Scoop Election 08: edited by Gordon Campbell

Gordon Campbell on the Nick Smith saga, and the America’s Cup

September 20th, 2013

Yesterday’s attempts by Conservation Minister Nick Smith to nitpick his way out of the Ruataniwha scandal seem to have reached a stalemate. Smith continues to claim that he can credibly state he was unaware on September 17 of the existence of DOC’s draft submission about the dam effects, even though he discussed said document on July 29. His escape route being, that he hadn’t seen the document in question. No doubt. And that would be because (a) having heard it was being drafted (b) having had his 29 July meeting with DOC deputy chief Doris Johnson and (c) having expressing his views on the matter, the draft document was stopped in its tracks. Whether or not Smith actually saw the doomed document in question in the aftermath makes little difference as to his claims in Pariament of complete innocence of any knowledge of its existence, or any involvement in its demise. The Parliamentary skirmishes yesterday between Smith and Greens Co-Leader Russel Norman on this issue can be heard here.

Its gets worse. In all its grisly detail, the extent to which DOC has abandoned its statutory duties could be heard in last night’s Checkpoint interview between Johnson and RNZ presenter Mary Wilson – in which Johnson introduced a new wrinkle to the story. In effect, Johnson wrote off the main river affected as being of such little consequence as to not merit a submission from DOC on its likely fate if the dam should proceed. It is an incredible interview.

So there we have it. Minister leans on department. Department caves in. Fate of river gets written off by our conservation guardian as being of little consequence. Minister tells Parliament he knew nothing, NOTHING. Move on, nothing to see here – and hey, what about that America’s Cup!

America’s Cup

Should we spend more millions on the America’s Cup ? Given the nationalistic fervour that has been whipped up in recent days over this event, the sky would seem to be the limit. But hang on. If we learned anything from the Rugby World Cup – and it is the same lesson we are about to learn from the SkyCity convention centre in Auckland – it is that investing in such an enterprise hinges on whether it attracts fresh money from offshore. It is not about whether it attracts domestic money that would have been spent here anyway if the event in question hadn’t existed. (People would still be going to Viaduct Basin bars and restaurants with or without the America’s Cup. Yet this normal turnover is commonly counted in as evidence of the benefits such events bring to the host city.)

With the Rugby World Cup, there was a hangover effect for months and months afterwards – as people tightened their belts and effectively recouped the money they had splurged on the RWC. The net effect was much closer to neutral than the heady estimates had predicted. Exactly the same thing happened in Sydney after its burst of Olympic glory. Local economists are already baulking at what is being described as a poisoned chalice for New Zealand.

What I’m suggesting is that New Zealand really has to think twice before pouring a further $40 million plus into the America’s Cup – because it could easily be money wasted on shuffling money around the domestic economy, to be spent in Auckland. It would be an Auckland subsidy – and a subsidy where the benefits are selectively experienced by only those cafes, restaurants and accomodation within a certain radius of Viaduct Basin. That’s what happencd during the RWC, and it is what has happened in San Francisco. Newspaper reports indicate that resturants as close to the racing as North Beach could detect little or no benefit from the America’s Cup events:

Despite the event being pitched as a boon to the whole city, an uptick in business hasn’t traveled the short distance inland to Bottle Cap, a neighborhood restaurant in North Beach. “I feel like it’s been kind of a flop compared to what we thought a year ago,” owner Dane Boryta said.

The same article – while including enthusiastic comments by Cup boosters – contained these damning numbers:

A 2010 report by the Bay Area Council Economic Institute and Beacon Economics projected the region would see $1.4 billion in economic activity from the event, most of it in San Francisco.That was based on 15 teams competing; the event wound up with only four. A follow-up report in March based on four teams projected $902 million in economic activity, with about 2 million attendees over almost three months of racing, 700,000 fewer than originally expected.

This failure did have a silver lining: by dialling back its expectations, the city ended up spending less on the America’s Cup – but here again, the promises of co-funding by the Cup’s business leaders failed to reach the set targets:

A smaller event is also a cheaper one, and city cost estimates have slid from more than $50 million at one point to less than $22 million today. As of June 30, the city had spent $13.4 million on the event, with almost $8.4 million of that reimbursed by the America’s Cup Organizing Committee, a group of civic leaders that was expected to raise $32 million to offset city costs. Their fundraising hasn’t reached those levels, but it has generally trailed a little behind the reduced city spending. The committee has raised more than $16 million, said CEO Kyri McClellan, but about $3 million has gone to other event-related commitments, including a wrap-up economic analysis report, bike valets and $100,000 to the Treasure Island Youth Sailing Center, a nonprofit that teaches underprivileged kids to sail.

Fox News conveyed a similar message:

“This is not the first time a bunch of starry eyed politicians have been bamboozled by a tycoon,” said former city supervisor Aaron Peskin, who settled his lawsuit last year that sought to stop the event. “Usually when things get hyped that much they turn out to be too good to be true. This was too good to be true.” Up to a dozen sailing teams were expected to set up operations for months around the bay, injecting a significant boost to the local economy, but only three competitors showed up to take on the defending cup champions Oracle in the racing.

Which raises a related issue. Globally, the America’s Cup has systematically trashed the value of its own franchise over the past 30 years. On the world stage, it means far less than it once did. In the San Francisco case, this was reflected in that very small number of challengers who showed up to contest the event. This is not what had been promised to the city – which had based (a) its bid to boost to host the event and (b) the city’s investment in the Cup on numbers that failed to materialise. Even after the estimates of attendees were scaled back earlier this year – the revised targets were not met.

