The Dim-Post

May 14, 2013

Or your money back

Filed under: Politics — danylmc @ 8:16 am

Via Adam Bennett at the Herald:

Prime Minister John Key yesterday claimed public support for his pokies-for-national convention centre deal as the Opposition reacted angrily to a 35-year compensation clause which protects the casino against future law changes.

The Government yesterday signed an initial agreement under which SkyCity will build and entirely fund a $402 million 3500-place international convention centre. In return, the casino company is allowed 230 new pokie machines and other concessions that are worth up to $527 million over the life of the deal.

Crucially, SkyCity gets its licence extended to 2048 and until then, if any future Government changes gambling laws and affects the profits the company gets from its new concessions, the taxpayer will have to pay compensation.

Again, National introduces an exciting new tactic into New Zealand politics that left-wing parties could have a field day with. How about stringent pro-worker labour laws where trade unions get paid massive compensations if a subsequent government changes them? Or environmental policies with multi-billion dollar pay-outs to Greenpeace if a future National government wants to open new coal mines or offshore oil platforms?

This part of the Sky arrangement seems pretty daft to me. National really needed to look like they negotiated hard and hammered out a tough deal with Sky, and this blows that perception out of the water. A thirty five year compensation clauseIt makes them look like they rolled over for yet another multi-national, while a future government can just legislate the clause away at no political cost.

47 Comments »

  1. You’re just hatin’ on Joyce and Key’s awesome negotiation skills. They’re so smart they didn’t even need an open bidding process, they knew SkyCity was the one. It was just a matter of letting them name their price and then agreeing on it.

    Comment by George D — May 14, 2013 @ 9:07 am

  2. It reminds me quite a lot of Melbourne (where I’ve spent some time living) and the 1990s deal which the Victorian government made to get Transurban to build the City Link toll road around the city, which could make a comparable case study for this sort of thing. City Link is now raking in the cash at rates like AU$5.20 for every car travelling between the CBD and the airport. Last financial year it averaged an AU$1.2 million profit every day. A highlight of the deal is that for 34 years, the state government is required to compensate City Link for any legislative or infrastructure changes which might reduce the road’s traffic flow. eg. Things like reducing available parking in and around the city, any significant changes that might encourage more people to use public transport (like subsidising it), or introducing any service that might have “a detrimental effect” on CityLink’s financial performance. It’s quite restrictive on what the government’s allowed to do towards discouraging private vehicle use, if that’s what it might want to do, until about the late 2020s or so. Some people like the flashy road, though.

    There’s a myth that the deal also prevents an airport link train, but supposedly they were smart enough with that part of the deal and it’s only an issue if such trains are allowed to carry freight.

    Comment by MikeM — May 14, 2013 @ 9:18 am

  3. It’s a staggeringly horrible deal for New Zealanders. In return for a white elephant convention centre with a dubious (at best) business case we give Sky City the right to have even more pokie machines and a guaranteed licence to print money for 35 years? This is what National’s mad negotiation skillz get us? I’d be fascnitated to see SKy City’s political donations over the last few years…

    Comment by Conrad — May 14, 2013 @ 10:06 am

  4. Tobacco companies must be lining up to do a locked-in PPP deal of some sort with this govt of ace negotiators. Schoolboys.

    Comment by Sacha — May 14, 2013 @ 10:17 am

  5. Note Joyce’s comparison of the SkyCity deal with the Auckland Core Rail Link is only even remotely relevant if the project is to be a PPP. Something you’re not telling us, Stevie boy? And did your parents not teach you there’s a moral difference between gambling concessions and a public transit project?

    Comment by Sacha — May 14, 2013 @ 10:20 am

  6. It’s not often a government literally sells out an entire generation. My kids will be older than I am now when this thing expires.

    By the way, this is the sort of thing that should be fueling a debate about our constitution. Would an Upper House allow the House of Representatives to stomp all over the independance of future governments? I’d hope not!

