Gordon Campbell on the SkyCity debacle   16 Feb 2015

Column - Gordon Campbell

Gordon Campbell on the SkyCity debacle

“What is this? A centre for ants? …I don't wanna hear your excuses! The building has to be at least three times bigger than this! “ – Derek Zoolander

As the Key government struggles to put a brave face on its blighted SkyCity deal, Judith Collins could be forgiven be feeling a small inner glow at just how badly this has turned out for the boys, and especially for Steven Joyce. Supposedly, the Oravida scandal dented any hopes she might have once had of succeeding John Key as party leader, and put Joyce in the pole position as Key’s heir apparent. Gosh, that’s turned out well, hasn’t it?

Because…. lets be clear about yesterday’s sudden about face by SkyCity. This is a case of SkyCity choosing to bail out the government by not invoking the top-up monies available to it under the terms of the contract. It is definitely not the case that the casino operator has buckled under pressure. (The bill for yesterday’s rescue mission has yet to be mailed.) In reality, SkyCity has had the government over a barrel ever since the contracts were signed. And why, over the past week, has the government been shifting its ground in such headlong panic? Simple reason : the focus groups must have been giving it hell. This SkyCity deal had become about as popular as underarm bowling.

For the record, we started out last week with (a) Prime Minister John Key telling the public that a $402 million convention centre would be only an ‘eyesore’ in downtown Auckland with the clear signaling that (b) the extra $128 million was probably necessary and justified under the contract. Within 24 hours and driven by the potential risk to his own credibility, Finance Minister Bill English became (c) the first Cabinet heavy hitter to break ranks and question the extra spending which led to (d) Key suddenly agreeing that he’d need a lot of convincing to spend the extra millions which led to (e) SkyCity agreeing to go back to the drawing board and (f) design and build a new convention centre for the original price that would (g) somehow be just as good. Yeah, right. Clearly, the screeching U-turns were being driven by nothing other than the public’s outrage at gifting SkyCity with $128 million on top of its other goodies.

That’s the teaching point, right there. In any normal political scandal, the government can afford to antagonize one or two groups in society – the centre-left and the civil libertarians say, over mass surveillance – and still sail on regardless, provided the broad mass of voters haven’t engaged with the issue. All along though, the SkyCity deal has been a different beast. This time, the government has gotten itself offside with almost everyone : with ratepayers in Auckland, taxpayers nationwide, social liberals concerned about problem gambling, with Treasury and with Deputy Auditor–General Philippa Smith, to name a few.

Crucially, the government has also looked like a bunch of total amateurs in front of its friends in business. That’s not just embarrassing, but politically harmful. As an article of faith, the corporate sector believes that a National government is more competent than any other political party at doing business, and is well able to cut a boardroom deal. Such simple faith will have been sorely shaken by the SkyCity fiasco. How on earth did the government manage to sleepwalk into an open-ended commitment to pay SkyCity an extra $128 million, on top of uniquely lenient operating conditions and the gifting of TVNZ’s prime, inner-city Auckland land to the casino for its exclusive use, until 2048?

Now that the proverbial has hit the fan, the government has been forced to accept being sold short in return for the major concessions it has made. Instead of the world-class convention centre originally touted, the public will be getting a smaller, cut rate job. Yet despite short-changing the public, SkyCity will still get to pocket its side of the bargain – which will include its expanded gambling operations and the TVNZ site which it supposedly needed for the convention centre site, but on which it now apparently plans to build a lucrative five star hotel. All thanks to the novices and/or its accomplices in the Beehive.

How could this happen? In her report on the SkyCity deal, the Deputy Auditor-General laid the blame squarely on the government’s "lack of attention to procedural risks, and therefore to the fairness and credibility of the process." The report depicted a textbook case of crony capitalism: “From the start of the evaluation process, the contact with one proposer was of a wholly different nature from the contact with others. In our view, officials effectively worked with SkyCity for some months, giving detailed feedback and engaging in some preliminary negotiations, while the other proposers were kept on hold and given very little information.” For its part, Treasury concluded that the deal’s private benefits to SkyCity exceeded the public benefits to New Zealand.

You have to ask: if it is possible to get a globally competitive convention centre that truly is fit for purpose at the original price, what was the $530 million price tag and the shenanigans of the past seven days all about? Was it just a shake-down, an attempt at extortion? And if a cut – rate $402 million centre delivers only a smaller facility that won’t be capable of attracting the level of conference business and related economic blessings first promised, will taxpayers end up copping the blame for this failure? If only, one can hear Joyce braying, the taxpayers had dared to be bolder.

Total bullshit, of course. The fact is, this government can’t negotiate its way out of a wet paper bag. No wonder the private sector is so keen on doing public private partnership (PPP) deals with these bunnies. It would be like stealing candy from children. As commentator Matthew Hooton explained on Friday in a devastating NBR column, the deal with SkyCity has been negotiated from the outset directly – and riskily - by Joyce and the PM’s chief of staff Wayne Eagleson who, Hooton claimed, is both a good friend and ‘a Las Vegas gambling buddy’ of SkyCity’s Wellington lobbyist, Mark Unsworth. Ultimately, the Joyce/Eagleson team has proved to be no match for the gambling industry professionals. As Danyl McLauchlan has also pointed out, John Key, Joyce and the rest of the kitchen Cabinet have always had an underlying contempt for the public service and for its expertise – whether that be at Treasury or elsewhere – even though it is that very expertise which could have averted this disaster.

Politically, the insuperable problem was that the government has repeatedly told voters that the Auckland convention centre would be “free” in the sense that SkyCity would stump up the entire construction and operating costs, set at $402 million. SkyCity has bailed Joyce out, for now. All along, the Key government has been gambling with taxpayer money. It has traded away major concessions, and got a pig in a poke in return. If it was an ordinary casino customer, the government would be being asked to walk away from the gaming table. Arguably, it should still walk away from this latest, hastily devised makeshift arrangement, and invite SkyCity to take its chances in court.

Notorious B.I.G, meet Mr M.B.I.E

On the other hand, contracts are contracts and rules are rules. Since Minister Joyce clearly needs help on how to neg-o-she-ate without losing weight, the late, great Notorious B.I.G. has a few relevant words to relate. As in:

I been in this game for years, it made me a animal
It's rules to this shit, I wrote me a manual
A step by step booklet for you to get
your game on track, not your wig pushed back
Rule nombre uno: never let no one know
how much dough you hold, cause you know
The cheddar breed jealousy 'specially
if that man fucked up, [you’ll] get your ass stuck up….

Indeed you will, and you have. Plus more besides, as Biggie explained long ago in his “Ten Crack Commandments”:

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