2 February 2007

Business leases the cause of ACT budgetary woes?

| johnboy
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Peter Martin is apparently the Canberra Times’ economic editor and has an interesting blog post on the cause of the ACT’s diabolical revenues in this best of all possible times:

But business leases were set up to be a source of continuing revenue. After the first 50 or so years of Canberra’s life, business leases were set to come up for renewal virtually every year. Because the leases were sold and valued in the knowledge that they expired after a period of time, businesses planned in the knowledge that they would have to shell out fresh money to buy new leases when they expired.

But it was easier and far more lucrative for businesses to lobby both sides of the relatively young ACT House of Assembly. Just before Christmas in 1996, both the Liberal and Labor Parties in the House of Assembly voted to convert all commercial leases from 50 years to 99 years, without charge…

Australian National University economist Julie Smith predicted that ‘present and future ACT citizens [will] pick up the tab … with either a 13 per cent addition to residential rates, or further cuts to health, education and community services.’

Your thoughts?

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Rural leases are not that simpole – they are a mess in fact. Decades ago they were issued ad hoc, so all sorts of different ones are still on the books. Plenty were 30 year leases. With differing conditions around what you can do with the land – mainly that it should look attractibve and ‘rural’ while still being some sort of ‘business’.

And rural leases are not treated as permanent – you try selling one with only 3 years left to go on it.

I’m sorry, but if this Peter Martin can’t bother to get the basics right – there ain’t no “House of Assembly” in the ACT (although the advisory ACT body was brifely called that in the late 70s) – I’m going to struggle to accept anything else he says.
The leasehold system in the ACT has long been the cause of headaches, rural lessees get 20 year leases, commercial 50, and residential 99. However the market treats all property leases as permanent, and values them accordingly. For the government not to extend leases for free or peppercorn would collapse the entire ACT economy.
There was talk some years ago about making residential leases 999 years, but the Commonwealth put the kybosh on it.

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