    Comment by Hamish Campbell — May 14, 2013 @ 10:25 am

  7. Conrad, SkyCity have given money to all the major parties in Parliament, except the Greens (who’ve refused to take their money in the past). They even gave money to Jim Anderton’s Progressives, at one stage. It’s a cheap investment.

    Sacha, tobacco companies don’t need to. Their negotiation interests are being protected by the US in secret TPPA negotiations. Once that agreement is signed, we give away our rights to make legislation that will harm any interest held by foreign investors. We’re lining up in the hope that Fonterra can get slightly better access to the US – there appears to be no other reason.

    Once we sign such agreements we can still make legislation. We’re just compelled to pay investors for all of the losses (real and paper) they accrue due to any change in our law.

    Comment by George D — May 14, 2013 @ 10:28 am

  8. Jane Kelsey yesterday on the TPP implications for this SkyCity deal: http://www.scoop.co.nz/stories/PO1305/S00173/tppa-could-bypass-cap-on-liability-for-tighter-gambling-laws.htm

    Comment by Sacha — May 14, 2013 @ 10:40 am

  9. Woulnt it be ironic if the deal couldnt be pased because Banks was in jail for accepting a ‘bribe’ from sky city

    Comment by Dv — May 14, 2013 @ 10:40 am

  10. Mai Chen says that the clause re compensation if law changed, is not legally binding unless 75% of Parliament agree to it. Hope so.
    [audio src="http://podcast.radionz.co.nz/ckpt/ckpt-20130513-1814-constitutional_lawyers_view_of_skycity_deal-048.mp3" /]

    Comment by xianmac — May 14, 2013 @ 10:43 am

  11. It isn’t legally binding. What Joyce et al. are relying on is business and their media buddies making a huge song and dance that such a law change would be ‘the worst thing ever to happen for business’ (ala NZ Power). In that way they can ensure that any law change would not be without political cost, reducing the chances of future governments actual doing so.

    Comment by wtl — May 14, 2013 @ 11:07 am

  12. Prime Minister John Key yesterday claimed public support for his pokies-for-national convention centre deal

    I must have missed the spontaneous outpourings of pent-up demand for a convention centre.

    Comment by herr doktor bimler — May 14, 2013 @ 11:11 am

  13. What Joyce et al. are relying on is business and their media buddies making a huge song and dance that such a law change would be ‘the worst thing ever to happen for business’ (ala NZ Power). In that way they can ensure that any law change would not be without political cost, reducing the chances of future governments actual doing so.

    The threat of a “summer of discontent” was enough to get the Clark-Anderton Government to back down on a lot of potential policy. What has changed since then is the balance between caucus and the membership in Labour, which is currently going through rebalancing and reform. That shift is one of the reasons they’ve started to take stronger positions on many issues in the last 6 months.

    Comment by George D — May 14, 2013 @ 11:18 am

  14. In 35 years, I wonder how it will look to have John Key’s name on that particular building.

    Comment by Alex Braae — May 14, 2013 @ 11:33 am

  15. One of the few certainties about legislation in NZ is that legislation passed by the current government doesn’t, can’t and shouldn’t bind future governments. If Key and Joyce have promised Sky City that they can bind future governments and Sky City are such schmucks as to believe them, maybe Key and Joyce are slick negotiators after all (although I suspect the actual situation is more as described by wtl in comment 11).

    Comment by Psycho Milt — May 14, 2013 @ 11:39 am

  16. “One of the few certainties about legislation in NZ is that legislation passed by the current government doesn’t, can’t and shouldn’t bind future governments.”

    Maybe this is a relevant point to me made in that constitution discussion?

    Comment by MikeM — May 14, 2013 @ 11:41 am

  17. It gives insight into the likely outcomes of this governments TPPA negotiations huh…

    Comment by garethw — May 14, 2013 @ 11:43 am

  18. Perhaps someone well-informed with ear to the ground and nose to the grindstone could put his shoulder to the wheel and give us an apologist’s view of the benefits that are about to accrue? NeilM, where are you when we need you?

