Cabinet ministers overruled expert advice which would have placed a $500,000 greater burden on SkyCity each year for treating problem gambling.
The decision was made shortly after SkyCity was asked to bid for the contract to build the National Convention Centre.
It has prompted questions from the Green Party over an apparent closeness between the Government and SkyCity at the time of the tender process.
In November 2009, Prime Minister John Key asked SkyCity to bid for the contract, just days after the company chairman spoke of close ties with Cabinet ministers.
Then, in March 2010, Cabinet put the contract out to tender - 14 months later announcing SkyCity as the winner. The company is now negotiating over carrying the $350 million construction cost in return for gambling concessions, including extra pokies.
The tender had just been put out to the market when the Ministry of Health proposed a new funding formula for problem gambling which would have put more cost on casinos, the racing industry, and the Lotteries Commission.
The plan was part of a three-yearly process to set the rate of the problem-gambling levy, which comes from the gambling industry and is based on 0.9 per cent of its forecast $5.9 billion profits for the next three years.
Problem-gambling health officials told ministers they needed to change the way the levy was funded. They said more money needed to be drawn from the gambling entities making the most money.
The funding plan they sought to change was charging the community gaming pokies more because that was the sector cited by most people asking for help with a gambling addiction.
The plan had support from the Department of Internal Affairs and the Gambling Commission, which had been campaigning since 2006 to get more from big money gambling industries for the levy. Figures in the report show the shift would mean casinos went from paying $10.3 million to $10.8 million - up $500,000. The shift would have cost NZ Lotteries Commission $1.6 million extra.
Officials said the public wouldn't notice any difference, although any money paid from pokies in clubs and pubs to the levy "result in less money ... being returned in the form of community grants". It could also lead to more money for Sport and Recreation NZ, which is funded out of the Lottery Grants Board.
It said the shift was needed to stop money being unfairly taken from poor areas, which suffered disproportionately from gambling. Officials also said sharing the blame for gambling harm more broadly meant all groups had a responsibility to help problem gamblers.
They said the existing system meant gambling providers could find reasons to avoid supporting problem gamblers because they would face a higher levy.
But Cabinet opted to keep the existing plan which directed most of the cost to pokies in clubs and pubs.
Internal Affairs Minister Chris Tremain said there was wide consultation before a decision was made. "Pokie machine operators pay the highest share of the levy because this is where most problem gambling is associated."
That was supported by Problem Gambling Foundation chief executive Graeme Ramsey, who said the new formula would have cost lotteries and been a boon for pokies.
Green Party co-leader Metiria Turei said the decision to look past officials' advice at the time the convention centre tender was out caused concern.
"They have gotten a cheap ride from this Government even when it comes to the problem gambling levy."
She said the principle that those who made the most money from gambling should share the greater burden of the sector's ills made sense.
SkyCity chairman Rod McGeoch speaks of close ties with "high ranking officials and Cabinet ministers". He says SkyCity wants changes to the Gambling Act.
Prime Minister John Key meets with the SkyCity board for dinner. They talk about the convention centre and the Gambling Act.
The tender for the convention centre is put out to market.
Cabinet overrules advice to increase the financial contribution to problem gambling on SkyCity, the racing industry, and Lotto.
SkyCity announced to be the preferred bidder for the casino. Key says discussions on Gambling Act concessions for the cost-free centre.