Selling off the farm: will the ACT find cause for regret? By Julie P. Smith While Australia debates the partial sale of Telstra, the Australian Capital Territory debates privatisation of a comparable national asset, land in the Federal capital. The ACT government is not selling public land assets - it is giving away valuable rights over land. The Constitution requires that Canberra be on land "vested and belonging to" the Commonwealth. An Act of 1910 provides for public leasehold. At the time of federation, the thinking was that public land ownership would help offset the cost of a federal administration. As Canberra developed, rising land values would boost public revenues. This would prevent private landowners amassing large profits from the growth of a city underwritten by public investment and Commonwealth development plans. Public leasehold helped build Canberra with high urban amenity. It kept land cheap and allowed planners to direct development and jobs to new towns, rather than inflating inner-city property values by squeezing development into an increasingly costly and inaccessible central business district. Disquiet over lease administration has grown since ACT self government in 1989. In 1995, following exposure of substantial errors in calculating charges for redeveloping cheap commercial or community leases, the ACT government appointed a judicial inquiry into lease administration, headed by Justice Stein of the NSW Land and Environment Court. The Stein Inquiry identified a litany of woes in ACT lease administration. It recommended restructuring the land and planning bureaucracy to improve management of the land asset. It also recommended a spill of senior positions, noting the importance of professionalism and integrity required by a public leasehold system. The inquiry findings noted a 1983 report by World Bank economist William Doeble which stated: "Since urban land is such a valuable commodity, and particular locations command semi-monopolistic prices, the temptations for corruption and favouritism are great. Even in honest administrations there is constant temptation to use favourable lease terms as a hidden subsidy to deserving groups or individuals." The inquiry also rejected perpetual leasehold - sought by commercial property owners who claimed public leasehold discouraged investment. In 1996, the ACT government passed legislation rejecting the inquiry's major recommendations. ACT Labor supported the Liberal government's legislation which changed the charge for renewing public leases. Instead of a 10 per cent fee, as recommended, renewal would be free. These changes cut the economic flesh off public land ownership in the ACT, giving a potential windfall of $115 million to $1.2 billion to commercial leasees. The greatest benefit from this goes to central Canberra commercial property owners. As leases were sold for 50-year terms, their market price reflected that renewing the lease would cost an additional amount. On Stein Inquiry recommendations to ease the requirement of a 10 per cent fee for renewal, a minority report correctly stated that: "Any departure from this approach to lease renewal undermines the leasehold system and represents a gift to sitting owners of commercial and industrial leases. There are no ethical or economic reasons why such a gift of a national asset should be made." Furthermore, the new legislation makes all short-term commercial leases effectively perpetual leases, by permitting extension to 99 years with automatic renewal rights. Chief Minister Kate Carnell claims these changes will entice jobs and investment from other states. But, on the ABC's 7.30 Report, she acknowledged most businesses would not benefit. The change is likely to increase commercial land values and business rental costs will rise, diverting investment capital from real enterprise into asset speculation. Meanwhile, the Howard government has foreshadowed amending the 1910 Act to permit 999-year leases - or perpetual leasehold. This will mainly work to prevent any future reversal of provisions for free and automatic lease renewal that the ACT Assembly just passed. Over Christmas, the ACT government also moved towards upgrading tenure for rural lessees. Rural leases in the ACT are a "land bank" for future urban development, with short lease terms. Announcing a rural leasing policy task force, the ACT government suggested the land bank was unnecessary, and rural lessees should have more "certainty". The task force, warned a Canberra Times editorial, was: "Dominated by interests that can be expected to be highly sympathetic to the interests of the rural leaseholders (and without any voices which can be relied upon to put the other point of view)". While some of the "land bank" is unsuitable for urban development, parts can be developed. To improve environmental management, the inquiry recommended some rural leases have up to 50-year terms, conditional on compliance with land management plans. Without such conditions, ACT rural areas risk conversion to ex-urban farmlets at the expense of the environment - and at enormous profit to the non-farmers who own many of them. Locking up the ACT's rural land could force Canberra to replace its successful, and cost-effective development plan with the "intensification" strategy rejected by the public and the ACT Assembly. Perpetual leasehold does not transfer ownership of redevelopment rights. However, it creates immense political difficulties in protecting the public's financial rights in the land. The history of Crown leases in Australia, and political reaction to the Wik decision, shows the determination and political clout with which those owning long-term Crown leases claim economic rights over land beyond that of their lease contracts. Having invested just under four pounds an acre for the Capital Territory's land several decades ago, the Australian taxpayer may feel the financial return from de-facto privatisation of ACT public leasehold is lower than we can afford. It makes the Telstra deal look good for the public - no matter what the sale price. Julie P. Smith is a Research Scholar in the Department of Economic History, RSSS.