Analogy not quite right

February 16th, 2015 at 1:00 pm by David Farrar

NBR reports:

“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.”

I disagree. Because Sky City is still spending the same amount of money. The concessions were valued at around $400 million (net present value), which is what they will still spend.

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.”

Matthew’s analogy fails on a key point. If you are a building company and you build a smaller swimming pool, then it doesn’t affect you at all – because you do not benefit from the swimming pool when complete.

But what Matthew, and others miss, is Sky City will be the operator of the convention centre. They will be the one who benefits or loses from how well patronised it is.

If we get a couple fewer conventions coming to NZ because the centre is a bit smaller, then it is Sky City that will not get the convention rental, the room hires, the meals, the entertainment spending.

Sky City have an incentive to make the convention centre as attractive as possible to attract conventions, because they (not the taxpayer) have to pay for the ongoing operating costs.

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A win for taxpayers

February 15th, 2015 at 2:09 pm by David Farrar

Steven Joyce has announced:

Economic Development Minister Steven Joyce today announced that the Government and SkyCity have reached agreement on the next stages of the International Convention Centre (NZICC) project.

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.

“I welcome SkyCity’s agreement with the Government’s approach,” Mr Joyce says. “This clears the path for the project to continue.

“I have repeatedly stated since December that our least preferred option is for the Government to contribute funding for the project. I am pleased to confirm that will be the case.”

That’s a great outcome – both for taxpayers, and the Government. Also a great outcome for Auckland in that they will get the 800 jobs and $49 million economic boost from having an international convention centre. I’m pleased Sky City saw sense, and that the Government held firm.

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Project cost over-runs

February 13th, 2015 at 4:00 pm by David Farrar

Jim Rose blogs:

SkyCity is sniffing around the New Zealand government for a $130 million bailout. The initial project estimate was $402 million for a convention centre and enlarged casino.

SkyCity was very clear when the convention centre deal was announced that it would be at no cost to either taxpayers or Auckland ratepayers. That is a clear assumption of the entrepreneurial risks – both the upside of high profits and the downside of cost overruns and losses.

The literature on mega-projects suggests that large engineering projects frequently fail to achieve their intended financial and operating objectives. Nine out of ten mega-projects have cost-over runs:

  1. Miller and Lessard (2000) studied 60 large engineering projects with an average size of $1 billion. Almost 40% of the projects performed very badly and were abandoned totally or restructured after a financial crisis.
  2. Merrow et al. (1988) found that four of the 47 megaprojects they studied came in on budget – the average cost overrun was 88%. Of the 36 projects that had sufficient data, 26 failed to achieve their profit objectives
  3. Flyvbjerg et al. (2003) analyzed 258 large transport projects (toll roads, bridges, railroads, etc.). Cost overruns of 50% to 100% and revenue shortfalls of 20% to 70% were common.

 

As Jim Rose says, both the risks and the benefits should be borne by Sky City.

If it transpired that they could do the convention centre for say $50 million less than budgeted, would they be offering to give that $50 million to the Government?

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Sign the petition against taxpayer money for Sky City

February 11th, 2015 at 3:00 pm by David Farrar

The Taxpayers’ Union has a petition against any taxpayer funds going towards the Sky City convention centre, on top of the regulatory concessions that were agreed to.

The petition says:

Back in May 2013 when the SkyCity convention centre was announced, the Government promised a national convention centre suitable for between 3,500 and 5,000 attendees in return for allowing SkyCity to have more pokies and tables. Throughout the 2014 election, the Government told New Zealanders that we were getting a ‘free’ convention centre. The deal was done, the ink was apparently dry.

Now SkyCity are trying to rip us all off. They’ve filed plans for a convention centre for only 1,500 and 3,000. As a result, John Key and Steven Joyce aren’t ruling out dipping into our pockets and forking out for SkyCity.

Sign our petition to tell John Key not to use taxpayer money on SkyCity – we’ll deliver the signatures to Parliament later in this month.

Over 300 have signed in a couple of hours. It takes 20 seconds. And you won’t get any e-mail spam as a result of it (unlike certain political parties) unless you opt in to them.

