Should taxpayers and ratepayers be continually hit up to subsidise sports events?
The issue has emerged again because Team New Zealand boss Grant Dalton has essentially suggested that unless central and/or local government pays for the infrastructure for the 2020-21 America's Cup, then the regatta is off to Italy.
At a lower profile level, the New Zealand Women's Golf Open over the past few days has listed both Auckland and New Zealand.com as the "Funding Partners."
So taxpayers and Auckland ratepayers together contributed money at a level between the "Title Sponsor" – a Korean clothing company – and the "Major Sponsors" which are an airline from an oil rich Gulf state and a luxury car brand from Japan.
It would seem no New Zealand company thought a big investment in the event was worthwhile.
Here's the question: If you run a business and you can't balance the books, do you expect either central or local government to bail you out? No.
Isn't a sports event, or a cultural event like an orchestra or ballet or writers' festival, where you pay money for admission, essentially a business? Yes.
Government, both central and local, is there to provide essential services for all citizens and to invest for the good of the community.
That means providing efficient transport systems, healthy water reticulation and drainage, as well as access to affordable health and education, including libraries.
In other words, services for all of us.
It should all be done at a level that can be afforded.
Can elite level sports events like the America's Cup, the NZ Women's Golf Open and the V8s at Pukekohe be considered essential services?
Of course not, because not everybody wants them or needs them.
Could they be called an investment for the good of the community, economic or otherwise?
Well, first and foremost, they exist to entertain people who want to watch. They provide competition and income for those who take part. They're also there to make money for the organisers.
Any investment of public money must make a return for the public. That’s what good investments do.
Central government can get a return on sponsorship of events through tax, both income and GST. But remember that for every million dollars invested, there has to be either $6.67 million spent by consumers of the event, or $3 million paid to employees of the event just for the government to get its money back.
That's about as simple a cost benefit analysis as you can get.
So there would seem to be some case for central government investment, but what about local government?
Should the financially stretched Auckland Council – with a debt of $7.97 billion as at June 30 this year – be handing over money to promoters of events when they have no tangible method of collecting any financial return from the investment?
Specifically, should it be giving upwards of fifty million dollars to America's Cup infrastructure?
Supporters will say what about the economic impact it will bring to the city? Think about all the visitors, the teams who will live and work here for six months or more?
Sure, I get all that. My point is that Auckland Council, with huge infrastructure spending coming up in the next decade, and with a debt to revenue ratio of 256 percent, really has to watch how it spends every dollar.
And even with the considerable GST and income tax collected by America’s Cup spending, how much of it will actually be returned to the Auckland Council? None.
Lots of the money will go to business owners who provide the services. They’ll love the extra income.
Heaps will go to central government coffers through extra tax.
But will Auckland Council, the organisation that collects $3.7 billion from ratepayers to spend on the city and services for its people, actually collect any extra money from having the America's Cup in the city? No.
So is there really a spare 50 million dollars to build big sheds on the waterfront to be used as bases for America’s Cup syndicates or to be a major sponsor of the event itself?
If the America's Cup is proven to be such an economic money spinner, then the public investment in it should come from central government only. Because only it has the ability to recoup the money invested.
A final point.
Auckland hosts concerts by some of the biggest names in music. This year Adele has been. Paul McCartney is coming.
They are here to make a profit for themselves and their promoters. They use facilities owned by Auckland Council for which they pay a substantial fee. The council does not subsidise their visits, despite their considerable economic benefit to the businesses in the city.
Unless Auckland Council can show that the America's Cup has a direct economic benefit for itself or one of its Council Controlled Organisations like Ports of Auckland or the waterfront land owner Panuku Development, then it's short changing ratepayers by subsidising it.
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