In reply to concerns raised by the Ticker over the accuracy of its America’s Cup Economic Assessment Evaluation and the treatment of its Cost Benefit Analysis, MBIE’s General Manager Tourism, Sectors, Regions and Cities, Iain Cossar, states:
MBIE uses both Cost Benefit Analysis and Economic Impact Assesment tools – depending on the scale of the event being assessed.
For example, MBIE uses a cost-benefit analysis tool to support its assessment of applications to, and recipients of, the Major Events Development Fund (a $10m annual appropriation). CBA is essentially a policy tool used to compare projects and the returns they generate in order to decide which projects to invest in. It is also the preferred economic evaluation methodology of The Treasury and wider government.
In general, MBIE’s view is that the scale and nature of most major and regional events is such that any multiplier effect on the national economy will be small enough to be legitimately ignored. This is a key reason for the use of CBA within the context of the Major Events Development Fund.
However, mega-events such as the America’s Cup can have a material impact on the national economy, including longer-term impacts. Therefore EIAs may be more suited to such ‘mega’ events. It was also used for previous economic evaluations of America’s Cup regattas
For this reason, Market Economics was commissioned to assess the potential Auckland-based 36th America’s Cup on an EIA and CBA basis. Note, the CBA ratio estimated in the report is for the economy as a whole (and is not a return on investment ratio); the costs included relate to all parties including for example the Crown, Auckland Council, syndicates, retailers and tourism providers.
Note, the study does not account for environmental impacts and is confined to the economic benefit only. It makes no assumptions around location or whether there are any incursions into the harbour or not. It does not, therefore, take account of any loss of value from reducing the available harbour space. Any investment decisions will take into account a broader range of considerations than just the economic, including environmental, social and cultural values.
We have also presented both the economic impact and cost/benefit numbers, and have been neutral with respect to which one is best – on the basis that they are measuring different things.