Editorial: Skycity deal a wrong move

17:00, Jul 18 2013

Government documents about the SkyCity pokies deal show once again what a poor bargain it was.

They also show how astonishing the casino's ambitions were: it asked for the sun and the stars. The winner, the documents show, was SkyCity, and the loser was New Zealand.

The documents reveal that Treasury has serious and well-founded objections to the deal. New Zealand already had a disproportionate share of the convention centre market. International arrivals for conferences had levelled off since 2005. Above all, international research showed a low net public benefit from conference centres.

That reinforces the sense that the economic case for the deal was poor, and also raises the question: why did the Government go ahead? Partly, it seems, to win more votes in Auckland. The net benefit was bad for the country, but building the convention centre would certainly bring hundreds of jobs in the meantime. That would be popular in the country's biggest city.

Treasury also worried that the benefits to SkyCity would exceed the benefits to New Zealand, and how right it was. The company's demands were truly amazing, including a perpetual extension to its Auckland casino licence, 853 extra pokie machines, and the lowering of the gambling age to 18.

It failed to get the age reduction, got less than half the desired pokie machines, and its licence was extended by "only" 27 years. Still, these are huge and lucrative concessions. It is no good the Government arguing that the overall number of pokie machines is falling. They are falling a lot more slowly as a result of the SkyCity deal, and problem gambling will increase. It is a minor consolation only that SkyCity failed to get a casino in Wellington.


The documents reveal that officials were surprised in November 2011 when the company put compensation on the table. They warned that the compensation clause would be "of huge value" to SkyCity and boost its share price. The result is that SkyCity will win hundreds of millions if a future government rewrites gambling regulations in the next 35 years or increases casino taxes in the next eight.

There are serious financial and even constitutional objections to this. SkyCity has won a licence to print money and no future government can take it back for a third of a century. Future governments, in other words, will remain trapped by National's bad deal.

Steven Joyce says the Government was prepared to walk away if the price was too high or the deal was not fair to New Zealand taxpayers. But the documents suggest that the price was too high and the deal was unfair, and that sober officials understood this.

Perhaps the Government thought it was getting a good deal because it reduced SkyCity's demands from "truly absurd' to "merely excessive". Perhaps this shows the dangers of over-enthusiasm and picking winners in advance. The Government was desperate to get a deal with SkyCity over the $402 million convention centre. It beat the company down a bit. And it concluded that therefore it must have won a good deal. It was wrong.

The Dominion Post