The real brinkmanship began after Team NZ crossed the finish line to win the 36th America's Cup.
It was now a race for money.
Within hours of Grant Dalton and Peter Burling embracing the Auld Mug on a sunny St Patrick's Day in Auckland's Viaduct Harbour Marina, the Government began trying to nail down the next event.
The stakes were high after an investment of $250 million of public money in a sporting showpiece that had dominated the news cycle for the past summer.
Even at a time of strained public finances, the Ardern Government was keen to bring back an event that has captivated Kiwis and been central to the financial health of Auckland's waterfront for decades.
At 5.17pm that night, it sent out a press release saying the Government would be "backing the team for the next America's Cup". Economic and Regional Development Minister Stuart Nash said he anticipated another request for public funding would be forthcoming and, as a goodwill gesture, he pointed out that some of the $136.5m the Government set aside for the America's Cup three years previously was still available.
Nash offered Team NZ an immediate $5m cash injection to help it get through the next few months after the victory, while it entered negotiations for the next event.
It wasn't an insignificant sum given the team's immense cashflow requirements, including a salary bill in the millions, and the possibility of stars like Burling and Blair Tuke being lured by big offers from rival syndicates.
But the goodwill wasn't reciprocated. In a move that hinted at wider tensions between Team NZ and the Government — and foreshadowed the failed negotiations to come — Dalton delivered his own message while Ardern's press release went out.
Team NZ, he informed the Government and Auckland Council, did not want a victory parade.
The last time New Zealand won the Cup, in July 2017, a parade through Auckland's CBD drew around 80,000 fans to Aotea Square. Local officials were hoping that a similar celebration this time would be welcomed by the public after the Covid lockdowns, a shot in the arm for struggling central businesses - and recognition of the city's $250m investment in the event.
"We played our part in making it happen this time, as did the Government, and we hope that Team New Zealand are able to reciprocate," said Auckland Mayor Phil Goff. The Government was also keen, Nash said, and offered to pay for the parade.
But Dalton snubbed the idea, reportedly because the team didn't want ratepayers to foot more bills.
Auckland Central business association CEO Viv Beck told the Herald she was "disappointed" in the parade snub. Goff was also taken aback.
The exchange was only a glimpse of the conflict to come.
This week, three months after Team NZ's triumph, negotiations failed after the
Government's $99m offer was rejected as too low. It now seems almost certain that the Cup will be defended in a foreign venue. This is the story of how it appears that relationship broke down.
Jim Ratcliffe and the British invasion
While the Government sought to move quickly to secure Auckland as the host of the 37th Cup, there were already moves under way to take it offshore.
A day after the 36th Cup ended, on March 18, Ineos Team UK was revealed as the next official challenger of record for the 37th America's Cup.
The Ineos team, which had finished third in the AC36 event under four-time gold medalist Sir Ben Ainslie, was bankrolled by Britain's fifth richest man, Jim Ratcliffe.
A billionaire who supported the Brexit campaign and founded the chemical group Ineos, Ratcliffe has invested more than $200m in his Portsmouth-based America's Cup team since he established the syndicate in 2018.
In a sign of his commitment to the Cup, the businessman travelled to Auckland despite the coronavirus, and so did several of his corporate officers. Ineos Team UK was given clearance for 13 of the Ineos Chemical CEOs and directors to enter New Zealand for the Cup as "essential workers" during the event, the Herald has learned.
They came on their superyachts, bypassing MIQ because they spent $50,000 in repairs in Kiwi boatyards on their $100m-plus superyachts via a maritime border exemption.
The March 18 announcement set off weeks of speculation that a one-off Deed of Gift America's Cup match might take place in 2022 at the Isle of Wight on the south coast of England. That would likely precede a larger regatta in either 2023 or 2024 but was rumoured to be a bargaining chip to force the New Zealand Government to stump up for their own event on home soil.
Dalton confirmed the rumours on March 20, saying, "It is quite cool to take it effectively right back to where it came in 1851, I think is good for the event".
The reaction from fellow America's Cup competitors was not so complimentary. Luna Rossa Prada co-helmsman Jimmy Spithill said he would be "shocked" if the Auld Mug wasn't defended in New Zealand again.
"I mean, you look at the amount of time and money that the average taxpayer and Kiwi has put into this team," Spithill said, "I would have thought it would be an absolute no-brainer to hold the America's Cup here."
As it turned out, bigger plans had been in the works for months.
As the Herald revealed in February, Team NZ had for months been examining the possibility of hosting the next event overseas if it retained the Auld Mug.
A pitch document sent to potential bidders outlined Team NZ's desire to secure, for a big hosting rights fee, a host city with enough financial clout to make the America's Cup a spectacle on the level of the Olympic Games, football's World Cup and Formula 1.
It did not rule out a return to Auckland, but the ambitions expressed in the 48-page memo seemed to make that an unlikely prospect.
In Team NZ's view, exploring overseas venues was merely a pragmatic move reflecting the reality of the sport.