On this issue it was interesting to hear Andrew Little on Larry Williams show on NewstalkZB tomorrow. I thought he did very well, for the following reasons:

  • He didn’t do the normal left rant about National just wants to look after its big business mates
  • He didn’t try and demonise Sky City because it has a casino
  • He focused on the issue of a deal is a deal
  • He focused on how it shouldn’t suddenly cost $130 million more barely a year later
  • He also didn’t say under no circumstances could the Government not put any money at all in, but $130 million is way too much – a couple of million could possibly be okay
  • This made Little sound reasonable, and not against a convention centre, just against a huge taxpayer contribution after a deal was signed which said there would be no contribution
  • Little also correctly analysed that while the Govt has a lot of political capital tied up this and doesn’t want it to fail, neither does Sky City want to have the deal not happen which means no centre, no licence extension and no more pokies. So the Govt should hold fast

Little’s performance was vastly superior to the previous Opposition Leaders because he sounded rational and flexible, not just sloganeering against the Government.

He has made mistakes such as the talking about Maori sovereignty, but his instincts generally are proving better than his predecessors.

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Better a free eyesore than a taxpayer funded colliseum

February 10th, 2015 at 4:00 pm by David Farrar

The Herald reports:

Prime Minister John Key won’t rule out using taxpayer money to stop SkyCity’s convention centre becoming an “eyesore”.

Mr Key expressed doubts over the wisdom of insisting the casino operator sticks to the initial $402 million spending plan for the building of the convention centre.

“I’m keen to see the best convention centre I can for Auckland, because this is a very long-term asset, so I would hate to see some sort of eyesore constructed down town.

I’d hate to see my taxes spent on subsidising Sky City’s convention centre.

“There are issues around the construction of it. Obviously you can spend more and get something that looks a lot better, or spend a bit less and get something that looks worse.”

If the extra money will improve the construction so that more groups will want to use the convention centre, then that is a commercial decision for Sky City. It is not an issue for the taxpayer.

SkyCity and the Government agreed a deal in July 2013 for the casino operator to spend $402 million to build and operate the New Zealand International Convention Centre in exchange for legislation allowing the company to operate additional gambling tables and machines and extending its gambling licence to 2040.

The law was changed in late 2013, but in December last year, SkyCity managing director Nigel Morrison said cost over-runs and “design improvements” had seen the bill blow out to between $470 million and $530 million.

There are two acceptable choices for me.

  1. Sky City builds it with no taxpayer subsidy
  2. Sky City doesn’t build it

I’d prefer (1) but can live with (2). It would be great to have an convention centre in Auckland that can attract global conferences. But not at any price.

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No rates for Sky City

January 25th, 2015 at 7:00 am by David Farrar

The Herald reports:

Auckland mayor Len Brown says the council will not put any ratepayer cash into building or running an international convention centre.

He told the Weekend Herald yesterday that there would be no money for the SkyCity convention centre in a new 10-year budget.

On this issue I am with the Mayor. Sky City has got their regulatory concessions in return for building a convention centre for $405 million. If they say they now can’t do it for that, then it is better to not have it happen, than have ratepayers or taxpayers subsidise it.

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Let Sky City walk

December 23rd, 2014 at 2:00 pm by David Farrar

The Herald reports:

Auckland Council and Mayor Len Brown were yesterday blindsided by suggestions from the Government and SkyCity that ratepayer money be used to fund the shortfall in costs for a controversial convention centre.

SkyCity chief executive Nigel Morrison yesterday also confirmed his company wants a taxpayer-funded top-up and was willing to walk away from the deal if it doesn’t get it, after last week revealing a rise of up to $130 million for the centre, originally priced at $402 million.

SkyCity was favoured by the Government to build the centre over rival bidders for its willingness to fund and operate the facility itself without taxpayer funds, in return for gambling concessions including more gaming machines and a licence extension.

Mr Morrison said SkyCity “absolutely” wanted a taxpayer top-up and issued a veiled threat to walk away from the project.

“This is an unprecedented investment in tourism infrastructure in Auckland.

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,” he told Radio New Zealand yesterday.

Economic Development Minister Steven Joyce, who has overseen talks with SkyCity, said Mr Morrison was “entitled” to try to seek taxpayer dollars. But “I have some slightly more cynical news for him, which is, that’s unlikely to be the case.”

Let Sky City walk, rather than give them taxpayer dollars. They are trying to do a Rio Tinto on the Government and extort some money from them, for something they have agreed to do. I hope Steven Joyce stays firm.

Eric Crampton makes the point:

A government committed to using PPP arrangements also has to be ready to play hardball with contractors who lowball initial cost estimates lest they encourage stupidity in each and every future contract.

