Editorial: Social cost of casino deal left for public to judge

5:29 AM Wednesday Feb 20, 2013

Anyone looking to the Auditor-General for a conclusive ruling on the propriety of a government trading gambling restrictions for a convention centre will be disappointed by the Audit Office report yesterday. The report has nothing directly to say on the subject. It finds nothing wrong with the Prime Minister's dealings with SkyCity casino and it reserves its criticism for officials handling the procedures of evaluating the bid.

It calls the gambling extensions sought by the casino "politically sensitive" and "unusual" as a form of government purchasing. It was surprised to find no advice from officials on how the proposed deal could be tested against the usual procedure for competitive bidding and commercial negotiations, and on ways to "manage the difficult relationship between the commercial issues and the policy and political decisions that were needed ..."

All of this - and much, much more - is a mealy mouthed way of saying the office does not know, and the public service does not know, whether it is right and proper to extend the casino's licence and enlarge its gambling operation in return for a $350 million international convention centre at no direct cost to the taxpayer. It regards that as an issue to be decided by Parliament and public opinion.

The verdict will probably depend on how seriously the public really regards "problem gambling" and the steps that SkyCity might be required to take to meet its social responsibilities in the agreement that might now be reached.

It is evident from the Audit Office report that discussions between government representatives and SkyCity were quite different from those with other parties whose proposals for a convention centre in Auckland would have required public money. It is equally clear the Government kept the other proposals alive only for leverage in its dealings with SkyCity. The office disapproves of the way it was done, finding the procedure neither transparent nor fair.

While it finds nothing wrong with John Key's approach to SkyCity, and his instruction to hold up consideration of the Auckland proposals for the "SkyCity angle" to be pursued, the Audit Office is concerned that his officials seemed ready to support those discussions without preparing advice on the Government's procedural obligations and options.

SkyCity, it says, had already made it clear it would need "regulatory reform to create an enhanced revenue stream for the project to be viable". This meant the Government would be involved in an "exchange of value" with the company. A Treasury official raised concern at that time about issues of probity if the discussion proceeded to a public-private partnership, but departments did not act on the warning.

The report is encouraging in its account of later negotiations, leading to the announcement in June last year that SkyCity's proposal had been chosen. The ministry got independent financial advice on benefits of the proposal and on the dollar value of various gambling concessions the casino was seeking.

The advice also included "whether any gambling harm minimisation measures would be necessary to balance the value of the concessions sought and the cost of building the centre". The June announcement did not specify any but perhaps the Government has taken further advice in the light of public criticism since.

Mr Key remains determined to conclude the deal this year and the Audit Office has said nothing to deter him. It has left it to the public to decide whether the social price of the casino's offer is too high. There will need to be convincing methods of screening problem gamblers before the country should accept this deal.