Fran O’Sullivan looks at two deals…Michael Cullen’s buy back of Kiwirail off Toll Holdings and John Key’s SkyCity deal. One cost the taxpayers truckloads of cash and the other cost the taxpayers nothing.
First the Kiwirail deal.
When Michael Cullen bought “the train set” back from hard-nosed Australian transport operators Toll Holdings in 2008, Australian wags labelled it the Sale of the Century.
The former Labour Finance Minister wrote a cheque for $665 million to acquire Toll NZ’s rail and Cook Strait ferry operations and relaunched the business as KiwiRail in a patriotic fanfare at Wellington Railway Station. Toll had placed its book value for the assets at only $430 million. Naturally, Toll was feted by Australian analysts and the sharemarket which regarded the Kiwi assets as “a dog” and couldn’t believe the price the Kiwis were paying.
Hidden costs soon emerged (as well as preferential undertakings to Toll) and the “dollars out” cost became $690 million.
By the following April, the rail assets that the taxpayer had stumped up $690 million for were revalued at $349 million by Treasury – an upfront loss to the taxpayer of $321 million. Â
Kiwirail has gone on to cost taxpayers considerably more than that. What is interesting is the next part.
It’s worthwhile recalling this cautionary tale when we assess the quality of the deal two businessmen-turned-politicians – John Key (who did a great deal of initial eyelash fluttering with the SkyCity board) and Steven Joyce – have notched.
Neither Cullen nor the Key/Joyce combo involved the New Zealand Treasury as a frontline negotiator in their respective deals.
Politicians of both Labour and National stripes wanted to get to the finish line and carping memoranda from Treasury officials full of economic jargon, net present values, cost-escalators, discounted cash flow etc; not to mention the crying need to invest in other more worthy investments, did not feature highly in their deliberations.
It’s worth remembering this when Labour bangs on now about Joyce/Key short-circuiting good governmental processes.
Labour’s moral high ground doesn’t look so very high when it comes to such matters.
Oh, look, another massive hypocrisy from Labour, a deal conducted behind closed doors, paying way over the mark and not involving Treasury. Labour really are sanctimonious pricks.
SkyCity meanwhile has cost the government how much? Oh that’s right nothing.
We won’t know for a while yet whether the “convention centre for pokies” deal SkyCity inked with the Key Government is the Buy of the Century. But judging by the raft of official papers released over the past two weeks, it does (on the surface) look very much as if SkyCity has scored a licence to print money with a good deal of downside risk underwritten by the Kiwi taxpayer.
Really? Underwritten how? The government has simply locked in a monopoly situation in Auckland which existed anyway and there was no political will to change. Labour and Greens oppose pokies out-right, despite availing themselves to sumptuous entertainment so they are never going to allow a second or even third casino to challenge SkyCity are they? Once again Sanctimonious crocodile tears from a bunch of lying hypocrites.
The problem is the deal created an uneven playing field and reinforces the impression that the Key Government will opt for backroom deals over due process.
Again, Really? All the other bidders required either government land, ratepayer cash, taxpayer cash or subsidies…in other words back handers. Only SkyCity cost taxpayers nothing.
We got a good deal, paid fro by stupid people being taxed for their stupidity. Just like smokers, I thank gamblers for their contribution to society.