Recommendation

The Commerce Committee has examined the New Zealand International Convention Centre Bill and recommends by majority that it be passed with the amendments shown.

Introduction

The bill seeks to give effect to parts of the New Zealand International Convention Centre and Licensing Agreement (NZICC Agreement) entered into by the Crown and SKYCITY Entertainment Group Limited on 5 July 2013. The Agreement aims to benefit New Zealanders economically by bringing about the construction of an international convention centre to improve New Zealand’s capability to host large-scale international conferences.

The NZICC Agreement provides for SKYCITY to design, construct, and operate a convention centre with the capability to host up to 3,500 delegates, at a cost of $402 million. In return for this investment SKYCITY would receive a number of regulatory concessions relating to gambling law, which would apply at the Auckland casino site until 30 June 2048.

Our commentary covers the main amendments we recommend to the bill and a petition.

Petition 2011/73 of Denise Roche and 1,302 others

The petition from Denise Roche requests

We considered this petition alongside the bill. Our commentary covers the issues we considered relating to the international convention centre. We have no other matters to bring to the attention of the House relating to this petition.

Harm minimisation measures

We recommend inserting new subparagraph 3(2)(a)(iii) in the purpose section of the bill, to make it explicit that the NZICC Agreement requires SKYCITY to implement certain harm minimisation and anti-money-laundering mechanisms as a pre-condition of regulatory concessions. We believe this would provide appropriate statutory recognition of the harm minimisation measures.

Although gambling-related harm has been recognised as a salient issue, the bill as introduced makes no reference to the harm minimisation measures required in the NZICC Agreement as a condition of regulatory concessions.

The measures are set out in section 6 of the NZICC Agreement. They include a voluntary pre-commitment system, doubling the number of host responsibility staff at the casino, and use of a predictive model to analyse data to determine which players are at risk from gambling harm.

We consider that prescribing specific harm minimisation measures in legislation is inappropriate, as advances in harm minimisation technology are expected over the 35-year term of the NZICC agreement. The Gambling Commission undertakes a two-yearly review of SKYCITY’S host responsibility programme. We consider that this is the appropriate regulatory mechanism for prescribing and enforcing particular harm minimisation measures at the Auckland casino.

Purpose of the bill

We recommend amending the title of the clause to “purpose and outline”, and adding a new subclause 3(3), to make it clear that subclause 3(2) would not have legal effect.

Subclause 3(2) in the bill as introduced is intended only to describe what the NZICC Agreement does in broad terms. This is distinct from the specific purpose of the bill, which is to give effect to those parts of the Agreement that require legislation: the regulatory concessions, and protection of the NZICC name. The bill also seeks to ensure that the restrictive covenants and agreed remedies for breaches of the Agreement are enforceable.

Reference to gambling law

We recommend the reference to the Gambling Act 2003 in subclause 8(1) be replaced with “gambling law”, for consistency throughout the bill.

Regulatory concessions

We recommend in clause 4 of the bill that the reference to the regulatory concessions “made” be replaced with one to the regulatory concessions “set out”. We believe this is more accurate, as the Crown is the only party that would be making concessions. Schedules 1 and 2 of the bill set out in detail the concessions the Crown has agreed to grant SKYCITY to increase gaming facilities at the Auckland casino site until 30 June 2048.

As introduced, clause 7 of the bill would give these regulatory concessions, as set out in clause 7.3 of the NZICC Agreement, the force of law. The text of this clause of the Agreement is set out in schedule 3 of the bill.

Gambling Commission’s continuous review of SKYCITY’s host responsibility programme

The Gambling Act 2003, regulations, and casino licences require casino operators to implement a range of measures in order to minimise and prevent harm from casino gambling. This includes the legal requirement to develop a policy for identifying problem gamblers.

Under the Act, the Gambling Commission is responsible for specifying casino licence conditions. Licences are an integral part of the gambling legal framework.

Casinos are required to have a host responsibility programme (HRP) as part of their casino operator’s licence. The HRP states how each casino implements its legal obligations to minimise and prevent gambling harm at its venue.

The Auckland casino operator’s licence, particularly paragraphs 23 to 29, requires the Commission to review the casino’s HRP every 2 years, and the operator is required to report every 6 months to the Commission on the implementation of the HRP. Following the 2013 HRP review, operator reporting will become an annual requirement.

Independent analysis of effectiveness of the host responsibility programmes in SKYCITY’S Auckland casino

A number of submitters requested that independent analysis be undertaken of SKYCITY’s host responsibility programme in order to determine its effectiveness. During consideration of this bill, the Gambling Commission’s August 2013 decision (GC 21/13) on the amendment of the “responsible gambling programme” for the Auckland casino was published. This decision demonstrated the Gambling Commission’s process in reviewing their programme. This included extensive consultation with the Salvation Army, the Ministry of Health, the Secretary for Internal Affairs, and Lifeline Aotearoa who were all invited to provide suggestions on matters for possible inclusion in the host responsibility programme. (GC 21/13, paragraph four).

For National Party members of the committee, this gave us confidence that these significant entities were included in the review process and that their views were taken into consideration. It is our expectation that the Gambling Commission will continue to consult with these agencies and entities in their two-yearly reviews of Auckland casino’s host responsibility programme.

The Gambling Commission considered whether there was a need for additional independent evaluation of the effectiveness of the Auckland casino HRP. The Commission felt no such need as it undertakes such an evaluation in the course of their periodic reviews of casino HRPs. It does so by consulting with a range of knowledgeable parties as well as seeking independent expert assistance.

The Gambling Commission engaged Dr Delfabbro, Associate Professor at the University of Adelaide, in their review. He reported to the Commission that New Zealand’s regulatory environment is rigorous in the extent to which it emphasizes responsible gambling principles, and that Auckland casino’s current HRP is of a high standard internationally.

National Party members of the committee concur that the processes put in place by the Gambling Commission in its review of Auckland casino HRP ensured significant third-party input and expert independent review and advice.

The committee was also informed that the Department of Internal Affairs inspectors walk through the casino on a regular basis.

Development of new technologies in regard to harm minimisation

The Agreement requires SKYCITY to implement enhanced harm minimisation measures at their Auckland casino, these being

• predictive model created by Focal Research which analyses loyalty data as a tool to identify players who are at risk from gambling harm

• voluntary pre-commitment system whereby “single terminal gaming machine” players may elect to restrict the amount of time they play and/or the amount they spend on machines over a selected period

• doubling of the number of host responsibility executives employed at SKYCITY Auckland casino so as to provide 24hr/day, 7 day a week, coverage at the SKYCITY Auckland casino site

• requirement that the issuance and redemption of Ticket-In Ticket-Out tickets and some cashless gambling credit above $500 in non-restricted areas is linked to suitable player identification.

These measures will be added to SKYCITY’s Auckland casino HRP, which is monitored and enforced by the Department of Internal Affairs and the Gambling Commission.

Currently 67 percent of gaming machine turnover at SKYCITY’s Auckland casino is loyalty-account based, and associated with individuals and therefore able to be tracked at all times.

It is the view of National Party members that these measures, particularly the predictive modelling tool through electronic monitoring, will enable identification of players who are at risk from gambling harm and will raise the bar in harm minimisation programmes. National Party members understand that SKYCITY’s development of this tool is an international first. This bill ensures that this technology is developed and implemented and offers another tool to mitigate gambling harm.

Accessibility and gambling harm

The view was presented by many submitters that increased opportunities will increase gambling harm. Certainly National Party members of the committee were concerned about a potential increase in gambling harm. However, we noted the Australian Productivity Commission’s report on “Accessibility and Gambling Harm” acknowledged the view that where gambling opportunities are increased in venues where gambling pre-exists, that “adaptation (host immunity and protective environmental changes such as reduced novelty in gambling and public awareness of problem gambling) typically occurs and problem gambling levels stabilise or reduce, even in the face of increasing exposure.”

Professor Max Abbot, Professor of Psychology and Public Health at Auckland University of Technology (author of the above statement), said to the committee in his oral submission that the degree of correlation between increased opportunity and increased harm was “uncertain”.

New Zealand Labour Party minority view

Green Party minority view

The Green Party believes that the Government has a responsibility to protect New Zealanders from gambling harm through sensible regulation and law making. We are opposed to the NZICC bill in its entirety because the Agreement the bill legislates for is an abrogation of that responsibility.

Parliament’s proper place in relation to gambling is to establish and hold accountable regulatory institutions and processes. This bill compromises the integrity of that role. Legislation permitting the funding of the Government-sponsored international convention centre in Auckland through the proceeds of gambling concessions to a monopoly private operator crosses a line between controlling gambling policy and law and participating and benefitting from the expansion of gambling.

The Gambling Act 2003 was designed to protect New Zealanders against gambling harm by putting a cap on the number of casinos in New Zealand, and preventing existing casinos from increasing the opportunities they offer to gamble.

The NZICC bill exempts SKYCITY from the public health protections of the Gambling Act, allowing for a significant increase in gambling machines and opportunities and the avoidance of the scrutiny required by that Act in relation to licence renewals.

Under the deal, SKYCITY has had its licence, which was due to expire in 2021, extended to 2048. The Green Party is extremely disappointed that despite the extent of these concessions SKYCITY did not appear before the committee in relation to this bill.

The Gambling Act’s processes in relation to renewal are specific, expert, independently conducted, and include a significant opportunity for the public and the Gambling Commission to examine casino operations. If this legislation passes then the only opportunity anyone has to consider the appropriateness of this licence extension is the select committee process, a process that SKYCITY has not engaged in at all.

The deal also allows 230 extra pokie machines and a further 12 gaming tables that can be automated with up to 20 terminals per game. Thus the real impact of the deal is actually 470 extra electronic gaming terminals.

When a society increases the opportunities to gamble, it increases problem gambling harm as a result. Gambling harm hurts everyone. It has a corrosive effect on societies and is directly linked to increased family breakdown, crime, child abuse and suicide.

The Green Party believe that a deal that trades the wellbeing of people for a building is wrong.

Officials have described as “almost certain” increases in harm to thousands of families as a result of the concessions.

Government Minsters were warned by the Department of Internal Affairs (DIA) officials that the extra gambling concessions in the bill would “almost certainly” increase gambling-related harm,¹ and officials warned that those who presented for help were likely to be the tip of the iceberg.

DIA officials estimated that about 6,500 children would be affected by gambling harm from the deal, and this could include “being inadequately clothed and fed, and suffering other examples of deprivation and poor parenting”.

The Government has repeatedly said that any harm resulting from the gambling concessions in the deal will be offset by the “significant additional harm minimisation measures” the casino has signed up to.

These include:²

• doubling the number of full-time host responsibility staff in Auckland from three to six, providing dedicated host responsibility staff onsite at all times, 24/7

• introducing predictive modelling technology which analyses player data to help identify customers most at risk from gambling harm

• continuing to roll out SKYCITY’s voluntary pre-commitment programme allowing customers to set both the time and the amount they wish to spend over a given period.

Minsters were warned by Ministry of Health and DIA officials that the so-called harm reduction measures in the bill were largely either already being used by SKYCITY and offered no additional protections at all, or in the case of voluntary pre-commitment, were largely useless.

More specifically, the Ministry of Health’s expert gambling harm team’s advice said that voluntary pre-commitment was unlikely to work, doubling host responsibility staff at SKYCITY was likely to have “minimal” effect, and the inclusion of predictive modelling in the deal was pointless unless it specified what the technology was supposed to achieve.³

The predictive model by Focal Research has been in use by SKYCITY for some years but has not been independently reviewed or tested.⁴ This tool risk-profiles players for signs of problem gambling. The data associated with the development of this algorithm is very important as it provides insight into SKYCITY’s business model and in particular how reliant the casino is on the turnover from at-risk or problem gamblers. This is important as evidence from Australia, USA, Canada, and New Zealand suggests that between 15 percent to 33 percent of gambling revenue is derived from problem gamblers.⁵This does figure does not include at-risk and affected others.