Dalton has always been attuned to the commercial side of the sport and good at bringing in the money needed to keep the syndicate competitive, as even his rivals acknowledge.
"Finding sponsorship in the world that we're living in for an event that's as volatile as the America's Cup is really bloody hard," said Terry Hutchinson, skipper of the American Magic team. "It's really difficult to do and Dalts has been the master of it for the better part of 15 years. "
On Tuesday night, Dalton addressed a tense meeting of about 400 members of the NZ Yacht Squadron at their clubhouse in Westhaven Marina. Speaking about the breakdown in talks with the Government, he referred to the aftermath of Team NZ's 2003 loss in Auckland to the newly formed Swiss syndicate Alinghi.
That loss came after Team NZ's America's Cup-winning skipper in 2000, Russell Coutts, was swiped by Alinghi, along with tacticians Brad Butterworth and Grant Simmer. Dalton, who was brought in to run Team NZ in the aftermath of that debacle, said he was determined to avoid something similar happening this time.
"We exist as an organisation with the club to defend the America's Cup and in an event that has a weakened defender, you'll end up with a semi repeat of what happened in 2003," he told the members. "In my mind, it was one of the worst sporting tragedies in New Zealand's history."
In yachting circles, there is sympathy for this view.
"I can understand why Team NZ are doing this," one America's Cup insider told the Herald. "They are between a rock and a hard place. They need cash now to pay people's wages. There's no point getting $200m in three years' time. It's a total cashflow requirement. People can't pay mortgages on a promise."
According to this insider, the prospect of losing world-class sailors like Burling and Tuke is a serious threat to Team NZ's future.
Although they are well-paid already, they could get far more if they went to an overseas competitor with deeper pockets than Team NZ, the insider said. "I don't think they are probably paid anything like their international worth.
"The problem is the cost of hiring sailors is very high because the expertise is so limited. You'd be struggling to count on two hands the number of people who would be capable and competitive in sailing these yachts."
But while there's sympathy for Team NZ's economic position, there are also those who blame Dalton for the breakdown.
"In my view, it's simply Dalton" who has been pushing the drive to move the next event beyond New Zealand shores, the insider said, in pursuit of a more lucrative hosting rights payment.
For all the success Team NZ has had under Dalton, there are people who are uneasy about his leadership.
Multiple sources told the Herald they believe the team principal has a reputation as a control freak and as someone who holds grudges.
"They run a very tight ship - actually, in my view, tight ship is too complimentary," one insider said. "There are people there who are under instruction not to talk to people Dalton doesn't like.
"I think some of them think he's wonderful for what he's achieved, some respond to that very strong leadership and there are others who don't. He does make some bad mistakes.
"In my opinion, he sees the world in a very binary fashion", the person added. "He's very black and white. You are either 100 per cent supportive of him or if there is any wavering you are excluded and that's that - you're not to be trusted."
When asked about Dalton's relationship with stars Burling and Tuke, the insider said the team principal's supreme power made it difficult to tell the sailors' true feelings.
"Well, they have no choice [but to like Dalton]. You can't say anything against him because they have an extremely strong team culture. If you are seen doing anything that might not be liked by members of the team then you are immediately ostracised, followed by expulsion."
Another source within Team NZ admitted some of the staff there find Dalton "a bit prickly" but there is also a lot of respect for his financial guidance and fundraising.
They said most of the lower-profile boat designers, tacticians and administrators have been asked if they are on board for AC37, but are totally out of the loop when it comes to the managerial discussions or the final destination of AC37.
The staff are currently cleaning up Team NZ's base in the Auckland Council-owned Viaduct Event Centre - which the team has a lease of until March 2022.
"They honestly don't know anything at this stage" about where the next Cup will be fought, the source said.
Auckland's massive economic loss
Both sides said they approached the talks hopeful of keeping the Cup in Auckland.
"We did put our best foot forward, we tried hard. It was in good faith," Stuart Nash said. "But I was always very clear on this - we didn't have a blank cheque."
The Government, which employed a professional negotiator to lead its side of the discussions, offered $99m to host AC37.
Team NZ was pushing for a figure closer to $200m, although it would've settled for $150-160m, according to one insider. It was felt that the $99m presented was just too far off.
Part of Dalton's issue with the $99m Government offer is understood to be that only around $32m is cash in hand to Team NZ. Extra police patrol, security, road closures and the provision of infrastructure makes up much of the rest of the Government's offer.
Speaking of the Government's $99m offer at the yacht club on Tuesday, Dalton said, "That's a lot of money. But the devil's in the detail. Terms and conditions don't make it that amount of money."
Publicly, the Government was diplomatic. Within the Auckland Council, the reaction was more heated.
The city spent $113m on infrastructure to transform the Viaduct Marina into the America's Cup Village and brought forward four projects under the Downtown Programme in time for the event: Quay St strengthening, Quay St enhancement, ferry basin redevelopment, downtown public space and a transport hub.
