America’s Cup costs understated

A mistake in work done to determine the economic benefit of the America’s Cup to New Zealand has been revised – and it shows the country might not break even.

The Ministry of Business, Innovation and Employment (MBIE) said Market Economics had informed it of errors in the initial cost-benefit analysis.

The data does not affect the prediction that the cup would provide between $600 million and $1 billion in value-add to the New Zealand economy, and an employment boost of 4700 to 8300 jobs.

But the costs involved may be higher than originally estimated.

Instead of delivering a return of $1.20 to $1.80 for every dollar spent, Market Economics instead predicted it would deliver between 0.997c and $1.14.

The alleged net benefit of the cup was relied on by decisionmakers including Economic Development Minister David Parker and Auckland mayor Phil Goff.

Sam Warburton, of the New Zealand Initiative think tank, said cost-benefit analyses were the most reliable of the methods used to determine the benefit of the America’s Cup.

He said it was misleading to focus on the $1b economic boost and ignore the costs.

‘‘The funding for the America’s Cup is going to come from reduced spending on public transport or roads or social housing or other cultural or sporting events. Each of these have flow-on impacts which, if you totalled them up, would come out more or less at $1b. Taking money from one area loses that $1b, just to transfer it to the America’s Cup to generate a different $1b.’’

The new cost-benefit figures were dangerously low and should force the Government to reconsider supporting the event, he said.

Auckland Council spokeswoman Katherine Forbes said the council was made aware of possible amendments to the report.

‘‘Economic impact estimates for Auckland remain unchanged. This doesn’t change anything from our perspective.’’