The increase of host responsibility staff from three to six does not necessarily mean that host responsibility measures will be improved. SKYCITY has been considering investing in additional “on-the-floor” host responsibility staff from as early as 2007 when it commissioned Adelaide casino host responsibility coordinators programme.

Research from Australia shows that the Ticket-In Ticket-Out technology that is also part of the deal reduces staff on the floor. Trained staff on the floor is an effective method of harm minimisation.

The Problem Gambling Foundation (PGF) told the committee that the proposal by SKYCITY to introduce host responsibility initiatives is a move to make the deal more palatable.⁶ They agreed with the Ministry of Health and DIA advice that the host responsibility measures contained in the Agreement are already in place and do not offer any meaningful improvement to SKYCITY’s current practices.

The predictive model by Focal Research has been in use by SKYCITY since 2007 and is reported on to the Gambling Commission. This tool identifies problem gamblers. PGF is concerned that SKYCITY will use this information to manage the gambler rather than stop the gambler.

The PGF asserted that 40 percent of money lost on pokie machines comes from people with a gambling problem. Therefore SKYCITY’s business model relies on problem gamblers continuing to spend money.

Overall PGF concluded that while the host responsibility measures look good on paper their experience of dealing with SKYCITY’s clients suggests the demands of revenue generation by SKYCITY will outweigh community and corporate responsibility considerations.

We were also concerned about the lack of clear evidence demonstrating the economic benefits of the Agreement. Many submitters raised concerns about the fact that there was economic analysis (such as the Howarth and KordaMentha reports) showing a low rate of economic return and low numbers of jobs created, while other submitters referred to evidence that the job numbers would be significant. However, there is no evidence presented of the latter.

The regulatory impact statement (RIS) relies on a 2011 NZIER report and information “supplied by SKYCITY”. The information supplied by SKYCITY has not been released. However following parliamentary questions and an Official Information Act request the NZIER report was released to us recently. The employment figures referred to in the RIS, “1000 construction jobs and 800 operational jobs at the NZICC itself”, are not contained anywhere in that report.

In fact, the NZIER report looks at the net employment impact in Auckland and nationally of the NZICC and concludes:

• NZ net 120 full-time equivalent (FTE) jobs during construction (380 in Auckland)

• NZ net 18 FTE jobs during operation (340 in Auckland).

In other words, all the job gains are in Auckland, with the investment effects of the deal leading to 260 fewer FTE jobs outside Auckland during construction and 322 fewer FTE jobs outside Auckland during operation.

The Green Party has also obtained employment figures from Australian convention centres which show far fewer than the 800 jobs (500 FTEs) the Government claims will be delivered by this deal. The 3,500-capacity Sydney convention centre employs 200 FTEs, and Melbourne’s 5,000-capacity convention centre employs 133 fulltime and 273 casual staff.

University of Auckland law professor Jane Kelsey raised concerns that the contract between the Government and SKYCITY could put a halt to the effective regulation of gambling for the next 35 years. Professor Kelsey said that foreign investors could sue any future government for breaching New Zealand’s international investment obligations if any new laws reduced the profitability of the casino and the value of the company’s shares.

This case would not be heard by New Zealand courts but would take place in a private overseas investment tribunal. New Zealand’s best defence in this case would be the fact that many of our existing free trade treaties provide room for the Government to regulate for public morals.

Professor Kelsey is concerned however that the proposed Trans-Pacific Partnership Agreement (TPP) would prove riskier. The United States is one of the 11 potential signatories to this TPP agreement and some of SKYCITY’s shareholders are United States-based finance companies. This bill, giving effect to the Agreement, opens New Zealand up to being sued by investors from those countries that have agreed to include investor state disputes clauses in this TPP agreement.

We do not agree that laws should be sold to the highest bidder, especially if those laws are designed to protect the community from harm, and the changes to those laws benefit only a select few.

We also do not agree that future governments and future citizens should be constrained by decisions made by politicians today and threatened with financial penalties if they use their right to change the law, bettering the interests of public health, in the future.

The Green Party believes that this bill, which legislates for the SKYCITY deal is legally flawed and morally wrong.