No doubt, New Zealanders will get excited about any America’s Cup defence held here. Taxpayers have already given $36 million to the Cup campaign, to get this far. No doubt certain business interests in Auckland will capitalise on that fervour to press the government to open its cheque book and dole out further subsidies in the tens of millions. (Yachting is a miscrosm of corporate welfare : it is a wealthy person’s professional sport that seems incapable of functioning without massive government subsidies.) At the outset, incentives need to be built into the deal. In this case, any further public subsidy to the America’s Cup should be structured on a repayable sliding scale by the regatta organisers – say $40 million if the event can attract 15 overseas contestants, $25 million if only 10 foreign teams show up, and $10 million if – as in San Francisco – hardly any foreign challengers show up. Let foreign interest (and not Kiwi interest) be the determinant of the size of the subsidy paid, because it is that foreign interest that will prove the America’s Cup is anything more than a mechanism for shuttling money around the country to little or no net benefit to the national economy. At present, it is a handout enjoyed by a few hoteliers and restauranters in central Auckland. Oh, and yes, to a luxury boat building industry that employs relatively few people – such as the 80 specialised staff ( not all of them New Zealanders – employed at a major boat building facility in Warkworth.

Similar subsidies in the film industry that create relatively few jobs – as opposed to putting the money into support for manufacturing as a whole – have been estimated to work out at about $50,000 per job. In other words, celebrate the America’s Cup victory by all means. But that’s not a good reason why tens of millions more of taxpayer money should be poured into it.


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    1. 9 Responses to “Gordon Campbell on the Nick Smith saga, and the America’s Cup”

    2. By Rob Taylor on Sep 20, 2013 | Reply

      Nick Smith’s claim that he was completely unaware of the existence of a draft submission is exposed as a lie in DOC’s 29 July report to Smith, wherein they advise him:

      “The Department’s preliminary view is that a submission should be lodged to the plan change in the name of the Director-General requesting… an independent peer review of the proposed approach (and) potential effect… on the freshwater values in the Tukituki catchment.”

    3. By Kat on Sep 20, 2013 | Reply

      Have to disagree with you on the AC front Gordon. NZ hasn’t even won the cup yet, and the govts investment has returned well in excess of $100m into the NZ economy. And not just from Oracle building its boats here.

    4. By Graham on Sep 20, 2013 | Reply

      Not sure what you mean by ‘subsidies in the film industry’ – if you’re referring to to the rebates, this only applies to offshore money brought in, so unless a production spends money here no money is able to be rebated, not the feared subsidy of Treasury and Bill English nightmares. Meanwhile the local facilities atrophy away until there will be no ability to support any industry, officially subsidised or not.

    5. By Awryly on Sep 21, 2013 | Reply

      Economically, the America’s Cup may not improve domestic performance as much as the deluded appear to think.


      1. It is a socially cohesive force to indulge in the winning of the thing. Most team sport is. And it has played a vital part in defining who we are and how we get along.
      2. It may well improve international performance for some of our technology and marine industries. The first tenure did. And we now have some of the best boating technology available worldwide.
      3. We have the chance to upgrade the weary world view of a rich man’s race by democratising participation – focusing more on national representation and sporting skill rather than just ludicrously expensive technology (even though we are good at it). By publicizing the AC as an opportunity for everyone, we get the benefit of publicising NZ as a land of opportunity.

    6. By Julian on Sep 22, 2013 | Reply

      Nice article, I watched the parliamentary session where Nick Smith was answering questions from Dr Russel Normal. He kept dodging the questions, did so multiple times. He then went on to say he was the person to appoint all the members of the board of inquiry and that it was in their best interests to make a decision that he would support. In essence he threatened them with their jobs.

      As for the Americas Cup, I hear what you are saying. It’s only certain core businesses that will benefit from us bringing it back to Auckland. Again we will be given the lies about how much we as a country stand to make from it, but in reality it will only be the core businesses in the viaduct basin area that will make gains.

      @Kat, can you give details on this $100m injected into our economy? Is this money injected via taxes (which would be injected into our whole countries economy). Because if it is not injected via taxation it will only become part of our economy if it is spent here. How much of this money goes offshore etc?

    7. By Myles on Sep 22, 2013 | Reply

      Oddly enough Kingsland suffered during the RWC because no one wanted to be swamped by the rugby crowds which weren’t there. The AC and the RWC both boosted our morale (Ak at least) and brought forward civic projects. That’s the benefit and still worthwhile (apart from Dunedin). But as you say, let’s not kid ourselves about financial benefits.

    8. By phil on Sep 23, 2013 | Reply

      The RWC meant that the crappy public toilets throughout the Kiwi hinterland received a coat of paint. Every time I used it, I thanked the Government and the Rugby club.

    9. By Te Kupu on Sep 23, 2013 | Reply

      Spending millions on these events results in a net loss. Check out ALL the amped up financial windfalls that are touted for all these so called major world events. Football WC, RWC, Olympics all have lost millions on millions (that continue to have a drag on economies e.g. Sth Africa WC – stadia closed as unable to continue to pay for costs)

      The same big finance/accounting houses that predict these massive gains are nowhere to be seen when the bottomlines are not even within the width of a tryline! Oh but they’re there to put up the next “$500m economic benefit” report when the next event rolls in!

      If people think that the ‘feel-good’ factor is worth $40m then you are deluded.

    10. By G Henderson on Sep 26, 2013 | Reply

      It is staggering that in the 21st century, after decades of awareness of water pollution, we have a government with a deliberate policy of asset-stripping our environment. John Key & Co act as if water and other natural resources were theirs to do with as they wish, rather than being held on trust for the next generation. It’s short-termism run riot.

      Contrast that with the position in Australia, where the Federal government is planning to return water to the Murray river system.

      All National’s actions are directed to increasing economic growth, which is an end in itself. But if economic growth means people can’t fish or swim in the Tukituki river, why have it at all?

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