The great Sky City tax payer robbery, coming to a trough near you

Mr Joyce said he couldn’t rule out the taxpayer helping to meet part of the shortfall.

No.

No no no!

Design improvements, a new five-star hotel and inflation have rocketed up the SkyCity convention centre’s pricetag by as much as $130 million.

And while additional gambling concessions are off the table to meet any shortfall for the building, taxpayer funding is under discussion.

SkyCity yesterday lodged its resource consent application for the centre, which it’s building in return for concessions such as extra gaming machines worth as much as $42 million a year in additional profits.

Announcing the application, SkyCity chief Nigel Morrison revealed the cost of the convention centre had jumped to between $470 million and $530 million.

The casino operator had previously estimated it would cost $402 million, which it agreed to cover in return for extending its Auckland gaming licence until 2048.

SkyCity — which reported a net profit of $123.2 million last year — is now in talks with the Government on how to fund the increased cost.

In August, SkyCity announced it had increased the scope of the project, unveiling plans for a 12-storey five-star hotel.

Private Public Partnerships are agreements where the private partner takes the risk away from the public, not the other way around.  

Why Joyce is even entertaining the thought is clearly to start to soften up the public to the idea.  The Government doesn’t have the sort of money to extend paid parental leave to 26 weeks.  Now, argument aside about its desirability, they say we can’t afford it.  But then we have 27 million for a flag referendum and a nudge to a private company that they can expect the Government to consider helping out paying for their convention centre.

The deal with the tax payer was clear:  Convention centre for more pokey machines.  At no time did we talk about or agree to paying hard cash towards the building of an asset that will not be owned by the public.

This is part of the “dump the dirty news before Christmas” time of year, and it shows National are not shutting the door on making your taxes pay for a company’s expansion without taking an ownership in it.

Worse, this is such a visible public private partnership initiative, it’s going to be a flagship for those that will come in future.  This will have two chilling effects:  either PPPs are no longer considered as the public are no longer willing to underwrite commercial risk incurred by private companies, or, the precedent is accepted that commercial risks faced by the private partner is to be underwritten by the tax payer – in essence – a blank cheque.

 

– Adam Bennett, Sky City News, NZ Herald

 


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  • Jaffa

    If they do that, it’s a deal breaker for me.
    I won’t be voting National next time!

    • Excitedly awaiting Whodunnit

      Yup, same but the issue is who do I choose to waste my vote on, because I cant see me voting for any of the others.

      • Mick Ie

        I also feel very strongly that the taxpayer should not be contributing; This is Sky City’s financial mess, not ours. However, this will be a calculated gamble (no pun intended) on National’s part, as they know in three years time it is unlikely there will be an alternative party for us to vote for. Is this what is referred to as 3rd term arrogance?

        • Alright

          Agreed.

          Simple solution: don’t vote.

  • Timboh

    Thanks WO. In this day and age it really takes a very special type of stupid to even ‘pull it up the flagpole and see who salutes’ with this issue. This is the Chinese water torture that eventually brings down a government. Small drips of stupid lapped up by the vampires of the MSM parliamentary press gallery.

  • Dave_1924

    Absolutely no relief for Sky City on this. A highly politically contenious deal was done to finance the convention centre. Sky signed up, the Government got a political kicking and now its time for Sky City to do what it has signed up to do.

    “Design improvements, a new five-star hotel and inflation”…. so head line inflation is 1% in NZ. So the real reason here is Sky wants to build a 5 star hotel to entice high rollers with, imho. So that is something they can damn well fund themselves.

    Sky paid $110 million in dividends last year at 20 cps. Seems they have oodles of capital to fund things with. So maybe they should stick their hands in their own pockets and fund the development. After all the convention centre brings a lot of juicy additional gaming profits to bank roll it all.

    I supported the original deal of more gaming machines for a decent convention centre… but no more. Harden Up Sky City and get the construction started…

    • Alright

      …..or can the whole thing.

      If this government commits one more dollar or provides one more concession to this it will lose my vote.

      Frankly, I don’t care how many people come to Auckland for conferences, and I want to subsidise their attendance even less.

      Key and Joyce are out to lunch for even suggesting this might be on the table.

      Sky City (and its shareholders) are a nett drain on Auckland already.

  • JC

    The deal had my support for the concept of a PPP. This new deal would likely poison the well and provide a huge lift to the Left.

    Could Key win a forth term with this over his head?.. I doubt it because it will simply become the focus of all the things that will go wrong over the next couple of years and kill off enterprises like Charter schools under a change of Govt.

    On the bright side, it opens the door for Collins to take Joyce’s place.

    JC

  • willtin

    I’m wondering whether or not to actually believe the story. How could any NZ Government actually be so stupid as to even suggest such a proposal? If anything, the tables should be turned and any concessions to changing the original plan, should incur a fee, payable to the Government – us!

    • Excitedly awaiting Whodunnit

      Take 15 years off their gambling licence then we shall see…

      • rangitoto

        Or give a licence to another party. Nothing like a bit of competition.

  • Excitedly awaiting Whodunnit

    I have a project myself that I have had a bit of a financial rewrite of and I’d like the taxpayer to chip in to help me finance it.

    By help I mean pay the rest of the cash.

