Yahoo Finance SkyCity convention centre deal goes sour
When you're told something is free, it's logical to assume you won't have to pay for it.
The government is trying to twist that logic and get away with it, which isn't working, writes NZ Newswire political columnist Peter Wilson.
When it struck the international convention centre deal with SkyCity two years ago it left no doubt about who was going to pay for it.
SkyCity was. All $402 million of it. John Key held a press conference to make the point.
"This won't cost taxpayers or ratepayers one cent," he said.
Now the cost has blown out by $130m, SkyCity says it won't pay, and the government can't make it pay.
Key, looking uncomfortable, says he was right at the time.
Steven Joyce, who signed the deal, absurdly claims there was nothing wrong with that assurance because "it was free to the agreed value of $402m".
Since then construction costs have risen and SkyCity has proposed an enhanced design. It expects the government to pay the difference.
It says it doesn't want to put up a second-rate centre for the thousands of delegates from all over the world who are expected to attend the conferences it will host.
Key initially agreed with this, suggesting there wasn't much point in having "an eyesore" in the middle of Auckland.
Eyesore? When the deal was announced the government released pictures of what was going to be built. It was hardly an eyesore, and the government praised the design.
Joyce says some of SkyCity's more flashy enhancements could be scrapped, saving money, and that there are smart ways to get around material procurement costs.
The real problem Key and Joyce have is that the deal was never popular with voters, and the "this won't cost you anything" assurance was their best shot.
Now they're in danger of being shot down, and they're trying to dodge the bullet.
SkyCity agreed to build the centre in return for significant gambling concessions - more pokies and tables in its casino, and a long-term licence extension.
The government put a bill through parliament, amid howls of opposition protest about the increased harm that would result from an even bigger casino.
This happened as the government was reducing the number of pokies in bars and clubs, which opened it up to intense criticism.
Key justified the deal by saying that even when SkyCity had put in its extra pokies, "overall" the number would keep diminishing.
Opposition parties say SkyCity has got the government over a barrel and taxpayers are going to end up paying the $130m.
That's not quite right, because SkyCity wants the centre just as badly as the government does.
It means thousands of well-heeled delegates staying in its own five-star hotel just a short stroll away from its own casino.
And it doesn't get more pokies or an extended licence until the construction contract is signed.
Both sides have talked about walking away from the project if the other doesn't cough up the cash.
They won't. The stakes are too high. They'll talk it through, trim the extra cost as much as they can and probably split the difference.
That will be followed by another public relations masterpiece - only half the cost will be met by taxpayers.
