The devil is in the detail
The political ruckus from the proposed deal between Skycity and the Government over the building of a convention centre in Auckland is showing no sign of abating.
Last week, Economic Development Minister Steven Joyce denied the Government was selling out our gambling laws in return for a shiny new convention centre in the Queen City.
In Joyce’s view, such deals are done all the time, as when the Labour Government changed the law to provide incentives for the film industry.
Business leaders also expressed frustration last week that arguments about ‘‘ politics and pokies’’ were deflecting attention from the convention centre’s alleged economic benefits to Auckland, and to the nation.
Thankfully, Joyce’s own Ministry of Economic Development released research in 2009 into the likely economic risks and benefits of an international convention centre in Auckland.
Friends and foes alike of the proposal will find ammunition in the ministry’s report, which finds that yes, if built in the right part of town – not the waterfront – such a centre would eventually turn a profit.
To do so, however, and until the centre reached full capacity, an extra $ 10 million in subsidies would be needed from the Government.
Moreover, all the crucial marketing would have to be carried out by Tourism New Zealand and by Tourism Auckland, and via the website run by the conference industry’s lobbying association.
In addition, the ministry found such a convention centre in Auckland would be likely to succeed only if other cities – such as a rebuilt Christchurch – scaled back any plans to compete for conference business.
Also, since catering onsite would be a likely ingredient of the business model, other hotels and restaurants in Auckland could not expect many benefits from the conference visitors to the new centre.
The clear winner from the proposal would appear to be Skycity.
While the casino operator would need to meet about $300 million in upfront costs in building the convention centre, Skycity would be allowed to install extra pokies in its current casino, and could expect a steady supply of well-heeled conference attendees spilling over into its gambling operations in future.
All the related risks – such as, say, the global trend towards teleconferencing – would be borne by the taxpayer/ratepayer.
The public would also be paying for marketing the centre here and overseas, on top of that estimated $10 million in subsidies until the centre is fully operational and turning a profit.
At which time, via a concept called ‘‘subvention’’, the Government would have to pay Skycity a percentage fee for the wider economic activity being generated.
Or, as the ministry report puts it, ‘‘subvention policies recognise the economic value of conferences to host destinations’’.
To date, the Opposition has largely focused on how the proposed deal might affect the country’s current problems of gambling addiction.
Yet Labour and the Greens have begun to call for a re-tendering of the entire project – which would at least enable the economic merits of the convention centre to be reexamined.
Joyce, for his part, is stressing that everything is still up in the air – from the exact number of extra pokies allowed, to the deadline for striking any deal at all.
As yet, the Government is showing no sign of folding its cards, and backing out entirely.