Combined Community Councils of the ACT

Combined Community Councils of the ACT

(PO Box 3310, Manuka ACT 2603; )

Ms Katy Gallagher MLA

Chief Minister

GPO Box 1020

Canberra, ACT 2601

Dear Chief Minister

Proposals to improve the management of Concessional Leases

At its meeting on 15 February 2014, the quarterly meeting of the Combined Community Councils (the CCC) unanimously resolved to write to you expressing our concerns about the management of concessional leases in the ACT.

In summary, we believe that the management of concessional leases over recent years has given rise to considerable community concern. The present arrangements lack transparency and consistency and therefore do not accord with sound public policy. Lessees have been able to benefit, at the expense of the community, by selling off their concessional lease for substantial profits.

We recommend the following actions are taken to restore public confidence in our system of concessional leases and ensure they serve community purposes, rather than individual leaseholders:

R1Section 265 of the Planning and Development Act 2007 be amended (1) to define 'eligible person'; (2) to require that a concessional lease may only be granted to an eligible person; and (3) to clarifythat negotiations to sell a concessional lease may not be entered into without ESDD’s knowledge and consent.

R2.When granting any new concessional lease, the terms of the lease should be such that, should the terms of the lease no longer be complied with, the concessional lease should lapse.

R3.To improve consistency and transparency, the Government should establish and make publicly available a data base of all concessional leases in the ACT and the financial arrangements that apply regarding annual leasing charges for each of these concessional leases.

R4.A list of concessional leases granted during the previous year, together with the deemed cultural, economic or social benefits of each concessional lease, and the financial arrangements between each recipient lessee and the Government, should be included in the ESDD Annual Report.

R5.To permit an open debate when a decision is controversial, the Planning and Development Act 2007 be amended to require the Planning and Land Authority to inform people, who have made submissions on the Development Application to deconcessionalise the lease, that the Minister’s decision to allow the Planning and Land Authority to consider the deconcessionalisation of a lease is appealable to the ACAT.

R6.If the terms of an existing concessional lease are not being complied with, the Government should consider either terminating the lease and using the land for some other purpose; or charging the full annual rent at commercial (non-concessional) rates.

R7.No decision to wave or reduce the deconcessionalisation discharge fee or a lease variation charge should have effect without it being approved in the Legislative Assembly.

These recommendations are discussed in detail in the attached discussion paper, prepared and endorsed by the CCC.

We would be grateful for your response to the issues we have raised and would be happy to meet with you to discuss this matter in detail.I can be contacted on 0419 854 211 or if you require further information in relation to this matter.

Yours sincerely

Gary Kent

Session Convenor

Combined Community Councils of the ACT

11 March 2014

ccLeader of the Opposition

Chair, Standing Committee on Planning, Environment and Territory and Municipal Services

Proposals to improve the management of Concessional Leases

Prepared by the Combined Community Councils of the ACT

Summary

Concessional Leases granted at less than market rates allow the Government to provide core community and social facilities that benefit the community.

The administration and management of concessional leases,over at least the last ten years, has caused considerable community concern. Lessees have been able to benefit, for failing to comply with the conditions of the lease, by deconcessionalising the lease and selling off the land to make substantial profits. For example, the Brumbies realised more than $11 million following the deconcessionalisation of the lease and sale of land.

An organisation, which no longer requires land for the purpose the concession was granted, should not be in any favourable position in relation to future use of that land. It should not be able to benefit, at community expense, by changing the land use to something completely different.

The situation is complicated because neither the Planning and Development Act 2007 (the Act) nor the accompanying Planning and Development Regulation 2008(the Regulations) specify the criteria that have to be met by applicants wishing to obtain a concessional lease, despite s259D of the Act providing for the development of Concessional Lease Guidelines. The decision remains entirely at the discretion of the ACT’s Planning Agency (ESDD).

The present arrangement lacks transparency and consistency and consequently does not accord with sound public policy. Accordingly, we are making seven recommendations to Government. These are:

R2.When granting any new concessional lease, the terms of the leaseshould be such that, should the terms of the lease no longer be complied with, the concessional lease should lapse.

R3.To improve consistency and transparency,the Government should establish and make publicly available a data base of all concessional leases in the ACT and the financial arrangements that apply regarding annual leasing charges for each of these concessional leases.

