (1,569 comments) says:

    I’d say the Government drove a pretty hard bargain.

    One would hope so given they’re effectively selling laws.

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  47. itstricky (1,569 comments) says:

    BTW If you are in a Kiwi Saver scheme that is NOT a cash only fund or an overseas investment fund you will be a benefical shareholder in Sky City.

    Reason Your fund manager will hold a percentage of your Kiwi Saver funds in that share along with most if not all of the rest of the NZX 50 top shares.

    Blah.

    There are plenty of KS plans that won’t have SkyCity in the portfolio. Most KS providers don’t provide a single plan, and a lot of those plans are global investments, commercial property investments, socially ethical investments (which probably depend on the provider’s definition of “ethical”)

    So get over it. Probably the Pollies bleating on about Sky City if they are in a K/Saver fund are shareholders in the company.

    Deliberately investing in a company solely versus giving your money to a fund manager who folds it into a set of investments based on his best knowledge for a set period of time are two different things, you know…

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  48. Couchpotatoe (26 comments) says:

    Skycitys opening Gambit was totally OTT and not to be taken seriously. I wonder what the Governments opening position was and what they gave up when selling the law?

    After all Skycity were well satisfied with what they got. So there was no intent on Skyciys part that their opening gambit was anything other than BS.

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  49. peoplesrepublic (3 comments) says:

    Isn’t the 27 year extension far and away the most valuable concession?
    If lastmanstanding et al feel as comfortable about gambling as they say, why not allow a free market and others to open casinos in Auckland as well.

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