The Herald understands that senior council staff have this week been looking back through the fine print of their contracts with Team NZ, to see if not bringing it back to Auckland would be a breach.
Goff said this week Aucklanders would be "incredibly disappointed if the world's oldest sporting competition was taken overseas by Team New Zealand. I think they would feel let down and there's just no way around that.
"Auckland was anticipating that the city and its businesses would get a second return on this investment, particularly after Covid prevented the positive economic impact of overseas visitors, and the boost superyacht refittings would have given to the maritime industry."
A source close to Team NZ also told the Herald there is a degree of animosity towards Goff among staff ever since a report in July 2020 that he was investigating forcing them out of their Viaduct Event Centre team base lease early.
At the council, there's a feeling that the investment in the Cup hasn't been worth it. Back in 2017, when the one and only business case for the event was conducted, MBIE estimated the 2021 America's Cup would add between $0.6 billion and $1b to New Zealand's economy.
By 2019, that cost-benefit ratio was valued at below 1:1 by New Zealand Initiative chief economist Eric Crampton and University of Auckland economics Professor Tim Hazledine.
Post the Covid-19 event, without international tourists and the lucrative superyacht trade, the direct economic losses will undoubtedly be massive when, and if, they are published by MBIE.
Auckland Council Finance and Performance chair Desley Simpson said the investment in the Auckland CBD waterfront was not entirely futile because it was always designed to form an "ocean water sports arena" that other events will utilise and invest in.
However, she said: "As a proud Kiwi, as a proud Aucklander, as a lover of the America's Cup, I'm really disappointed that it seems pretty obvious they weren't going to hold it [AC37 defence] here".
Simpson said she wondered why there hasn't been more of a push by Team NZ to raise money domestically to keep the Cup here. "I've seen and heard nothing in that space and I'm surprised at that. We've made our ratepayer investment - the infrastructure. This is not a time to be asking council for money."
The animosity towards Team NZ within sections of council was already festering late 2020 after Team NZ was defrauded of $3m by scammers.
A senior member of council who oversaw the approval of the $133m infrastructure investment said at the time: "It's swinging dick territory isn't it. These guys have been doing this … this has been the America's Cup for as long as I've known it. I'm a keen follower of the America's Cup.
"It's always been like this, and actually they're on their way to ruining … I don't think there's going to be much appetite for coughing up. If they retain this Cup I don't think there's going to be much appetite from ratepayers and taxpayers to cough up any more from these guys.
"I think the goodwill has been totally stretched to something that's just not retrievable anymore."
'The Cup will never come back'
Despite the breakdown in talks, both sides have pointed out that there's still a chance of reaching a deal to hold the next event in Auckland - even if it now seems unlikely.
Although the exclusive negotiation period has ended, New Zealand could retain the hosting rights if an attractive overseas deal isn't found.
"It's not out of the realms that there will be some New Zealand or overseas benefactor that will decide they want to invest in the cup and hold it here in New Zealand," Nash said. "I don't know that, but what I'm saying is that's a possibility."
This week, Jacinda Ardern urged Kiwis to "make your voice heard" to Team NZ so the Cup can stay here. "There are still negotiations being had, and if you feel really strongly about this in the same way we did, let the team know," she said.
The next step for Team NZ will be to consult with Origin Sports, the marketing company it employed to draft the AC37 host-city pitch document sent around the world in December last year.
Origin sports will be canvassing interest and bids from the most likely international candidates. The UK's Isle of Wight, China, Saudi Arabia, Valencia and Qatar and Dubai in the UAE are all tipped as possible locations.
And this week, the Irish Examiner reported that Cork was lining up a surprise bid, after a technical team from the America's Cup organising authority visited there last weekend for a site assessment.
But Dalton has left the door open for Auckland.
"There is money in town, we all know that," he said at the meeting on Tuesday. "But it isn't coming that easy, the phone's not ringing off the hook.
"Everybody just needs to calm down a little bit, because although we finish the negotiation period with the Government and council on Thursday, we don't finish the end of it being in New Zealand and in Auckland."
However it ends, the struggle to keep the Cup in New Zealand reflects the harsh reality of the sport, said the America's Cup insider.
The increasing engineering sophistication of the boats means that the costs of a competitive syndicate are skyrocketing. It may need reforms including uniform design rules and other restrictions to keep the sport competitive and accessible to a wide global market.
"What it really highlights is the need for dramatic reform in the America's Cup," the insider said.
"It would seem in the current circumstances that New Zealand has been priced out of the America's Cup, which I think is counterproductive for the sport of sailing. The sporting public and everyone else who has enjoyed the America's Cup over the years loses as a result. Is this the net result of uncontrolled billionaires? That's terrible.
"I mean it would be an incredibly sad day, to use a rugby analogy, if the All Blacks were being sold off overseas because we could no longer afford to keep them.
"Once the Cup goes offshore it will never come back - you are totally dependent on venue funding to support the team."