R7.No decision to wave or reduce the deconcessionalisation discharge fee or a lease variation charge should have effect without it being approved in the Legislative Assembly.

Background

The policy of granting leases on concessional terms to organisations that are engaged in activities regarded as being of community benefit was developed to assist or encourage worthwhile activities that might not otherwise take place if a market rate were charged for the lease. The policy involves identification and assessment of activities that warrant this sort of assistance, such as sport and recreation, and more generally any activity that could be carried out by a “public benevolent institution”. Other concessional leases may have been granted, and might still be granted, with the intention of assisting the economic growth and development of the ACT.

Holders of concessional leases can apply to pay out the lease. But it was never the intention that lessees should have the right to pay out the lease and then sell it for other purposes and make a substantial profit.

The land should not be deconcessionalised and sold off by the lessee for the sole purpose of generating a profit, because this could disadvantage the community, in that it may not necessarily obtain the most benefit from the deconcessionalisation process. The key issue is that there needs to be more transparency to cover the whole deconcessionalisation process.

We contend that an organisation, which no longer requires land for the purpose the concession was granted, should not be in any favourable position in relation to future use of that land and should not be able to benefit by changing the land use to something completely different.

We also recommend that in granting any future concessional lease, the lease contains a provision that, should the terms of the lease no longer be complied with, the concessional lease should automatically lapse (R2).

“Of recent years there have been a number of occasions when the administration of concessional leases has caused concern in the community.”

The above is the first sentence in the Introduction of the 2005 “Report on Granting and Administration of Concessional Leases in the Australian Capital Territory” prepared for the ACT Government by KLα Propriety Ltd ().

The same sentence is just as applicable today, eight years later.

Even though in December 2005 the Government stated that: “ACT Government has made a clear commitment to reform (and?) make changes to the current planning system to make it simpler, faster and easier to use for industry, business and the community.” and agreed to most of the 27 recommendations, () the disquiet over the management of Concessional Leases in the community is undiminished.

Of particular concern is the deconcessionalisation of leases.

A major factor is that land, on which concessional leases have been granted for community use, is limited and in demand for other development. The deconcessionalisationof these leases attracts windfall profits for the leaseholders. Examples in Canberra Inner South include the Manuka Football Club, Easts Rugby Club, the Hungarian Club, the Macedonian Church, the Canberra South Bowling Club and of course the Brumbies. In effect, Clubs are benefiting greatly by not complying with their leases.

Current and future possible sites for development include the Braddon Club, the Canberra Services Club, the Canberra Deakin Football Oval, the Italo Australian Club and the Deakin Bowling Club. Some clubs have been given $15,000by the Government specifically tocreate plansfor the development of their land.

We propose seven recommendations which we believe if implemented, will enable the community to have more confidence in the management of concessional leases within the ACT leasehold system. It would be for government to address any remaining issues.

Granting a Concessional Lease

In s235A of the Act (as modified up to October 2013) “a concessional lease means a lease granted for a consideration less than the full market value of the lease, whether paid as a lump sum or payable as rent, or for no consideration; and …”

s265 of the Act (Restrictions on dealings with concessional leases) limits the sale of an existing concessional leases to 'eligible persons,' but 'eligible person' is not defined in the Act and there are no criteria specified in either the Act or the Regulations that have to be met by original applicants wishing to obtain a concessional lease. This section also makes any dealing in a concessional lease subject to the consent of ACTPLA (now presumably ESDD). However, it is not entirely clear whether this section as it now stands restricts the power to negotiate the sale of a lease, or only applies to the negotiation of a sublease. The Government could usefully reword this section to make it clear that negotiations to sell a concessional lease could not be entered into without ESDD’s knowledge and consent.

We therefore recommend (R1):

R1.Section 265 of the Planning and Development Act 2007 be amended (1) to define 'eligible person'; (2) to require that a concessional lease may only be granted to an eligible person; and (3) to clarifythat negotiations to sell a concessional lease may not be entered into without ESDD’s knowledge and consent.

There is a guide to government policy in the document:

(

Some of the key words from this text are:

“Concessional leases are leases that have been granted for less than market value (other than rural leases, Territory owned leases and other specified exceptions). They allow Government to help provide core community and social facilities that benefit the community. For example a concessional lease might be granted to a church or community organisation. Concessional leases have also been offered as part of business incentive packages to help the economic growth and development of the Territory.