    Of course as payment I will drive the project nicely and when I sell it I will ensure that the money I might make will all be reinvested into my bank acct and used later in my next project.

    Really, a commercial business has altered their plans after an agreement was reached and now they want the taxpayer to chip in for their upgraded plans?
    Umm no!

    You greedy bastards can take the money you make in profit from your greedy little schemes and pay for it yourself.

  • caochladh

    A deal is a deal, full stop. Imagine if you throw a $10,000 chip on the table, you loose then try and argue it should have only been a $5,000 chip. Same difference.

  • SNAFU

    “Private Public Partnerships are agreements where the private partner takes the risk away from the public, not the other way around.” No their not. PPP’s are the complete opposite. The public takes the risk and the company takes the profit.

  • Mags

    If that happened I would feel that the govt had pulled a swifty. I would seriously wonder if they were trustworthy.

    Edit. Repetitive

  • Rex

    I’m a Sky City shareholder and as far as I am concerned I would like Sky City to pull the plug on this whole deal! Why should us shareholders finance a Convention Centre for Aucklanders? Sky don’t need more pokies. Pay the millions of dollars back to us shareholders and let Auckland pay for their own Convention Centre.

    • Platinum Fox

      Auckland already owns two convention centres (the Aotea Centre and the Viaduct Events Centre) and doesn’t have the means to fund a convention centre of the scale proposed. Heck, we can’t afford to pay for Red Len’s train set so we don’t need to take on another $400 odd million. Neither should the NZ government be involved in funding it.

    • Dave_1924

      Rex I reckon the convention centre will be a huge cashflow positive for the Casino. When you have a facility to handle some of the truly huge Asa-Pacific conferences its a lot of extra punters through the tables and machines. You wouldn’t be building i for the City it would be built for Sky Citys bottom line…

  • Platinum Fox

    A simpler solution for Mr Morrison would be to make a renounceable rights issue to the SkyCity shareholders which would have the effect of the shareholders reinvesting a large part of two years worth of dividends. That should easily cover a shortfall of $68-128m.
    If a rights issue was already part of the company’s funding plan then its size needs to be increased.
    I realise many SkyCity shareholders are holding the shares as income shares and need the dividends to meet outgoings. A properly priced rights issue should not impact on the value of existing holders’ interests and their dividend stream should also not be affected. If shareholders don’t take up their rights because they cannot afford to or because they would upset the balance of their balanced portfolio by investing more into one entity they may, however, end up owning a smaller percentage of a larger entity.
    Disclosure: I do not hold shares in SkyCity and I am not a financial adviser.

  • Yeahright

    Coming in over budget is nothing new, I wonder what all these roading upgrades will go over by.
    To me it’s no big deal it happens everywhere, right or wrong. The question is why don’t people add in a contingency value to all projects for these over runs?
    I know it’s a bidding war, but it should be a compulsory addition from the start.

    • david

      Its a bit like the law for IT projects – all projects cost twice the budget even when the budget allows for the effect of this law.

      • Yeahright

        I know it well, quot for lots of projects, gets accepted, start, customer comes along and wants this changed, this added and then expects it to be the same price, out of luck buddy!
        Dare I say I think this is what has happened at Sky City.

  • OneTrack

    I was fully onboard with the argument to allow SkyCity the extra machines. But public funding of SkyCity’s development?

    No way. What are they thinking?

  • Sagacious Blonde

    Who costs these projects? Train sets, IT upgrades, convention centres, et al the pricing is a farce.
    Ladies and Gentlemen our contingency for this project is one, two, or even three times the budget estimate, but by the time you wake up, we will have started and you will have no choice but to suck it up.

    • OneTrack

      Len wouldn’t have made up the price of the train set, would he? Say it isn’t so.

      He might have put the decimal point in the wrong place though.

  • Alright

    Be careful Mr Key and Mr Joyce. Be very, very careful.

    Otherwise you’ll send the crystal clear message the wheels are falling off.

  • Skydog

    Lets weigh up the odds on this. If the govt were to do this, what is likely voter increase compared to the likely decrease of National support? I guess those who approve already vote national. However there would be many National supporters like me who would reconsider their vote next election. Not worth it National, stay well away.

  • I.M Bach

    This isn’t real….I’ll wake up soon and realise it was all a nightmare. Won’t I?

    Righto, I’m awake now and it’s still a nightmare. Give me strength.

    Private enterprise getting taxpayer dollars to counter extremely poor cost calculations? Ya what? My old man used to be a quantity surveyor (priced up the job of building the James Cook Hotel in Wellington many moons ago) and voted National for as long as I remember. He’ll be rolling in his grave.

  • The Accountant

    I’ve always scoffed at the corporate welfare comments, but this is a watershed. Providing funds for a corporate construction project would be an absolute abhorrence. Maybe if the Government in return received a significant ownership stake, I could understand it. But taxpayers would have to be better off.

  • Jayar

    For the National Government to contribute any taxpayers’ dollars to Sky City (or the Americas Cup) would ensure a Labour victory in 2017. The thought!

  • Alexander K

    No way! This is NOT the deal Sky City and the Government agreed to. Even that was barely tenable, but this is just ridiculous and I would never trust the National brand again if it happens.

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