The point of what is effectively a PPP is that the private sector partner carries the risk, rather than the Government.

Instead, Mr Joyce said any shortfall which could not be covered by removing costly features, downsizing the centre or more effectively managing construction costs could be offset by an operating subsidy from the council. “The other option is asking for the Auckland Council to come in, not necessarily with capital but if you look at the Wellington Council, they’ve just done a deal to do a convention centre, a much smaller one but they’ve underwritten some operating costs so that might help.”

They should downsize the centre so that it can be constructed for the original price.

The Wellington convention centre deal has actually just fallen over.

The Herald understands SkyCity would also like the council to offer millions of dollars in concessions on costly red tape necessary to build the centre.

Getting rid of red tape for developments would be good.

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Hotel capacity is part of having a convention centre

October 5th, 2014 at 7:00 am by David Farrar

The Herald reports:

SkyCity is building its new hotel on land surrendered by the taxpayer for the creation of the $402 million convention centre, the Herald can reveal.

It is just one of a number of changes to the deal in which the Government gave the casino company gambling concessions in return for building the centre.

The decision to build a hotel on the former TVNZ property came just three months after the casino company bought the land – the result of three years campaigning for it on the premise it was needed to build the convention centre.

In response to a written question from the Green Party, Mr Joyce said the contract with SkyCity “prevents the land being used for any other purpose than as a convention centre”. He said this week he stood by his answer. “As far as I’m concerned that actually still meets the definition of it being used for the convention centre.”

Part of what makes a successful convention centre is being able to house the delegates at the venue. Building a global capacity convention centre isn’t just about having more meeting rooms – it is absolutely about having the accommodation capacity to go with it.

So from my point of view, trying to claim there is a difference about land for the convention centre and land for the hotel expansion is an artificial distinction.

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Labour and Sky City

October 22nd, 2013 at 12:52 pm by David Farrar

The Herald reports:

The Labour Party minority view also included advice from officials confirming that the bill, including provisions that would see SkyCity compensated if any of the regulatory concessions under the deal were removed, could be amended in future.

The report states that Labour MPs “reserve the right to change the law when in government”.

Mr Key this morning said it was a convention that no Parliament could bind a future Parliament, “and that’s true of any laws or anything that takes place here so, so be it”.

That was something SkyCity was well aware of .

“Legislatively they can change any law they want but there’s also contract law in New Zealand and future Governments would probably be mindful of cutting across contract law because that has implications for other things that take place, but in the end they’re the commercial risks any operator takes.

“They won’t go there. Labour’s already telling SkyCity they won’t. I know people who have told me”, Mr Key told reporters this morning.

“They won’t get rid of the deal, that’s what I’ve heard around the traps in Auckland.”

But while Mr Cunliffe said a Labour Government “won’t be incinerating the SkyCity contract,” it would be preserving “the sovereign right of every Parliament to make sovereign legislation as required”.

The language being used here is very carefully selected to sound meaningful, when it fact it isn’t.

The issue is not about the sovereign right of every Parliament to make sovereign legislation as required. That right clearly exists and does not need preserving. There is nothing is the law before Parliament that changes that.

Labour saying they wish to preserve the sovereign right of Parliament to make sovereign legislation is about as meaningful as claiming you wish to preserve the right of gravity to be 9.8 m/s^2. The only way that could ever change is if NZ adopted a written constitution as supreme law.

The issue is whether Labour will or will not legislate to over-ride the contract, if they are in Government. And Labour won’t answer that.

Mr Cunliffe would not confirm that Labour would change the legislation, “but I would reserve the right for a future Parliament to address issues of gambling harm”.

Again, that is not the issue. No one disputes that right exists. This is a red herring. The issue is whether Labour would use legislation to over-ride the contract. The fact that they will not say so (which is a good thing incidentially), shows that there clearly is an understanding.

Mr Cunliffe had not had any discussions about the issue with the casino company, “and we’ve made no commitments whatsoever to SkyCity despite what the Prime Minister might say.

Sky City is packed full of former Labour staffers and the notion that none of them would have had any conversations with any Labour MPs on this issue is ridiculous. Of course they have.  They wouldn’t have been given a cast iron guarantee, but they would have been told something along the lines of “You have nothing to worry about”.

