The Dim-Post

February 11, 2015

Win by not playing

Filed under: Uncategorized — danylmc @ 8:21 am

Two weeks ago the Herald ran this op-ed by former Sky-City executive Heather Shotter making an impassioned, Jane-Austenesque plea for taxpayer funding for Sky City’s ‘free’ convention center:

It is widely acknowledged that international convention centres are essential elements that contribute to the growth and development of big cities. Not only do they bring substantial economic benefits, encouraging international business delegate expenditure during the tourism off-season, but if done well, they are pivotal to promoting the unique character or brand of a city to a wide range of international audiences.

But like any large pieces of infrastructure, convention centres come at a considerable cost.

All over the world, other large cities have acknowledged this and their governments see value in funding convention centres, either fully or with partial cash injections, because of the other economic benefit that they drive.

Centres in Sydney, Melbourne, Singapore, Kuala Lumpur and Hong Kong were all constructed as part of comprehensive developments where the government and private sector have worked together to develop world-class conference and exhbition facilities.

Firstly, it is widely acknowledged by pretty much every independent economic analysis of convention centers you can find that they’re a massive scam that construction companies and politicians perpetuate on taxpayers. The promised benefits never match the tax write-offs and other public costs these companies impose, and in the case of casinos they’re completely wiped out by the negative impacts of the business.

Secondly, this reference to regional competitors is very meaningful, because this is a strategy that casinos and convention center construction companies practice all over the world. They play regional (and in this case national) tourist destinations off each other. Here’s a Washington Post article from June 2014:

All those consultants’ reports, it turns out, were based on optimistic assumptions and failed to anticipate the impact of industry consolidation and slower economic growth on the demand for meeting space. Even more curious was the consultants’ failure to take into account all the other cities contemplating subsidized expansions — something they surely knew because the same group of firms had prepared virtually all of the reports.

Rather than acknowledge their mistakes, however, the CIC convinced political leaders that the reason bookings had failed to meet expectations was that they didn’t have a big “headquarters hotel” to offer convention planners, who value such hotels because they reduce the cost and complexity of running such large events. Curiously, the private sector has been reluctant to seize on this golden opportunity to build them, so dozens of cities concluded that they had no choice but to provide subsidies for the hotels as well.

It’s a bit like being an arms company and selling weapons to a bunch of countries at war with each other. If/when National gives Sky their hundred million dollar payout, Sky can then turn around and start lobbying the governments in Brisbane, Melbourne, Sydney etc for tax write-offs or taxpayer cash because they’ll need to compete with Auckland. And, inevitably, in a few years time we’ll be seeing more op-eds in the Herald insisting that this wildly profitable casino company needs more taxpayer money to compete with whatever Sky just secured from state governments in Australia.

34 Comments »

  1. Typo in the last paragraph, you have written payout, I think you mean payoff?

    Comment by michael — February 11, 2015 @ 8:35 am

  2. “It is widely acknowledged that international convention centres are essential elements that contribute to the growth and development of big cities. Not only do they bring substantial economic benefits, encouraging international business delegate expenditure during the tourism off-season”

    This is debatable. There are zombie convention centres all over the world that sit empty or mainly empty.

    Comment by Bill Bennett — February 11, 2015 @ 8:40 am

  3. To understand the issues correctly substitute ‘monorail’ for ‘convention centre’.

    Comment by Bill Bennett — February 11, 2015 @ 8:43 am

  4. Disagree on that casinos have substantial negative effects. Otherwise….

    Comment by Eric Crampton (@EricCrampton) — February 11, 2015 @ 9:16 am

  5. Disagree on that casinos have substantial negative effects. Otherwise….

    I know, I know, compulsive gamblers experience the joy of losing everything they own, and that’s a benefit.

    Comment by danylmc — February 11, 2015 @ 9:25 am

  6. If you want to know why the Herald and other media won’t be investigating this story, just check out the black banner on this link.

    http://www.nzherald.co.nz/skycity/news/article.cfm?c_id=1503717&objectid=11395341

    The name of the spokesman will be familiar too. Journalism just doesn’t pay the bills any more.

    Comment by sammy 3.0 — February 11, 2015 @ 9:42 am

  7. How ’bout we exchange taxpayer funding for the extra allowances Key’n’co gave at the beginning of the project in lieu of taxpayer funding? Win-win?

    Comment by Michael — February 11, 2015 @ 9:42 am

  8. I know, I know, compulsive gamblers experience the joy of losing everything they own, and that’s a benefit.

    The benefit is that we can regulate and scrutinise the environment with the casino, minimising the harm of gambling and offering assistance to compulsive gamblers. Gambling isn’t something that goes away.

    Comment by unaha-closp — February 11, 2015 @ 9:50 am

  9. The benefit is that we can regulate and scrutinise the environment with the casino, minimising the harm of gambling and offering assistance to compulsive gamblers. Gambling isn’t something that goes away.

