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

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.