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Malone on Sky City deal

July 28th, 2013 at 9:00 am by David Farrar

Dr Ryan Malone is a former Cabinet Officer staffer and a public law commentator. He writes in the Dom Post on the Sky City deal:

Can the SkyCity agreement, and the resulting legislation, be considered a breach of our unwritten constitution? The argument of constitutional impropriety rests on three pillars. None are very persuasive.

The first is that the legislation will benefit just one person, in this case SkyCity. This, it is argued, is offensive to the rule of law because legislation should be of general application to everyone.

This is certainly true of criminal laws passed by Parliament. Here we are all equal before the law. Yet outside of this area, Parliament regularly makes laws that benefit a single individual or group. Private bills by their very definition change the law for the benefit of a particular person or company.

Similarly, local bills relate to specific regions. Parliament gave Wanganui District Council the power to ban gang patches in parts of the town. Not all local authorities were given this power – just Wanganui District Council.

Perhaps more importantly, government bills are commonly passed that benefit one individual or industry group to the exclusion of others. Thus, individual iwi receive compensation packages through statutes that implement Treaty of Waitangi settlements with the Crown.

So that is the first point dealt with.

The second argument as to why the deal is unconstitutional is that by amending the Gambling Act in exchange for building the convention centre, the Government is “selling” a dispensation from the Gambling Act. …

But what is clear is that parties in government always face difficult tradeoffs when making big policy decisions. In this case the National Government – still facing challenging economic conditions – considers that the pros of having a privately funded national convention centre outweigh the cons. Not everyone will agree with that assessment, and they will have the opportunity to express their views at the next election. But hard policy choices do not automatically equate with governments running roughshod over our constitution. …

It also changed the Overseas Investment Act regulations to ward off the Canadian Pension Board’s takeover bid for Auckland Airport. The fact that many people opposed those decisions did not make the resulting laws unconstitutional. They were simply political decisions taken by the government of the day. The Government’s deal with SkyCity is no different.

And the third point:

The third reason why the deal is supposedly unconstitutional is that it “binds” a future government. Under the terms of the agreement, SkyCity is entitled to compensation if key parts of it are overturned. But it is not unusual for governments to have their hands tied by earlier decisions of Cabinet or Parliament.

For example, the current Government must pay Tainui and Ngai Tahu additional settlement money because of relativity clauses inserted in legislation passed by Parliament in the 1990s. In any event, it will always remain open for a future Parliament to revoke the deal and specifically rule out compensation to SkyCity.

Our Parliament is free to enact laws that remove rights without compensation and has done so in the past. The Government’s agreement with SkyCity is not contrary to New Zealand’s constitutional system. Fundamentally it is a political issue, not a legal one.

And one announced prior to the last election.

For a different view, there is this opinion from Stephen Franks.

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Silly comparisons

July 23rd, 2013 at 10:00 am by David Farrar

Just noticed a blog by Russell Brown where he basically compares the convention centre deal to the Electoral Finance Bill. This is over a clause in the agreement which says:

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.

I think people forget how draconian the original Electoral Finance Bill, approved by the Labour Cabinet, was. It would have made it illegal for me to e-mail someone and talk about a policy issue, unless I put an authorisation statement on my e-mail. Any comparison of the Sky City deal to it, is hysterical nonsense.

While I probably should not dignify the nonsense with a response, I will point out three rather pertinent points. They are:

  • National announced the convention centre deal prior to the 2011 election. Labour never mentioned the Electoral Finance Bill prior to the 2005 election and had no mandate for it.
  • National gains no personal benefit from the Sky City deal. The only benefit is jobs. While Labour’s Electoral Finance Bill was designed to stop people attacking them, and help Labour get re-elected.
  • The convention centre is unlikely to be completed and operating while National is in Government, so the hysterical suggestions that the clause above (which is probably pretty standard in most contracts with a Government) is so National can stop Greenpeace having a conference there is ridiculous.

I don’t care whether or not such a clause is there. Any Govt of the future that used the clause to block a legitimate convention would suffer a political backlash.

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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 gambling 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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Not comparing apples and apples

July 1st, 2013 at 7:00 am by David Farrar

unevenpoll

 

The Herald had a story about how opposition to the Sky City deal has increased since last year from 40% to 62%. But the print version includes this graphic which shows very different questions asked, in terms of options provided.

What would have been the results if the Herald asked the same question as last year, giving an option of approving if the number of machines across the city drops? I guess we’ll never know – which is a pity.