    But not all forms of “gambling” are the same, are they? http://www.newrepublic.com/article/115838/gambling-addiction-why-are-slot-machines-so-addictive

    Comment by Flashing Light — February 11, 2015 @ 9:58 am

  10. You’d need to have avoided the last decade of news reports to believe Sky City actually minimizes the harm of gambling. If you want the links – start with Google, page one.

    Comment by sammy 3.0 — February 11, 2015 @ 10:00 am

  11. Around 90% of the convention business is allready catered for by existing facilities, anyone heard of Aotea Convention Centre, which WAS built and subsidised by ratepayers.

    On top of the Sky City build costs the taxpayers will be expected to pay for the marketing costs plus the depreciation as it wont in itself cover the running costs

    Comment by ghostwhowalksnz — February 11, 2015 @ 10:01 am

  12. Isn’t basing the assessment of the impact of casinos on problem gamblers a little unfair? That’s like judging the impact of pubs on how they effect alcoholics.

    Comment by kalvarnsen — February 11, 2015 @ 10:26 am

  13. “Isn’t basing the assessment of the impact of casinos on problem gamblers a little unfair? That’s like judging the impact of pubs on how they effect alcoholics.”

    If we had a pub in central Auckland that occupied two entire blocks, was expressly designed to encourage people to drink as much as possible, and had an entirely voluntary “host responsibility” framework to minimise (any publicity about) the harm caused to its best customers, I would be judging it pretty goddamned hard.

    Comment by samfnz — February 11, 2015 @ 10:51 am

  14. Isn’t basing the assessment of the impact of casinos on problem gamblers a little unfair? That’s like judging the impact of pubs on how they effect alcoholics.

    If you replace “alcoholics” with “problem drinkers” then this is exactly how the effect of pubs should be assessed, though it isn’t as a matter of course, because generally “Freedom of Choice!! Nanny State!! Regulation bad!!!”
    Note that in some LGs district licensing rules, this is one of the considerations – the same as it is for new off-license applications.

    Comment by Gregor W — February 11, 2015 @ 10:51 am

  15. Paul Little pointedly remarked almost 3 years ago the following, which seems to ring eevn more true now:

    “We are, admittedly, the ideal location for conventions of the Vanuatu Chamber of Commerce or the Norfolk Island Entrepreneurs Association.

    But that’s about it. Australian bodies prefer to look west when selecting sites for their bunfights. Most groups will be better off closer to home.”

    Comment by Kumara Republic (@kumararepublic) — February 11, 2015 @ 10:51 am

  16. Slight correction to the above – for “entirely voluntary”, substitute “legally required but toothless and repeatedly flouted”: http://norightturn.blogspot.co.nz/2012/05/gambling-commission-and-host.html .

    Comment by samfnz — February 11, 2015 @ 10:56 am

  17. Gambling is, except for the state lottery, illegal in mainland China. Consequentially no-one knows how much of it goes on, but the estimates are in the trillions of yuan. We could have this situation here too, we just need to ban gambling.

    In New Zealand we have casinos and each of them is so highly scrutinised that Google will generate a plethora of articles. We also have horse tracks, TAB, lotto, pub pokies – which are scrutinised and documented and regulated. And we have illegal gambling and internet gambling, which aren’t monitored and we can’t stop. Ours is a better system, because we can find and help some compulsive gamblers; and we can tax some of the rest.

    Comment by unaha-closp — February 11, 2015 @ 11:07 am

  18. “Ours is a better system, because we can find and help some compulsive gamblers; and we can tax some of the rest.”

    I’d agree with you that it’s better to provide a visible place for stuff that’ll happen anyway, but I think it’s completely valid to consider how much SkyCity and its related corporates may be manipulating the system, through PR machines and background lobbying, to reduce regulation that’s meant to help compulsive gamblers (but cuts into SkyCity’s profits) and then have tens to hundreds of millions of dollars of public money distributed to its shareholders.

    Meanwhile on a tangent, check out Melbourne Crown Casino’s publicity campaign which flooded TV screens when I lived there in 2012, and where you’d barely know that Crown had anything to do with gambling. A more recent variation of this commercial replaced the phrase “gaming areas” with “function areas”. On the other hand, this is a state which devotes an annual public holiday (Melbourne Cup Day) to making everyone happy about gambling, so at least out in public, the presence of gambling tends to have a more positive acceptance.

    Comment by izogi — February 11, 2015 @ 11:35 am

  19. Sky City CEO, in today’s NBR, “If Auckland doesn’t want it, if New Zealand doesn’t want it, quite frankly that’s fine with SkyCity. We don’t have to do this,” Mr Morrison said.