The Planning and Land Authority can decide if a lease is concessional on its own initiative or a lessee may apply to us for a decision about whether the lease is a concessional lease.

A lessee has the right to apply to the Administrative Appeals Tribunal for a review of the decision.”

In other words, ACTPLA appears to have the power to grant a concessional lease and to determine the financial arrangements. Its decisions are not made public and the process appears to be adhocandunnecessarily secret. Furthermore, the legislation is very complex. This is despite s259D of the Act giving ACTPLA the power to make Concessional Lease Guidelines, which would be a notifiable instrument.

In the Government’s response to Recommendation 4 in the KLα Report it stated that:

“A formal register of concessional leases should also be established to record both known and future declared concessional leases. The Authority (ACTPLA) will work with the Registrar General’s Office to implement this as an integral element of the current Land Titles Register.”

This was a very good proposal, but unfortunately it has not been fully implemented. At present it is not possible to find out the location, for example, of all current concessional leases. To determine the concessional status in a suburb, each block has to be individually accessed. We see no reason why this information cannot be made public because most of the leases have been granted a concession to fulfil a community need. Implementing this proposal would also enable the public to compare the financial arrangements at different sites, in other words, to be informed on the precedents that have been set. We therefore make the following recommendations (R2, R3 & R4). These are consistent with the Government’s commitments in respect to Recommendation 4 in the KLα Report.

R2.When granting any new concessional lease, the terms of the leaseshould be such that, should the terms of the lease no longer be complied with, the concessional lease should lapse.

R3.To improve consistency and transparency,the Government should establish and make publicly available a data base of all concessional leases in the ACT and the financial arrangements that apply regarding annual leasing charges for each of these concessional leases.

Deconcessionalising a Lease

Usually the concessional status of a lease may only be removed by a variation of the lease through a Development Application (s260A of the Act). No decision on the application can be made unless the Minister decides whether it is in the public interest to consider the application (s261 of the Act).

The Minister must also consider whether approving the application ‘would cause any disadvantage to the community.’ Should the Minister decide that considering an application to deconcessionalise a lease is not in the public interest s162 (2) requires that he must refuse the application.

Whether an application is in the community’s or the public’s interest is essentially the sole responsibility of the Minister.

The two main financial beneficiaries of deconcessionalisation are the ACT Governmentand the lessee who has the concession. In this situation the Government could have a conflict of interest. Social Impact Assessment statements have usually been prepared by the proponents in consultation with the Government and may not have addressed how the proposal will benefit the community, what benefits might no longer be available to the community as a consequence of deconcessionalisation, and how thesepotential dis-benefits might be mitigated.

There is no requirement for evidence that a concessional lease has been put out to tender, or offered to other community organisations.

To ensure transparency in the deconcessionalisation process,the Government should publicise what organisations have been granted consent to dealing rights under ss265-266 of the Act. This would enable other eligible organisations to use the land. To minimise the perception of a conflict of interest, the Minister’s decision should be appealable through the ACAT. We therefore recommend:

At present several agencies/groups/clubs are making substantial windfall profits at the expense of the taxpayer. For example in the Brumbies case for a charge of $270,000 to deconcessionalise half their lease, the Brumbies were able to deconcessionalise the whole site in Griffith (half the deconcessional fee was waived) and to sell the land for $11,375,000 (). Furthermore the Lease Variation Charge of $7.5 million was waived (Andrew Barr,media release 4 June 2013). In effect this could be seen as a reward for not maintaining the lease that was granted for a lawn bowls club. It was not possible for another developer to propose an alternative use of the land. The CCC contends that these windfalls, which are obtained by failing to manage a concessional lease, are not in the public interest. We therefore recommend:

The action of rewarding an organisation for not fulfilling its lease obligations and then waiving the lease variation charges and/or the deconcessional charges does not contribute to good government. All the required charges should be paid and the applicant should then apply through the normal granting channels for any additional funds. The issue is that there needs to be transparency when standard charges are not being applied. We therefore recommend:

R7. No decision to wave or reduce the deconcessionalisation discharge fee or a lease variation charge should have effect without it being approved in the Legislative Assembly.

Combined Community Councils of the ACT

11 March 2014