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Keep digging

June 14th, 2013 at 3:14 pm by David Farrar

Oh dear. David Shearer is just making it worse for him and Labour.

First we have this interview in Stuff:

Today Shearer admitted that the MPs accepting the hospitality looked bad.

“I would have said, this is pretty unwise guys, given what we know,” Shearer said, adding that he believed the MPs had learned their lesson.

So Shearer is saying his office didn’t even know the MPs were attending?

But Shearer denied the situation undermined Labour’s arguments against the terms of the convention centre deal.

The invitation was “obviously a gift, on one level it is a perk of the job”, he said, adding that his MPs went to a large number of events which they would probably prefer not to.

Oh my God. Now he is arguing that the poor Labour MPs didn’t event want to attend. It was just their duty to go. How awful – getting to see an All Black test from a corporate box with free food and alcohol.

Shearer had gone into the box to speak to someone he knew was there, whom he declined to name. He would not explain how he knew the person was in the box.

He said he did not know his colleagues were being hosted by SkyCity until he got there. 

So Shearer was popping into the box to see some one else? And no one had told him Labour MPs were there. I think Shearer is fundamentally an honest person so is telling the truth. But it says volumes about their internal communications.

Also Whale has audio from Radio Live where David Shearer says, well listen to it yourself and try and work it out.

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Where is Labour’s political management?

June 14th, 2013 at 11:00 am by David Farrar

We’re now on Day 7 of stories about Labour MPs accepting hospitality from Sky City at Eden Park, just weeks after campaigning that any agreement that gives them extra pokie machines is disgraceful and how gambling destroys people’s lives etc.

When I ran into Clayton Cosgrove leaving the Sky City box, I thought that I might be able to get a minor mention in the media for a day or two. I never thought Labour would be so politically incompetent that they would allow it to run for an entire week, ending up with an eventual confession from David Shearer that he was also there.

There’s four things Labour should have done, in order:

  1. Decline the invite. Say that you’ll take it up at some future event, not not just a few weeks after you’ve been savaging the convention centre deal.
  2. If you do attend, let the media know in advance that some MPs will be in attendance, and get your spin in first that the MPs wish to engage with Sky City as a major employer, but will be making their policy clear that they will pass a law repealing the convention centre deal. That way you get just one story on it, not a series of them.
  3. Once rumbled, immediately front up with which MPs were in attendance, rather than have the press gallery pack hunt down each MP individually to question them.
  4. Don’t do a partial denial about David Shearer being there. For two days they pushed the line that he was not a guest of Sky City, but eventually conceded that he did visit the box. Their claim he didn’t drink anything while there was correctly described by Steven Joyce as the “i did not inhale” defence.

This story could have been a one or two day wonder. Instead it was a major story again on 3 News last night, almost a week later.

I’m amazed that Labour’s political management was so lacking, that they didn’t front up to media requests on Sunday and Monday for a list of who was in attendance. Either the Labour whips and leader’s office didn’t know themselves – or worse they did know and thought it would be better to have the media drag the names out one by one all week.

And the partial denials over Shearer being there just made the media more determined to keep pursuing the story.

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Labour enjoying Sky City hospitality

June 10th, 2013 at 3:00 pm by David Farrar

A number of Labour MPs were seen enjoying the hospitality of Sky City at Eden Park on Saturday night.

Rather amusing that they rant and rail about how Sky City destroys people lives through addictive pokie machines, and a deal with the Government to allow them some more. But then they are happy to take their hospitality, funded by the very same pokie machines.

Have to at least give the Greens credit for consistency.

Anyway here is my question, and I genuinely don’t know the answer. Was David Shearer one of those Labour MPs in the Sky City corporate box at Eden Park?

Surely no opposition leader would be so foolish as to lead a charge against Sky City’s pokie machines and deal with the Govt – and then turn up to their corporate box a few weeks later? Would they?

As I said, I know of at least two Labour MPs who were there. I don’t know if Shearer was there also. But I do hope someone asks.

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A 13 to 1 benefit to cost ratio

May 16th, 2013 at 1:00 pm by David Farrar

The Herald reports:

The Department of Internal Affairs has warned the Government that extra pokie machines at SkyCity, resulting from its convention centre deal, risks increased harm to the community, Steven Joyce confirmed yesterday.