    Sounds reasonable. Let’s have the final terms of the deal spelt out and have a referendum on it.

    Comment by Neil Miller — February 11, 2015 @ 11:49 am

  20. Let’s not forget the govt has committed $284m to a convention centre in ChCh as part of the rebuild (already derided as a white elephant), so now they’ll be investing the thick end of $400m in two competing and probably unviable ventures.

    Comment by philstewart — February 11, 2015 @ 2:16 pm

  21. The gambling concessions are estimated to be worth over $400m so what’s another $100m or so? The original deal was a scam insofar it pretended we were getting it for nothing.

    Comment by Swan — February 11, 2015 @ 2:59 pm

  22. The gambling concessions are estimated to be worth over $400m so what’s another $100m or so?

    Ah! The good old sunk cost fallacy!!

    Comment by Flashing Light — February 11, 2015 @ 3:30 pm

  23. Swan: the issue isn’t so much about actual dollar amounts. The issue is that a promise was explicitly made that the taxpayer wouldn’t have to cough up for the whole thing in the first place. Now that promise has been torn up and thrown in the fireplace, this could end up like the Gravina Island Bridge or Montreal’s Big Owe.

    Comment by Kumara Republic (@kumararepublic) — February 11, 2015 @ 3:40 pm

  24. “Gambling is, except for the state lottery, illegal in mainland China. Consequentially no-one knows how much of it goes on, but the estimates are in the trillions of yuan. We could have this situation here too, we just need to ban gambling.”

    There’s a pretty common misconception, common to both left and right, that goes like this: “The government can’t ban anything, because it just drives the behaviour underground – except when it’s banning things I don’t like, then it works fine”

    Comment by kalvarnsen — February 11, 2015 @ 6:40 pm

  25. Convention centres, professional sport people, blockbuster movie makers, assorted cultural people. All want taxpayer funding, concessions or other special treatment due to claimed positive externalities. I’m (say) an employer, it’s great that I’m employing people & thus feeding all these families, can I get a concession please? I’m quite rich (say) and spend lots of money in my local community, even donating some money, can I get a concession please? And a knighthood. I’m old and fought and died in 2 world wars, can I have free everything, so I can continue to afford to visit my grand kids in the UK very year?

    Fuck off: flat tax plus citizen salary please.

    Comment by Clunking Fist — February 11, 2015 @ 6:41 pm

  26. 22 & 23, you may want to read Swan’s comment again?

    Comment by Clunking Fist — February 11, 2015 @ 6:44 pm

  27. @CF,

    I get Swan isn’t endorsing the fallacy. But you can bet it’s a factor in the Govt’s “thinking” on this issue!

    Comment by Flashing Light — February 11, 2015 @ 8:12 pm

  28. How ugly is this thing?

    Nelson St, Auckland City isn’t a pretty street so anything uglier must be uniquely awful and might thus become iconic. If the choice between spectacularly ugly cheap and blandly acceptable expensive – we should go for the spectacular.

    Comment by unaha-closp — February 12, 2015 @ 9:04 am

  29. philstewart — February 11, 2015 @ 2:16 pm –

    “Let’s not forget the govt has committed $284m to a convention centre in ChCh as part of the rebuild”

    which is even more dodgy when you add that the govts own documentation clearly states that there isnt the market in NZ for more than one international con center – and also add that they have already made noises about one being supported in queenstown.

    I smell a con job of epic proportions

    Comment by framu — February 12, 2015 @ 9:06 am

  30. Oh look, the polling is in: http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11399811

    Comment by samfnz — February 12, 2015 @ 9:13 am

  31. @unaha-closp. Isoreconic?

    Comment by Neil Miller — February 12, 2015 @ 11:04 am

  32. The benefit is that we can regulate and scrutinise the environment with the casino, minimising the harm of gambling and offering assistance to compulsive gamblers. Gambling isn’t something that goes away.

    The first real inspection of NZ casinos happened last year, after Campbell Live embarrassed the DIA into doing so. Of the 16 inspections they did (sending in trained staff to exhibit clear signs of gambling harm), they found 14 failures.

    The SkyCity Group know how much is spent by each player, and how much is spent on each machine. But for the rest of us it’s a well kept secret, and their accounts are inscrutable.

    Comment by George — February 12, 2015 @ 1:07 pm

  33. @George: Are you seriously saying the DIA has never inspected a casino before 2014? I have a friend who once worked there as a casino inspector, and she was pretty busy.

    Comment by kalvarnsen — February 12, 2015 @ 6:23 pm

  34. If you’ve not seen it Matthew Hooten’s piece in the NBR this week is required reading

    http://www.nbr.co.nz/opinion/skycity-debacle-offers-morbid-fascination

    Comment by TerryB — February 13, 2015 @ 10:31 am


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.

%d bloggers like this: