John Roughan: SkyCity deal insight into PM's mind

5:30 AM Saturday Feb 23, 2013

It is not often you get a chance to look in the window of the Beehive's inner sanctum and see how a Prime Minister works.

Reading the Audit Office report this week on John Key's dealings with SkyCity, I could see him at his desk on December 22, 2008, just a month after taking office. His papers that day included a briefing on a world-class conference venue for Auckland. He'd heard of it, it was the only concrete suggestion you ever heard in economic brainstorming seminars.

The brief told him the city council and business people calling themselves the Committee for Auckland had engaged consultants who had calculated the wealth that might be added to the economy by a convention centre capable of seating up to 1000 delegates.

Scanning the proposal, he came to the paragraph that said, "... significant economic benefits, however, tend not to generate commercially viable returns ... public sector leadership in funding is often critical ..."

Fat chance. He has come to office in a global financial crisis, the country is in recession and his Budget is in a deficit that will take 10 years to rebalance. Considering the world's condition nobody would be coming here for a conference for a while.

In the circumstances, previous prime ministers would have put that paper aside and forgotten it. Key's different, he's a trader. He knows there are always options.

A few months later, when the council asked him to fund a feasibility study, he approved $80,000 and put tourism officials on the steering committee.

In July that year, 2009, the study was completed. It rated the cost/benefits of various site proposals. All of them assumed public finance.

By then Key knew that SkyCity was planning to enlarge its conference centre at the casino. His officials had noted it in an update on the feasibility study in June. But the finished document did not just favour public funding, it made a positive virtue of it.

Its view, as summarised by the Audit Office this week, was that "public sector ownership could support wider economic, social and environmental outcomes. [It] could operate as a community asset - for example, by having free concerts and events from time to time".

Free concerts? That gem of Auckland Council thinking probably convinced Key that if this thing was ever to be remotely economic it would have to be in the private sector. He declined to approve its next planning stage and wrote, "we should close off the SkyCity angle first".

Those are not confident words, they sound like a long shot. SkyCity was still tossing up between an extension of its existing premises and a rebuild on the scale of an international attraction. If it was to be the latter, SkyCity too expected a public subsidy.

At a meeting in October Bill English told the company bluntly the Government had no money for a convention centre. On November 4, the board had Key to dinner where he says he urged them to "think outside the box". They did.

The Deputy Auditor General has found nothing wrong in principle with trading social regulations for an economic asset. She was concerned only that rival bids were not told the Government preferred not to put in money and could offer regulatory concessions instead.

I doubt there's much room for concessions in social regulation of anything except gambling, where there must be plenty of ways to help those with a problem.

We have been deluged with warnings and war stories from the Problem Gambling Foundation since the Government announced its intention to do a deal with SkyCity. But how many really have a problem?

The latest survey was done by the Ministry of Health over nine months to March last year. It finds that just over half of the population over 15 gambles on something, mainly Lotto.

That is quite a reduction in the 10 years since Helen Clark's Government put a cap on numbers of pokie machines, but interestingly, the numbers of "problem gamblers" has hardly changed in that time. Not that there were ever very many of them. They comprised 0.4 per cent of the sample in the previous survey and 0.3 per cent now.

That tells me that those people will gamble regardless of the number of gaming tables and poker machines permitted in the casino or anywhere else. And the casino is the best place for them if their gambling is to be monitored and limited.

Key has got the basis of a good deal. Convention centres and casinos sit naturally together everywhere, and Sky City's licence would be extended anyway. It is a tower on Auckland's landscape and a sponsor of much of the city's life. When it builds this convention centre Key's name should be on it.