Gambling opponents cite research suggesting the extra 230 pokie machines alone could cost society as much as $6.6 million a year. But with the Government touting a $90 million annual boost to the Auckland economy from the international convention centre, Cabinet “decided on balance that it was best to go with the deal”, Economic Development Minister Mr Joyce said.

That’s a 13:1 benefit to cost ratio. Not even close to marginal.

Costs at a glance

230 extra pokie machines at SkyCity
184 extra problem gamblers
$36,000 a year’s potential cost to society of each problem gambler
$6.6m total annual cost to society of additional problem gamblers
$90m annual injection into the economy from the international convention centre

They loo pretty good numbers to me. 800 more people in jobs.

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Labour on convention centres

May 15th, 2013 at 10:00 am by David Farrar

Okay most of us know that when Labour was Government a deal was done with Sky City for 221 extra pokie machines in return for a $140 million convention centre. It seems that if you get a quango to negotiate the deal then it is a very good thing, but if a government department negotiates it is evil and bad.

But did you know Labour’s 2011 manifesto pledge a convention centre for Auckland? They said:

Business tourism is essential to NZ but we lack facilities to cater for large conferences.  If we want to be a true business tourism destination we need to have a world class conference centre and Auckland is the most practical place for it.”

Labour supports the concept of a world class Conference Centre and will work with Auckland Council in progressing such a project. “

So here’s my question? Is Labour going to announce that they will borrow $400 million to fund the convention centre directly? And will they pledge to have it Government owned and run, so that if it ever makes a loss then the taxpayer has to bail it out?

Also let us recall what Labour said about the existing convention centre, that also got funded by a gaming concession:

“The potential gains from this are widespread – not only for SKYCITY but for the Auckland city region, the tourism industry and the whole of New Zealand.”  

That was Tourism Minister Mark Burton at the opening of the SKYCITY Auckland Convention Centre on 3 August 2004.

So in summary:

  • Labour had a quango do a similiar deal (but for a centre one quarter the size) in 2001
  • They proudly opened the centre as a result of the deal in 2004
  • They committed to a convention centre in 2011

So again, isn’t it time for them to front up and announce how they would pay for it?

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Greens say they may legislate to over-turn the Auckland Convention Centre deal

May 13th, 2013 at 4:00 pm by David Farrar

The Herald reports:

Greens co-leader Metiria Turei said the deal was “disastrous” but she had not yet sought legal advice on the implications of rejecting the deal.

She said it could become a bottom line in future coalition discussions between the Greens and Labour and the Greens would want the legislation repealed.

“Whether we can negotiation that with them in the future – we will see. The Green Party does not accept being held to ransom like this and will repeal this legislation if we get into Government,” she said.

Another sabotage attempt. It is true Parliament is sovereign, and could legislate to break a contract the Government has signed without any penalties or compensation. Likewise Parliament could pass a law to nationalise supermarkets, confiscate your house without compensation or whatever it likes.

However it is a sure fire way to scare investment away from a country. A major reason why first world countries are first world countries is because of respect for property rights and the fact people can invest in a country without fear that a change of Government may result in their investment or property being confiscated.

The Greens seem to be positioning themselves to the left of Chavez, and Labour are trying to outflank them on the left.  That’s good news for National, but bad for New Zealand as eventually they will get elected.

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The Auckland convention centre deal

May 13th, 2013 at 8:29 am by David Farrar

Steven Joyce has announced a heads of agreement with Sky City for construction of an international convention centre for Auckland. The details are:

  • Construction cost $402 million
  • Capacity will be 3,500 delegates
  • Projected economic benefit is $90 million a year
  • Jobs estimated to be 1,000 during construction and 800 once up and running
  • An extra 33,000 delegates a year expected
  • Renewal of casino licence from 2021  to 2048
  • An additional 230 pokie machines and 40 gaming tables
  • Four new measures to deter problem gambling and money laundering
    • a predictive modelling tool that analyses data to identify players at risk of problem gambling
    • a voluntary pre-commitment system where players can elect to restrict the amount of time they play or the amount they spend
    • doubling the number of Host Responsibility specialists
    • introduction of player identification requirements when amounts over $500 are being put onto, or cashed from, TITO tickets

This reinforces to me what a tough negotiator Steven Joyce is, as groups were talking the agreement could be as many as 500 new pokie machines. The number, at 230, is identical to those granted to SkyCity under the previous Government in 2001 for the development of the existing, and much smaller, Auckland Convention Centre.

