Editorial: Vagueness surrounds SkyCity deal

The risks on the government side lie with the extent of that problem and the anticipated economic benefits eventuating. Photo / Russell Smith

The Ministry of Business, Innovation and Employment, for one, is convinced of the overall merit of SkyCity's international convention centre. In a regulatory impact statement, it says "the potential costs of the regulatory concessions [to SkyCity], in terms of harm from problem gambling, are outweighed by the benefits to New Zealand from having an international-standard convention centre".

That, of course, is also the view of the Government, which has signed off the deal and expects the convention centre to be operational in 2017. Regrettably, just-released documents about the project do little to advance that assessment.

Vagueness is the common trait of much of the paperwork. The impact statement notes, for example, that it is expected the centre will be the catalyst for $90 million of additional tourism spending in Auckland each year.

This, however, is based on an Institute of Economic Research study done two years ago. Similarly, the ministry anticipates that the 3500-delegate centre will attract 31 additional conferences to New Zealand each year, which will mean an additional 33,000 conference attendees. This is sourced from a study done by tourism consultant Horwath HTL for the Auckland City Council as far back as 2009.

The obvious problem is that such forecasts may be outdated given the fiercely competitive convention centre market. Much, of course, may also happen before the SkyCity venue opens. It is of limited comfort that the Government will spend $34 million over the next four years to attract large international conferences. The New Zealand centre will have to compete with well-established centres in Sydney and Melbourne, particularly, to achieve its ambition.

The other side of the coin is the potential harm of the increased number of poker machines and gambling tables that SkyCity has been given in exchange for designing, building and operating the convention centre.

Again, the impact statement is vague. Research, it says, shows a clear link between the availability of gaming machines and opportunities to gamble and the incidence of problem gambling. But it did not demonstrate a direct causal relationship. "Therefore, while it would appear likely that the additional opportunities to gamble presented by the concessions being offered to SkyCity could increase the incidence of problem gambling, there is no reliable way to quantify or cost the potential harmful effects".

That will offer no comfort to those who fear the worst, especially because the harm minimisation package that is part of the deal places a heavy reliance on SkyCity's policing of problem gamblers. Nor will they be impressed by a Cabinet paper's statement that the 35-year extension of SkyCity's exclusive licence "will inevitably require variation from time to time so that it does not become out of date and out of sync with technological developments in the gambling sector".

The uncertainty extends to what will happen when the agreement terminates in mid-2048. According to the agreement, an extension, renewal or replacement and on what terms SkyCity continues to operate the centre "will be a matter to be considered by the parties prior to that date".

The convention centre is clearly a risky undertaking for all parties. A Cabinet paper stresses the need for the enabling legislation to make enforceable the compensation remedies for SkyCity in the event of a change in the regulatory concessions.

That envisages the likely scenario of a government less sympathetic to the company and more concerned about problem gambling being elected. The risks on the government side lie with the extent of that problem and the anticipated economic benefits eventuating. In many ways, this project is, itself, a gamble. Now the die is cast, we need to back the city and the country to get it right.