Prime Minister John Key says the SkyCity convention centre plan grew in both size and "flashness" until a public backlash persuaded the Government not to spend any more money on it.

SkyCity may need to shrink its international convention centre after public funding was ruled out, prompting critics to question whether the plan for a "world-class, iconic" building in downtown Auckland is now fading away.

"It grew from 33,000 square metres to 38,000 square metres. It did get a bit flasher," he told Mike Hosking on Newstalk ZB this morning.

"Some of the points SkyCity were making were totally valid. But in the end I just think that public opinion on this thing, rightly so, was: 'There's a deal, leave it as the contract said, even if SkyCity were right, it's possibly gone up a little more, we all need to live within our means', and that's what we are going to do."


Pressed by Hosking on why the Government didn't simply rule out more taxpayer funding from the start, Mr Key said ministers had always said more funding was their "least preferred option" but SkyCity had a right to negotiate.

"They had a clause in the contract which technically said they could ask us for more money and they did increase it, the size of it, and they did change it, and they did want a bit more. It's just one of those negotiations," he said.

Mr Key said there was nothing unusual in the controversial original deal in which the Government agreed to let SkyCity install more pokies and gambling tables in return for the company building the convention centre.

"Helen Clark did the same thing actually, Labour forget that. That's how we got the first convention centre," he said. SkyCity opened its first convention centre in Federal St in 2004, eight years after the casino opened in 1996.

Mr Key said the company made a similar deal to expand its Adelaide casino.

Sky City chief executive Nigel Morrison said the company would try to cut costs by tweaking the design of its proposed convention centre, starting work sooner and getting better deals on procuring materials.

Asked by Hosking this morning whether the city would end up with a "box", Mr Morrison said it was "too early to make that call".

"We don't want a box," he said. "We are going to spend $402 million, and quite frankly more than likely more than that."


He said the company would ask its architect to find cost savings "through some design review" now that the Government had ruled out any taxpayer funding.

He believed the company could also save money by taking over sole responsibility for procuring construction materials.

"I think one of the good things that's come out of this is that, as [Economic Development Minister] Steven Joyce said yesterday, he'll let us get on with the procurement process, which means we'll work with the contractor, and I think that will save a lot of time and I think that should save us some costs."

He said construction costs generally had escalated recently due to a building upswing in Auckland and Christchurch, slowing down several major projects.

"I think there is a big opportunity, we can actually save some money by getting on with it," he said.

"Also, through a review of the procurement process, how we are going to procure this thing."


Mr Morrison said last week that SkyCity was willing to pay only an extra $10 million on top of its agreed $402 million towards closing a cost gap on the latest cost escalation projections of between $70 million and $130 million.

He said commentators had seized on the top of that range, $130 million, but the company never expected to get that much.

"Could we afford $20 million or $30 million more?" he asked. "Maybe."

The long-running negotiations between the Government and casino giant added another chapter yesterday as SkyCity confirmed it would redraft its convention centre design to fit within the existing budget of $402 million.

That decision came after the Government refused to grant up to $130 million to construct a more expensive design submitted in December.

Opposition parties said ministers had been fooled into allowing SkyCity to build a smaller centre, contrary to its contract, while still allowing it to hold on to its hugely valuable gambling concessions.


Economic Development Minister Steven Joyce yesterday said the redesigned convention centre might end up 10 per cent smaller, "but no more than that".

That would mean the main exhibition hall was unlikely to fit 3500 delegates as planned.

The total number of jobs created could be fewer than the 800 promised, though a proposed 500-bed hotel which was added to the design last year could make up for this potential shortfall.

Mr Joyce defended the revised convention centre, saying it could remain competitive with Australian centres and promising it would not become a "white elephant" in Auckland's CBD. He said SkyCity's design changes would alter the building's size, not the appearance, and it would not become an "eyesore" as feared.

Labour leader Andrew Little welcomed the decision to rule out taxpayer funding, saying it was the only choice given overwhelming public pressure.

But he added: "The disappointing side is that ... it's now quite clear that they are looking to find a cheaper option in terms of what to build. The deal was an iconic, world-class convention centre. Nothing less will do. Let's ... hope that this Government has the cojones to hold SkyCity to the promise of an ... iconic convention centre."


SkyCity's chief, Nigel Morrison, said yesterday that the company was still committed to a "landmark" building.

The concessions SkyCity received in the deal, which included 230 additional pokie machines and a 28-year extension to its gambling licence, would not be affected by the redesign.

Green Party MP Denise Roche said the new plan was a "gift" because SkyCity could build a smaller convention centre while still keeping all of its gambling concessions.

The timeline

August 2009:

Ministry of Tourism and Auckland City Council complete convention centre feasibility study.

November 2009: PM John Key has dinner with SkyCity board, discussing an Auckland convention centre and possible changes to the Gambling Act.


March 2010: Cabinet decides to call for "expressions of interest" from other developers. Tender process begins two months later.

May 2011: Tender process closes, with bids from SkyCity, The Edge, Ngati Whatua, Infratil and ASB Showgrounds.

June 2011: SkyCity wins with $350m bid. Its convention centre requires no taxpayer funding but depends on changes to Gambling Act to allow more pokies and other concessions.

June 2012: Auditor General announces inquiry into the way the Government sought proposals for the convention centre.

February 2013: Auditor General clears Key of wrong-doing but says Govt's dealings with SkyCity "fell short of good practice in a number of respects".

May 2013: Govt signs initial deal with SkyCity for a $402 million convention centre. The deal extends the casino's licence to 2048 (beyond expiry date of 2021) and allows 230 more pokie machines and other concessions worth an estimated $527m over 35 years.


November 2013: Parliament passes legislation to allow gambling concessions.

December 2013: SkyCity decides to build a 500-bed hotel on former TVNZ land surrendered for the convention centre.

December 2014: SkyCity lodges resource consent, revealing the cost of a new convention centre has increased by between $70m-$130m. Government says taxpayer funding may be needed.

February 2015: Key warns that without the extra funding the convention centre could be "an eye-sore" but later clarifies that public funding is "the least preferred option".

February 2015: Economic Development Minister Steven Joyce today announced that SkyCity had agreed not to pursue a financial contribution from the Government and would instead amend its design to ensure the facility can be completed without financial input from the Crown.