    Comment by paritutu — May 14, 2013 @ 1:33 pm

  19. It’s a terrible deal for the country, but it’s pretty effective short-term politics by the Joyce gang. They know how easily spooked Labour are by mythical dragons. Invoke “responsible government” and you can be as irresponsible as you like.

    All National have to do is point at Shearer, say “Whatcha gonna do about it, eh?”. He’s got nothing.

    Comment by sammy 2.0 — May 14, 2013 @ 1:49 pm

  20. “NeilM, where are you when we need you?” Neil doesn’t love National, he just hates Labour like you hate your ex.

    I reckon the deal is a great, creative, way to get something built for NZ… except for the bit where it relies on the misery of problem gambling for funding…

    Comment by Clunking Fist — May 14, 2013 @ 2:19 pm

  21. SkyCity will build and entirely fund a $402 million 3500-place international convention centre. In return, the casino company is allowed 230 new pokie machines and other concessions that are worth up to $527 million over the life of the deal [which is 35 years].

    Assuming 5% discount rate for both the investment and the concessions:
    Net present value of $402m repaid over 10 years (through, say, a long term bond issue) : $310.4m
    Net present value of $527m of concessions received evenly over 35 years: $246.6m

    Oh noes!

    Comment by Phil — May 14, 2013 @ 2:39 pm

  22. So does that mean it will cost Sky City more to build the convention centre than they will receive from concessions?

    Comment by TransportationDevice A7-98.1 — May 14, 2013 @ 4:19 pm

  23. No, it means that Phil’s calculation does not correctly give either the cost or benefit to SkyCity, or both.

    Comment by RJL — May 14, 2013 @ 4:42 pm

  24. >It reminds me quite a lot of Melbourne (where I’ve spent some time living) and the 1990s deal which the Victorian government made to get Transurban to build the City Link toll road around the city, which could make a comparable case study for this sort of thing. City Link is now raking in the cash at rates like AU$5.20 for every car travelling between the CBD and the airport. Last financial year it averaged an AU$1.2 million profit every day.

    That happened when I lived there and it fucked me off so much, especially because the road to the Airport was built on ratepayer dime well in advance of Transurban getting the deal. I used it for years for free, then one day, it was tolled. So I was paying a toll not to build the damned road, but to build the other roads they had, which I seldom used. And the tolls were administered by a fuxored system that you had to pay in advance for. So added to my monthly bills was a new bill, a new account I had to maintain, in which I paid for the right to use roads that had previously been free.

    Comment by Ben Wilson — May 14, 2013 @ 4:42 pm

  25. BW, at least the tolls encourage you on to public transport, so that you don’t, you know, cause global warming and stuff.

    Sorry couldn’t help it. Taxes like tolls and carbon tax are DESIGNED to modify behaviour, so quit complaining.
    I was in London when the congestion charge came in. Couriers, taxis, tradesmen were all up in arms about it before it came in. Afterwards, they shut up because the roads were clear and parking was easy, and the charge was simply passed onto the client, who expected to be charged for it anyway.

    Comment by Clunking Fist — May 14, 2013 @ 5:55 pm

  26. My challenge to the greens and labour is this. If you truly believe that adding 300 porkies is the end of the world .why stop at 300 get rid of all pokies machines .But we all know that wont happen the Green Party talk about mandates last time I looked 90% of the country wouldn’t trust them to run a piss up in a brewery

    Comment by Graham — May 14, 2013 @ 6:53 pm

  27. Hey Clint, sorry but its clear Danyl now appears to be (sadly) your mere equivalent of DPF.

    However apart from a few sanctimonious journalists and left wing zealots, no one really gives a damn about SkyCity.

    Its SkyCity (one oddly capitalised word) btw Clint if you want to engage Auckland outside the Wellington beltway and student politics, Sky is a TV channel. Just saying.

    Comment by Grant — May 14, 2013 @ 7:18 pm

  28. Where do all these semi-literate and incoherent right-wingers come from? Are they all Aaron Gilmore?

    Comment by Judge Holden — May 14, 2013 @ 7:26 pm

  29. …put his shoulder to the wheel and give us an apologist’s view of the benefits that are about to accrue? NeilM, where are you when we need you?

