The Kingston foreshore-Acton land swap project is likely to a big test for the ACT Government, Opposition, cross-benchers, federal and ACT planning authorities and the new federal minister for territories, Warwick Smith.
It is a large project involving a lot of public money and public assets. It is also going to engage a lot of private investment. Such projects have often been recipes for financial catastrophe, and there are any number of examples in recent Australian history. It is usually the long-suffering taxpayers who miss out. But with care, good management and planning, there is nothing wrong with the grand vision and public and private sector partnerships.
But the warning signs are there in Kingston. While the public-sector bodies are shuffling about the private sector has sniffed the wind of opportunity. The lease of one parcel of land has been sold and there are others nearby. The present lease purpose clauses are for ferries and buses. The new owners have bought subject to approval for a change in lease purpose … to a much more profitable purpose, especially in light of all the projected public investment in the area.
Whether it is leasehold or freehold with zoning, there is a long history in Australia of people speculating on increases in the value of land created by public investment in nearby infrastructure. But this is not entrepreneurial in the sense of making profit from excellence in building or skill in trading or service providing and it does not add to the overall generation of wealth.
Leasehold is supposed to prevent land speculation, but without determined government action, it can be circumvented. If Kingston is to be developed along the visionary lines announced by the Carnell Government, it will be necessary to ensure that the increase in land value created by public infrastructure spending is captured by the government to repay the amounts spent on the infrastructure and on public facilities in the project. This is elementary good management. Given the wholesale nature of the redevelopment, existing leases in the redevelopment area should be resumed with compensation and the area replanned.
If they are resumed, speculators can buy existing leases at artificially high prices and those prices will set an artificially high “”before value” for the purposes of use-change charge. The use-change charge that goes to the government will therefore be lower. So the spoils are being divided by existing owners and new speculators. Without the speculation, on theother hand, returns to government will be higher and, more importantly, land prices to the real entrepreneurs who build and do business on the sites will be lower, which will benefit their businesses.
The Government needs to put people on notice now that buying existing leases in the Kingston redevelopment zone in the hope of getting a profitable change of use is a waste of time. It would be a tragedy if the vision of Kingston foreshore redevelopment became compromised by land speculation.
This is not a call for some grand socialist public-enterprise development. To the contrary, the Kingston redevelopment should be pre-dominantly private-enterprise and the great bulk of the remaining public works should be contracted out to private enterprise. Private enterprise does individual projects better and more efficiently, but it performs better when government creates an environment conducive to business. That means good physical infrastructure, education and health services, police, an effective legal system and so on. The last includes sensible rules against monopolisation and good principles of land tenure, including commercial tenancies. Government should not be bloated, but without government business is doomed.
The ACT must now exploit its advantages. Its high education level and good infrastructure are attractive to business. So should its land tenure system be. It is far better to engage in hi-tech, tourism, retail, printing newspapers and so on if costs are reduced. If the speculative element of land ownership is removed, land becomes cheaper to occupy and each business can spend its money on the business it knows best.
Land speculation, in the form of buying land and sitting on it or buying land in the hope that government allows its uses (or in freehold terms its zone) to be changed, is socially destructive and not very creative. It certainly does not create wealth in a community.
This then is the test for the ACT Government. It must ensure that the Kingston project (and others like the Symonston hi-tech area) is one that encourages entrepreneurial spirit. Canberra business must go beyond the housing of federal public servants (at work and privately) as its main industry. It must go beyond waiting for federal funds to build infrastructure so that land-holders benefit without effort, like an upper middle-class welfare state. We must use the education and brains of our young people to create more enduring forms of wealth generation.