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Home / New Zealand

SkyCity convention centre supporters go cool over cash plea

Matt Nippert
By Matt Nippert
Business Investigations Reporter·NZ Herald·
12 Jan, 2015 04:00 PM4 mins to read

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An artist's impression of the centre planned to be built around the Albion hotel.

An artist's impression of the centre planned to be built around the Albion hotel.

SkyCity’s request for funding hasn’t gained much traction, writes Matt Nippert in the final of a two-part series

SkyCity's convention centre proposal has hit fresh turbulence as several high-profile former supporters declined to back the use of public funds to meet cost overruns.

SkyCity and the Government signed a deal in July 2013 for the casino to spend $402 million to build and operate the New Zealand International Convention Centre in exchange for legislation allowing the company to operate additional gambling tables and machines and extending its gambling licence to 2040.

The law was changed in late 2013, but just before Christmas, SkyCity managing director Nigel Morrison said cost over-runs and "design improvements" had seen the bill blow out to between $470 million and $530 million.

Mr Morrison told financial analysts SkyCity was unwilling to contribute more than $10 million to the gap without compensation for his shareholders, and floated the possibility of financial support from central or local government.

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This appears to have cost the project support, with figures who backed the plan now raising doubts over its viability.

Auckland Chamber of Commerce chief executive Michael Barnett is sold on the idea of a convention centre, but is now no longer sure the SkyCity deal is worthwhile.

"It seems to have been the missing piece in our offering of what we like to call an international city of scale - but what was offered was at no cost to the public purse," he said.

Mr Barnett was especially critical of the pre-Christmas announcement by Mr Morrison. "That was a like-it-or-lump-it statement. This has been an appalling exercise in communication," Mr Barnett said.

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A SkyCity spokeswoman said in a statement that the funding issue was still in the air and the company had committed to providing only the initially agreed $402 million.

"We are currently working on a solution with the Government to bridge the funding gap. In resolving this issue, we will ensure that the value of this significant and complex project is not diminished for our shareholders," the spokeswoman said.

Eric Crampton, head of research for right-leaning thinktank the New Zealand Initiative, said he was unconvinced of the need for a convention centre, but if a such a facility was needed the SkyCity deal represented the best option. "If the alternative were that the Government were going to build and run a convention centre anyway, the SkyCity deal beat that," he said.

Mr Crampton said he had thought the risk of construction cost over-runs had been "taken off the government's hands" with the deal. But Mr Morrison's request cast this assumption into doubt and also raised the possibility other costs - including if the centre became a "white elephant" - might also be sheeted home to taxpayers and ratepayers.

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He said if the NZICC now needed public funds, the business case for the facility should be reassessed. "We do need a pretty robust look at how many more conventions would really come to New Zealand."

Sue Sullivan, head of industry body Conventions and Incentives New Zealand, which has been lobbying for an international convention centre for more than a decade, was unwilling to argue the project was now value for taxpayer money.

She said a convention centre had considerable spin-offs, pointing to studies which showed international convention centre visitors were big local spenders. "We see it as an opportunity for new business, significant business. It puts New Zealand on the map," she said.

Asked if $110 million of central or local government funding committed to the convention centre would represent public money well spent, Ms Sullivan was noncommittal. "I would prefer not to comment on the financial aspects of this."

She was unwilling to elaborate on what lay behind her non-committal stance. "I won't answer it; maybe I will next week. There's a couple of things going on I need to check."

Ms Sullivan was unwilling to disclose what developments she expected in the near future.

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The debate

For

• Supporters say the new facility will allow New Zealand to bid for lucrative international conferences that attract thousands of well-heeled attendees.

• It will meet a need identified by the business community as far back as 2000.

• According to a 2011 NZ Institute of Economic Research study, the centre will create 340 full-time jobs and overseas delegates will spend $90 million annually.

Against

• Cost increases and design changes have prompted SkyCity to request up to $110 million in funding from the public.

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• Some financial analysts say gambling concessions already granted are worth more than the $402 million SkyCity has committed to spend on the convention centre.

• Convention centres internationally have typically required public support to operate.

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