    Doing other things.

    The standard of abuse round here has dropped to a point it’s no longer entertaining.

    There’s probably quite a few centre left voters who look at Labour now and think – too much Curran, not enough Clark.

    Having Labour people allege this amounts to being conservative or having some problem with authority, and in such in unimaginative terms, may not lead many to think otherwise.

    Comment by NeilM — May 14, 2013 @ 8:36 pm

  30. It is unfortunate that we now have an opposition with such a flagrant disregard for the rule of law, that businesses now see such clauses as of value when dealing with the government. Turei and Norman are about a quarter turn of the dial away from Chavez right now.

    Comment by Swan — May 14, 2013 @ 9:19 pm

  31. Sigh1 Once again our wheeler dealer wall street whiz kid rorts NZ values.

    How long is it before we become part of Hawaii or (oh joy) maybe a state of the USA?

    This is where this Gordon Gecko of a PM is leading this once independent little country into.

    Comment by peterlepaysan — May 14, 2013 @ 10:08 pm

  32. @NeilM,

    I think you just confirmed Clunking Fist’s analysis at 2:19 pm.

    @Swan

    Turei and Norman are about a quarter turn of the dial away from Chavez right now.

    You need to re-read your talking points. You’ll see from Kiwiblog that the Greens are to Chavez’s left, and Labour are trying to outflank them there.

    How can you hope to retain power in 2014 if you can’t even sing in tune from the same song sheet?

    Comment by Flashing Light — May 14, 2013 @ 10:53 pm

  33. Phil’s calculation does not correctly give either the cost or benefit to SkyCity, or both.

    Sure, it was a rough guesstimate… but it’s still many steps in the right direction to “500 million is larger than 400 million. The SKY IS FALLING!!!”

    Comment by Phil — May 15, 2013 @ 12:01 am

  34. Neilm, it is like the standard lite here these days.

    Comment by petey — May 15, 2013 @ 7:01 am

  35. Phil,

    Surely the herald would have discounted the future benefits to net present value and not just added them up right. It’s not like Herald reporters are economically illiterate are they? Oh right…

    Comment by Swan — May 15, 2013 @ 7:24 am

  36. Flashing light,

    I have performed Turing tests on many left wing commenters and determined they are bots, but be assured I am a real live human just telling it how I see it.

    Comment by Swan — May 15, 2013 @ 7:26 am

  37. Phil, the main issue is not that the SkyCity benefits from a government contract. That is fair enough. The two issues are a) whether the NZ government need to fund a larger convention centre at all, and that b) SkyCity’s benefit comes at a great cost to New Zealand (in terms of gambling addiction and the consequent health/social services that will be required to pick up the pieces).

    Comment by RJL — May 15, 2013 @ 9:27 am

  38. Fist, the problem is Melbourne is that the tolls can’t push people onto public transport, because there is no PT alternative. The airport is a nice simple example – your choice is the SkyBus from Southern Cross Station ($15 each way) or a taxi. The bus is more than slightly ridiculous for anyone living north of Southern Cross Station, as it takes longer and costs more to go south to the station then north to the airport than it does to take a taxi direct (in our case, ~20 minutes by taxi or over an hour by train/SkyBus).

    The train line to the airport is a bit like the one to Auckland Airport – the only time it is discussed is when it’s ruled out.

    Comment by Moz — May 15, 2013 @ 10:43 am

  39. “as it takes longer and costs more to go south to the station then north to the airport than it does to take a taxi direct ”

    Um, that’s the thing about public transport v taxi/car: a slight inconvenience. At least you don’t have to pay for parking if you take the bus (and from memory isn’t it $20 one way, but $23 for a return ticket?)

    Comment by Clunking Fist — May 15, 2013 @ 1:18 pm

  40. PS why not agitate for a SkyBus to other parts of the city?

    Comment by Clunking Fist — May 15, 2013 @ 1:20 pm

  41. SkyCity’s benefit comes at a great cost to New Zealand (in terms of gambling addiction and the consequent health/social services that will be required to pick up the pieces).

