Labour warns on SkyCity blowout

The deal allows for three design phases where SkyCity and the Government must reach agreement on details of the 3500-place venue. Photo / Dean Purcell

The Government's international convention centre deal with SkyCity could see the taxpayer saddled with millions of dollars in cost overruns before building even begins, Labour MP David Clark has warned.

Dr Clark is on Parliament's commerce committee which meets at Auckland Airport's Holiday Inn today to hear submissions on the legislation that grants the casino exemptions from the Gambling Act in return for building the $402 million centre.

While many of those submitting today will spell out their concerns that the 230 additional pokie machines and other concessions for SkyCity will increase problem gambling, Dr Clark said the deal also posed a financial risk to the Government and taxpayers.

The deal, signed in late July, allows for three design phases where SkyCity and the Government must reach agreement on details of the 3500-place venue.

Should the estimated cost of construction exceed the $402 million budgeted, SkyCity and the Government can agree to design modifications, walk away from the deal or "either party may pay the other cash", the contract says.

Dr Clark said that meant the Government would likely pay SkyCity, which had a much stronger bargaining position.

"The cards are stacked heavily in favour of SkyCity because of the political risk to the Government of not getting the deal through."

Dr Clark said the international convention centre deal was one of the Government's flagship economic policies and "the political cost of not getting it through is phenomenal", particularly given the negotiations would continue through the 2014 election year.

"They'll be willing to sacrifice potentially millions of dollars in taxpayer funds to get it through."

SkyCity would be aware of that during the design negotiations phase, he said.

SkyCity declined to comment but a spokesman for Economic Development Minister Steven Joyce said that at each of the three design phases "an estimate of the total construction cost must be approved and accepted by both parties".

Crown consultants would advise the Government on the designs and costings to ensure the project stayed within the agreed total construction budget of $402 million.