Tuesday, May 14, 2013

The corruption of high-country tenure review

The government privatises a state-owned asset for $265,000. Four years later, a small part of it gets flicked on for $10 million. A tale from some corrupt African nation, or from post-Soviet Russia? No, its from New Zealand, an example of high-country tenure review:

Alpha Burn Station on the southern shores of Lake Wanaka and on the road to the Treble Cone skifield is one of more than 100 high-country farms that have been through tenure review in the past 20 years.

Brower says that in 2002, the Crown sold 3365 of the 4579-hectare station to leaseholders Don and Vicki McRae for $267,500, the equivalent of $79.50 per ha.

The Crown then bought pastoral leasehold rights for grazing and conservation of the remaining 1214ha - higher-altitude land - for $202,500, or $166.83 per ha.

She says the McRaes then subdivided the newly freeholded land and sold just 193ha of it to Damper Bay Estates in October 2006 for $10.1 million, according to Quotable Value data.

"That's 658 times what they paid. Translated into urban terms, this is like selling a section for $100,000 then seeing it sold on for $65.8m four years later."

Brower said the 658 times multiplier was, however, "quite reasonable" compared with some other deals.

Less than half of the leasehold land the Crown had sold for $6.9m had since sold for $135.7m.

"These subdividers have on-sold land for a price per hectare ranging from 1.8 to 27,096 times the price they paid. The median multiplier was 992.

[Emphasis added. Yes, that's right, the median gain is a thousand times the initial outlay]

This process has been going on for fifteen years, ever since the passage of the Crown Pastoral Land Act in 1998; its been pushed by both parties, driven by the goal of providing "clear ownership" (as if government ownership was somehow unclear). But massive systematic undervaluing by LINZ has allowed farmers to reap windfall gains, with unearned superprofits flowing into the private pockets of the few.

This process is simply organised corruption. It has to stop. And those unearned superprofits need to be reclaimed for the people of New Zealand. Anything less is allowing farmers to get away with their pillage and plunder.