This agreement in principle was announced before the 2011 election has been fully transparent and the legislation to enable it will go through Parliament to be debated.

It is also worth noting that the number of pokie machines in New Zealand will continue to decrease overall, just at a slower rate.

1,000 new jobs and an international convention centre bringing in an extra 33,000 high spending tourists a year is a very good thing. I hope Parliament backs the deal.

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And how many in supermarkets?

March 30th, 2013 at 9:44 am by David Farrar

Jared Savage at NZ Herald reports:

Nearly 100 children were found wandering by themselves in SkyCity last year, show new statistics which anti-gambling advocates say prove problem gambling is a growing issue.

In most cases, the adults responsible for the children were found in the main gaming floor on pokie machines or at a table game.

Note we don’t get told the proportion between the two. It might be 4 at pokie machines and 96 at table games. Does the PGF who released the data have the breakdown?

Figures released by the Department of Internal Affairs under the Official Information Act show there were 64 incidents of “unattended children” last year, involving 96 children. In 2009, just 19 such incidents were recorded.

64 incidents is around one a week. Sounds reasonably high but what I want to know is comparison rates. How many unattended children are found each week in malls and/or supermarkets and what is that as a proportion of overall customers?

Because casinos are probably the only entities required to report on this data, it is all too easy to jump to conclusions.

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Disquiet from Dunne?

March 8th, 2013 at 11:00 am by David Farrar

Peter Dunne blogged:

This government prides itself on a business like approach to issues. It likes to cut through quickly and resolve issues before they get too bogged down in red tape. For many New Zealanders, this pragmatism is welcome, coming after years of stultification and wariness under successive previous governments.

A lot of this change is due to the attitude and style of the Prime Minister, who is focused on achieving things and making a difference. In general, it is an approach which has worked well and probably explains in part at least why the government remains so popular in its fifth year in office.

But, as a couple of recent examples show, there is a danger that the cut through which has been one of the government’s hallmarks will become a major problem for it.

Take the case of the Sky City Convention Centre proposal. There is no doubt Auckland needs a world class convention centre, and that in all probability, Sky City is arguably in the best position to develop such a facility. No problem with that, subject, of course, to the specifics of the deal stacking up. But as the Auditor-General’s report shows, while there has been no impropriety in the process followed by the government, it did play very fast and loose at times.

Similarly, with the Hobbit movies. No-one seriously opposed making the movies here, and the government would have been roundly criticised if let the opportunity slip through its fingers, but as the various documents recently released show, the government’s enthusiasm for the movies being made here did get in the way of the facts from time to time as deals were struck to ensure the right outcome.

There is a time-bomb warning to the government here. Support for the cut through approach will wither if it is seen to be a standard proxy for bending the rules or doing special deals to achieve the desired outcome. While the government is not immediately vulnerable on this issue, the clock has started ticking.

I think at the heart of what Dunne is saying, is that Governments should not be seen to be picking out individual companies to do “deals” with. There is a difference between measures which favour a specific sector such as relaxing RMA rules, making mining easier, tax rebates for films – and “deals” with specific companies.

In the two cases cited, there were unusual circumstances for both, which won’t generally apply across the board.

The Hobbit “deal” was basically triggered by the malign acts of an Australian union official who was trying to blackmail the production through an international boycott. The union represented almost no actual New Zealanders and was trying to muscle its way in. If MEAA had never triggered a global boycott, then the crisis that caused the deal would never have eventuated. It was an own goal. But the key point, is that it was forced on the Government. And in the end the agreement they came to with Warners did not apply just for that production or that company.

The proposed (not yet agreed) Sky City deal for some regulatory changes in return for building a $350 million convention centre is a deal with just one company. This is not ideal. But the reason it is that way is because we have a law that prohibits any further casinos in New Zealand – there is a monopoly in Auckland – Sky City. Hence there is only one company you can negotiate with if you want to negotiate regulatory changes in return for more investment. If I had my way I’d get rid of the silly ban on more casinos so we have multiple operators.

Anyway the point I think Peter Dunne was making is that these two cases should be exceptions, not the rule. And I agree with him.

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The Sky City reports

February 19th, 2013 at 2:32 pm by David Farrar

The Deputy Auditor-General has reported:

The inquiry has considered both the adequacy of the process followed and whether anything substantively wrong has taken place. The main question underlying this inquiry was whether the Government’s decision to negotiate with SkyCity had been influenced by inappropriate considerations, such as connections between political and business leaders.

