The Ministry of Business, Innovation and Employment has slashed its estimate of the benefit from hosting the America’s Cup after an error in its original assessment was corrected.
MBIE’s original ’36th America’s Cup: High Level Economic Assessment Evaluation’, released last month, showed the net benefit of holding the event was estimated at between $35.8m and $115.7m.
It now says that range is actually between -$2m and $76m, indicating hosting the event could have a net cost.
Market Economics, the consultants who prepared the assessment for MBIE, stood by its original economic impact assessment of hosting the regatta, claiming it would provide $0.6bn- $1bn in value add to the economy and boost employment by 4,700-8,300.
However, its original cost benefit analysis of the event, a measure considered by most economists to be a better judgement of the economic value of an event’s impact, was miscalculated.
“In simple terms, the cost benefit ratio is normally the total benefits divided by the total costs (e.g. construction cost plus costs to deliver the goods and services),” said MBIE in a statement yesterday.
“However, Market Economics had erroneously divided net benefits (new spending less the costs to deliver the goods and services) by total construction costs.”
The corrected net benefit range of between -$2m to $76m is a significant reduction of the original assessment’s $35.8m and $115.7m and raises the possibility of the event costing more than it generates.
MBIE’s original assessment came under fire for overstating the benefits of hosting the event. MBIE’s General Manager Tourism, Sectors, Regions and Cities, Iain Cossar, addressed concerns raised over its assessment.
MBIE’s amended ’36th America’s Cup: High Level Economic Assessment Evaluation’ can be viewed here.