Kiwiblog

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.

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?

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.

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.

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.

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.

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.

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.

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.

The Office of the Auditor-General has announced:

The Deputy Auditor-General, Phillippa Smith, has decided to carry out an inquiry into the expressions of interest (EOI) process for proposals to establish an international convention centre. This document sets out the terms of reference for the inquiry. …

The inquiry will examine:

• the overall process for seeking and assessing proposals for an international convention centre;
• the adequacy of the assessment of the likely costs and benefits of each proposal; and
• any other matters the Deputy Auditor-General considers it desirable to report on.

The inquiry is being carried out under sections 16 and 18(1) of the Public Audit Act 2001. We will not comment while the inquiry is under way, but will publish a report when the inquiry is completed.

The Auditor-General has a small share-holding in Sky City, so hence the Deputy is doing the inquiry.

It is good that DAG is investigating. On the basis of what is known, I don’t think there is a problem – but sunlight is the best disinfectant. We benefit from having a strong and independent Auditor-General and associated office.

It is important that the decision to in principle award the contract to Sky City was made in a sound and fair way. The inquiry will look into that and either confirm it was, or point out deficiencies – either way it will be good to have its conclusions.

Labour and Greens have called for negotiations to halt during the inquiry. The parties may decide to do this, but I don’t see it as a major issue. Even if a agreement is reached, it can only be enacted by Act of Parliament which would take six to 12 months and go through normal select committee scrutiny.

Abby Gillies at NZ Herald reports:

Auckland mayor Len Brown is conditionally supporting a controversial government decision to negotiate a convention centre deal with SkyCity.

The Government has faced mounting criticism over discussions with the casino that would see the company fund a $350 million convention centre in Auckland in return for an extension to its casino licence.

Mr Brown, speaking to Radio New Zealand this morning after returning from a trade mission to China, said there was a huge need for a convention centre in Auckland, but if the deal goes ahead controls should be put in place to minimise harm to gamblers.

“I’m not anti gambling at all. I think there is a place and time for it and people are entitled to make their choices and they do that.”

Very sensible. Len is showing the responsibility of being in office. Those who do not have to live with the consequences can oppose everything and anything.

Matt McCarten writes in the Herald on Sunday:

As you can appreciate, it’s a highly political environment these operators and the casinos live in.

Consequently, political donations to candidates and parties are rife. Both mayoral candidates, Len Brown and John Banks, received generous financial backing from SkyCity and last general election National and Labour picked up $60,000 apiece from them.

This is massively incorrect. The donations of $60,000 to National and Labour (and $12,000 to Progressives, ACT and United each) were not at the last election, or even the election before that but three elections ago in 2005.

My Herald column is on the proposed Sky City deal. One extract:

I suspect the political acceptability of any agreement will come down to how many extra machines are agreed to. If for example, the agreement was for 10 extra machines, no one would get too worked up. As no agreement has yet been reached we don’t know what number will be agreed upon. The Opposition claim it could be up to 500.

While 500 sounds a lot, it would increase the number of pokies in NZ by just 2.8 per cent, from 18000 to 18,500. The total number of pokies would still be 6,720 less than the peak of 25,221 in June 2003.

In National’s first term the number of pokie machines declined from 19,739 to 18,001 – a decline of 1,738. An increase of 500 at Sky City would still see the total level significantly lower than in 2008.

The number of pokie machines over time can be viewed at this webpageof the Department of Internal Affairs.

My conclusion:

Most voters react on instinct. They react to whether or not they think Sky City is a good or a bad company. Hence why opposition politicians are now accusing it of everything from money laundering to causing child abuse. If Sky City is successfully portrayed as a “bad” company, then any agreement with it on a convention centre will politically damage the Government.

Ironically the greater the political pressure on the Government, the stronger their negotiating strength with Sky City is. They can point to all the criticism of the proposed agreement, and use that to negotiate the numbers downwards. If at the end of the day, the agreed number of extra pokie machines is quite modest, then the Opposition will deserve some of the credit.

The negotiations have been ongoing for nine months. I suspect they will be completed soon.

Stuff reports:

The Labour Party is calling on Prime Minister John Key “to come completely clean” with details of negotiations for the controversial Sky City convention centre.

Economic Development Minister Steven Joyce is negotiating with the Auckland-based casino to build a $350 million national convention centre in return for changes to the Gaming Act that would allow it to have hundreds more pokie machines.

Key admitted he approached Sky City and asked it to put up its best offer. But he said he had the same conversation with other bidders.

What this story and beatup doesn’t mention is there was no “admission” as if this was some secret the Government was hiding. John Key told the press gallery this in June 2011! Yes at his post-cabinet press conference. How do I know this? Well Felix Marwick of NewstalkZB tweeted it yesterday. He later tweeted why some may have forgotten it. If you want to know what is happening, follow Felix on Twitter. It is fine to have forgotten Key was open about it a year ago, but not okay to have stories appear the next day which do not mention this, and make it still appear it was some sort of secret.

Probably worth me blogging my thoughts on the “deal”. First let’s talk the general. Is this “selling” laws, which has never been done before. No – of course not. Do you recall Michael Cullen agreeing to special tax write offs for the movie industry so they would invest here? This is the normal job of Government – to try and get businesses investing in New Zealand. When Nokia was looking to invest here, they were offered all sorts of inducements.

Now on the specific, some say that increasing the number of pokies at Sky City will increase gambling related harm. Let us accept that. Let us even accept all gambling has some associated harm with it. But New Zealand does not ban gambling. If we did, there would be no money for the Lotteries Board and the thousands of organisations they fund, no money for the racing industry, reduced money for NZ sports teams, and a lot fewer jobs and tax paid in New Zealand.

So when it comes to this deal, surely the appropriate measure isn’t will there be some increased harm from gambling, but how significant will that harm be, and how does that measure against the gains for New Zealand from having an international convention centre.

An ICC means that Auckland can host major world congresses. These to to be of professional disciplines, and the delegates tend to be wealthy. Many will tour New Zealand while they are here.

An earlier Stuff story reported:

TIA has long been advocating for a national convention centre.

It was highlighted as a top priority in the 2008 Tourism Industry Election Manifesto and reiterated in the run-up to last year’s Parliamentary elections as a top priority for government action.

It was estimated a national convention centre would boost New Zealand’s economy by more than $90 million a year, Mr Thompson said.

The estimate is an extra 100,000 visitor nights a year.

And on the jobs front:

•  Around 1,000 trades job during the construction of the $350 million building
• Around 900 800 permanent jobs (according to Heart of the City)

For my 2c I want to see the final deal, and the estimated gains and harms before casting judgement on it. But to be blunt if 900 800 families gain a working parent due to these extra jobs, that is a very big gain.

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 Sky City’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.