A bad look, and a smell to match
It's not a good look to see politically well-connected types on the payrolls of outfits that avoid public tenders while winning favours or business worth hundreds of millions of dollars from government.
Just ask Michael Costa, Arthur Sinodinos and the boys at Australian Water Holdings.
Or there's the way Reg Kermode's Cabcharge has done so very nicely out of government taxi policies while taking care to keep the odd influential politician on board. All those taxi plates granted by the Wran and Carr governments come to mind.
“Nifty” Wran became a long-serving Cabcharge director. Of course, nothing remotely illegal is suggested about any party involved – it's just that, somehow, it's not a good look.
And so it is with James Packer's well-stocked political larder as he goes about avoiding a tender for Sydney's second casino licence. A tender dodged is an aroma that will linger.
Particularly when the avoidance of full public scrutiny is as contrived as Packer's Barangaroo gambit, when the review process is so thin and the claimed public benefit so vague from doing this little “unsolicited proposal” deal as opposed to going public and discovering its genuine market value.
There are no specific terms of reference for the David Murray-chaired government “project team” to investigate or consider what might be the optimum casino policy for New South Wales – because there are no specific terms of reference. That's despite this being the consideration of granting a government licence, yet another ticket for seeking rent.
The project team instead will be operating only with the rather vague “assessment criteria” designed to handle things like someone wanting to build a new harbour tunnel, or Transurban's proposal to link the F3 to its M2 Motorway – things the government would like but can't afford to build itself and that won't get built any other way.
The criteria are well-intentioned enough for their original purpose, but seriously lacking when it comes to handing out a privileged casino licence. The government's guidelines state that “Additional assessment criteria relevant to a particular proposal may also be applied” – but a government spokesman confirmed that they haven't been.
Hilariously, the assessment criteria's economic test for Packer's casino is a “public sector comparator” – what it would cost for the government to undertake the project on a like-for-like basis. Talk about setting a low hurdle.
This is how the O'Farrell government – the one that formed a cheer squad and performed somersaults as soon as James Packer mentioned his desire – is ensuring optimal public benefit:
“In order to demonstrate that optimal value for money will be achieved, an 'open book' approach to negotiations is to be adopted. Government will develop a public-sector comparator (against a reference project defined by government) that will be used as a benchmark for assessing value for money. Government will also consider whole-of-government impact and cost. The approach to demonstrating value for money will be generally consistent with Infrastructure Australia guidelines.
“In order to guide the proponent, government will provide an early indication of an acceptable return on investment and other requirements to be achieved by the proponent in the delivery of its proposal.”
If that sounds like a pile of tripe to you, outside the realms of road and tunnel building, that makes at least two of us. But keep the capitalisation of things like value for money coming – it might almost make it look important.
What's more, it's hard to see how the Murray panel will have the time or the resources to do a full and proper job of assessing what should be necessary questions about the value of a government-limited casino licence and what a clean-sheet casino policy should look like. That would be a massive task.
But the panel will have help where it counts – from Packer's Crown boyos. The process calls for the two parties to devote resources to and work together on the assessment process. That's nice. No doubt Crown will have one of the usual “independent expert reports” knocked up by one of the usual suspects who knows who's paying them in the way of these things. Given the ease with which both the NSW Liberal and Labor parties have been slid into Packer's pocket on this proposal, it should be a cinch.
Unlike linking the F3 and M2, there's only artificially constructed constraint on anyone else wanting to build a flash hotel on the Barangaroo site: the head developer, Lend Lease, entered into a two-year exclusive contract with Crown. That was the choice of Crown and Lend Lease and becomes Crown's problem to deliver. You might wonder why Crown would do that if its proposal had to have a casino licence to be viable – unless it doesn't actually need the licence. Or unless Crown already knew something – but that would be an unkind thought.
In any case, to try to turn that commercial contract into some sort of exclusive property right that justifies avoiding public tender for a casino licence is artificial beyond the understanding of plastic flowers.
In announcing that the Packer plan would move to the second stage of assessment (such as it is), Premier O'Farrell said: “Crown's submission is that the development would see up to $1 billion invested in NSW and would result in more than 1200 jobs. As Sydney's first six-star hotel, it would be a world-class tourist facility, which would help us compete with other global destinations, particularly in the lucrative and booming Asian tourism market.”
Barry needs to get out more. There is a shortage of hotel beds in Sydney and a shortage of good sites on which to build new ones, especially sites that have a mandated requirement to include a big, flash one like Barangaroo. Packer's proposal to build one isn't doing NSW a favour – it's meeting Lend Lease's contractual commitment.
In fact, the hotel market in NSW is booming with a record $772 million poured into it this year, more than the previous peak year of 2007.
You know all the stuff about the high dollar killing the foreign tourism market? It's rubbish – foreigners have continued to come in record numbers and they mainly want to come to Sydney and a good proportion of them want to stay in a very nice pub. A few of them might be high-roller gamblers – nowhere near enough to make a difference to the overall numbers.
But no doubt some independent expert report will be produced to promise a chicken in every pot if Packer is given what he wants without its market value being properly assessed by public tender. And Tourism Australia will surely back that up and should be fully informed about the details – another one of Packer's mates and fellow Crown director, Geoff Dixon, chairs the thing.
All quite cosy really. All we need now is a bunch of ex-politicians on the Packer payroll. Oh, that's right – they're already there.
As for the “six-star hotel” stuff – that's a marketing slogan, not a building specification. Don't know why they haven't called it “seven-star”. Barry O'Farrell himself torpedoed the easy way of guaranteeing a seriously flash hotel for Barangaroo by caving in to the usual crowd of naysayers who couldn't grasp the original Barangaroo design of an iconic hotel on a pier – something that would have been a destination in its own right without any alleged need for being subsidised by a casino licence.
It was much the same sort of mob that could be relied on to decry the “Toaster” (the stylish development that has so improved East Circular Quay), the building of the Opera House (the very stylish development that has so improved Bennelong Point) and Melbourne's Federation Square. Oh well, occasionally they're right.
It is fascinating though to compare O'Farrell's leap in killing that original hotel concept that could have genuinely attracted international attention – and probably would have cost a billion and created 1200 jobs – and his immediate desire to go all the way with the Packer machine. The former would have gone to tender, Barry is happy for the latter not to.
It's not a good look – is it?
Michael Pascoe is a BusinessDay contributing editor.