    Well, they do pay taxes on the profit and (as far as I know) contribute toward various problem gambling initiatives and foundations. They’re also presumably going to hire more staff.

    I’d be hesitant to jump on the more pokies = more problem gambling (which you don’t say explicilty, but I’m reading into your comments) as there are plenty of ways for the problem gamblers in NZ to part with their money already. Adding and extra 230 pokie machines under the same roof as the existing ones doesn’t do anything to “improve” access to gambling.

    Comment by Phil — May 15, 2013 @ 1:33 pm

  42. “Adding and extra 230 pokie machines under the same roof as the existing ones doesn’t do anything to “improve” access to gambling.”

    Why does SkyCity wish to do it, then?

    Comment by MikeM — May 15, 2013 @ 2:04 pm

  43. Phil – the Problem Gambling Foundation fella claimed on Nat Radio that 80% of the problem gamblers they see are hooked on pokies, not Lotto, horsies, etc. Hence the concern over increased pokies. Not to mention the corrupt process Key ran, etc.

    Comment by bob — May 15, 2013 @ 8:00 pm

  44. 43.Phil – the Problem Gambling Foundation fella claimed on Nat Radio that 80% of the problem gamblers they see are hooked on pokies, not Lotto, horsies, etc. Hence the concern over increased pokies.

    I don’t dispute that pokies are part of the problem-gambling problem. What I would dispute, however, is that adding 230 more machines to a location that already has 1,600 under its roof is going to increase the number of people identified as ‘problem gamblers’.
    To reword what I said above – if you’re a problem gambler in Auckland, you’re probably already at SkyCity. If you don’t have a gambling problem, then you’re not going to develop one because the number of machines in Sky City increased by 14%.

    Certainly the current outcome would have less of an impact on national problem-gambling levels than if they were opening a casino where one doesn’t currently exist, like Wellington.

    Comment by Phil — May 16, 2013 @ 1:49 pm

  45. Is there a clear reason to believe that they’ll be under the same roof, and not at another site elsewhere?

    My reading from some articles was that there’s more in the deal for SkyCity than the obvious 230 extra machines that have been reported, but I’m not too clear on what those other things are.

    Comment by MikeM — May 16, 2013 @ 2:20 pm

  46. “if you’re a problem gambler in Auckland, you’re probably already at SkyCity. If you don’t have a gambling problem, then you’re not going to develop one because the number of machines in Sky City increased by 14%.”
    Phil, doesn’t that depend on supply of pokies & demand of pokie-fixated problem gamblers? If SkyCity has 1600 pokies, but regularly over 1600 punters willing to ‘play’ them at the same time, then they have a shortage of pokies; giving SkyCity 230 more pokies would enhance their revenue. And if SkyCity are not short of pokie machines at some times, why did they primarily demand extra 230 pokies in exchange for an offer to spend hundreds of millions on a convention centre (which is expected to lose money)?
    MikeM – the artist’s impression seemed to indicate the convention centre would be 1 block closer to the waterfront and Queen St than the casino. Dunno if they will have extra pokies in the centre or the casino; presumably the latter.

    Comment by bob — May 17, 2013 @ 1:40 am

  47. The half-dozen-or-so times I’ve been inside the casino when visiting Auckland, I don’t think i’ve ever seen the pokies at more than half ‘occupancy’. Some of the tables (like the low-value balckjack and roulette) can get very busy. I wonder if the 230 is acutally a combination of pokies and other tables?

    Anyway, a quick google suggests a slot machine pays for itself in less than a year. Even in a low ‘occupancy’ state, SkyCity are probably still nowhere near the point that marginal cost rises to meet marginal revenue. They may just be trying to cram more machines in the same space and better utilse their floor area.

    I see the DPF has a Herald article which estimates 184 extra problem gamblers… the comments thread there is unusally helpful in trying to find where that number comes from.

    Comment by Phil — May 17, 2013 @ 1:21 pm


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