We have seen no evidence to suggest that the final decision to negotiate with SkyCity was influenced by any inappropriate considerations.

The Opposition will try and ignore this conclusion.

However, we found a range of deficiencies in the advice that the Ministry provided and the steps that officials and Ministers took leading up to that decision. The quality of support that was provided fell short of what we would have expected from the lead government agency on commercial and procurement matters.

And this appears to be very fair criticism. Note that there is no suggestion that the process should be redone. Also none of the other bidders want (as far as I know) for the process to be redone.

The full report is here. A quote:

In our view, the result was that one potential submitter had a clearer understanding of the actual position on a critical issue – that the Government  did not want to fund any capital costs – than any other potential submitters. 

Although this is a fl aw in the process, it might not have had significant consequences. The other submitters still understood that the Government’s finances were constrained, and became more so as 2010 progressed. No other submitter appears to have been likely to be able to adapt their proposal to enable them to fund the full construction costs. We accept that it is unlikely that this flaw made a material difference to the outcome.

Also:

Given the nature of the responses, it is likely that the SkyCity proposal was always going to be the most attractive from most perspectives. Indeed, in the course of this inquiry, we have not heard any comment to suggest that other proposers did not understand the reasons why the Government might prefer the SkyCity proposal. …

We accept that officials were acting in good faith to support decision-making by Ministers on some difficult and controversial matters. The fact that the process was unsatisfactory does not automatically mean that the conclusions reached were unsound.

Now this is not to minimise the criticism of the Deputy Auditor-General. MED did not run the process to the standard expected, and the Government should ensure it does so in future. But let’s be very clear that this is a different issue from whether the report of the DAG means the convention centre agreement should not proceed.

Also worth noting:

In the previous Parts, we briefly mentioned that officials have researched the costs of increased gambling and provided advice to Ministers on this. It is not appropriate for us to detail the content of that advice in this report, but we can confirm that we are satisfied that the issues have received adequate attention during the evaluation and negotiation process. As already noted, any reforms of this kind will also be debated publicly and by Parliament before they can be implemented.

Of course the Government and Sky City are yet to agree on a package, so the focus will now be on an agreement being struck, and then legislation proposed to implement it.

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The Sky Tower

August 12th, 2012 at 12:09 pm by David Farrar

Stuff reports:

It opened on a cold August night 15 years ago when fire works and army abseilers lit up a $75 million project that was set to change the Auckland skyline forever.

At 328 metres, the world’s 28th tallest tower took more than two years to build, using 15,000 cubic metres of concrete and almost 3000 tonnes of steel.

Plans for the tower date back to 1987, but they didn’t gain momentum until 1994 and within three years, on August 3, 1997, it had its grand opening.

I would have sworn the Sky Tower had been with us for more than 15 years. It has become so iconic that it is hard to recall central Auckland without it. I thought it was over 20 years old, but it isn’t.

Haven’t been up for a fair while. I do recall though the first time jumping up and down on the glass floor to test if it was as solid as claimed.

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The doubled edged audit sword

June 15th, 2012 at 3:16 pm by David Farrar

I write at the NZ Herald:

The decision by the Deputy Auditor-General to inquire into international convention centre tender, more popularly known as the Sky City deal, is a double-edged sword for the Government and the Opposition.

If the Deputy Auditor-General finds that the tender process was not run in a fair way, then it will damage the credibility of the Minister of Tourism. The Minister also, of course, happens to be the Prime Minister. This means adverse findings could strike at the heart of the Government.

However if the Deputy Auditor-General does not conclude there were any significant issues in the awarding of the tender, then it could blunt the opposition attacks on the awarding in principle of the tender to Sky City.

I also note the way different PMs have handled the Audit Office:

The Office of the Auditor-General is a vital one in our constitutional arrangements. It is the public watchdog, and has very wide powers. It has not always endeared itself to the Government of the day. When the Auditor-General found that most parliamentary parties had illegally spent taxpayer money on electioneering, then Prime Minister Helen Clark attacked the finding, saying she does not accept the reasoning in his opinion and judgement, and that he was wrong. She refused to express confidence in his competence, and said he “has a serious credibility problem”.

This response is in stark contrast to the current Prime Minister who said he welcome the inquiry by the Deputy Auditor-General, and was “delighted” with it. 

I still regard those attacks on the Auditor-General as a low point in executive behaviour.

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