Economic Development Minister Steven Joyce says taxpayers are the Government's "least preferred" solution to a blowout in the cost of SkyCity's Auckland convention centre. He should not even think about it. One of the alternatives, he says, is an Auckland Council contribution. He should not think about that either.
SkyCity's bid to build the convention centre was accepted over several others for one reason: it was the only tender that did not need public money. The casino operator offered to provide the desired facility in return for additional gambling capacity and an extension of its casino licence. That was agreed 18 months ago when the cost was estimated at $402 million. Now SkyCity puts the cost somewhere between $470 million and $530 million.
It blames the escalation on design improvements to meet the requirements of the company's contract with the Government, the need to deal sensitively with two heritage buildings on the site, and construction cost inflation. None of those could not have been foreseen when the company was preparing its bid.
The contract does not take effect until construction begins. Until then, SkyCity does not have a right to operate the additional tables and pokie machines it has been granted and cannot count on an extension of its licence. Those were big concessions by the Government, too big in the opinion of many critics. Additional pokie machines set back a decade of effort to contain their spread. The Auckland Council's "sinking lid" on licensed venues was compromised so that the city might get a convention centre of international standard.
There is no suggestion the cost escalation now will be met by another increase in the casino's permit. The Government has gone as far as it dares in that direction. But it has options besides public finance. If its own requirements are adding to the cost of a convention centre, it can be reasonable. The public interest lies in acquiring a facility of a size and standard that can attract international conferences. The precise specifications and design details can be confidently left to SkyCity. Its interest is the same as Auckland's. It needs a facility of superior size and quality to others in New Zealand.
The Government is contributing public money to a $55.5 million convention centre in Queenstown mainly funded by the local council. It has also offered Christchurch a 2000-seat venue to help the city recover from earthquakes. The Auckland scheme, a 3500-seat venue, has to compete in a different league.
SkyCity's bid was attractive not only because it offered to build the centre at no cost to the public but because the casino probably has more operating expertise than could confidently have been expected from the bids that would have needed public money. Convention centres are commonly integrated with the big casinos of the world. If Auckland is going to compete with them, SkyCity is our best bet. It is disturbing to learn the project might need a subsidy not only for construction but for its operation too. SkyCity should be told that unless it can meet its side of the bargain, all bets are off.