Chief Minister Andrew Barr has justified approving the former Land Development Agency's $7 million purchase of Milapuru on the grounds the government will get at least $100 million from residential sales of the land.
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Mr Barr approved the LDA's purchase of the land in June 2015, despite the deal not meeting the agency's own land acquisition test, and the purchase price exceeding a key valuation of the property by $3 million.
An audit of a series of the former LDA's rural land acquisitions found the purchase ultimately led to a loss of $3.3 million for the agency in 2015-16, including stamp duty and costs associated with the acquisition.
But it also found the purchase did not meet the government's land acquisition policies in place at the time, particularly the "value for money" principle that was meant to guide such purchases.
And, the audit found, apparently the government has not collected up to $90,000 worth of rent from the property it now owns, owed up to the end of December last year.
The audit of a series of farm purchases by the now-defunct agency was highly critical of some of the agency's actions on the acquisitions and management of contractors.
Auditor-General Dr Maxine Cooper found "probity risks" in the buy-ups, pointing to the NSW Independent Commission Against Corruption's definition of probity as "integrity, uprightness and honesty", and complying with public sector values and duties such as impartiality, accountability and transparency.
While Mr Barr as Treasurer was not legally bound to adhere to the agency's land acquisition policy framework that was in place at the time, it is unclear why he approved the purchase, given the loss and the audit's findings it did not meet the agency's own "value for money" criteria.
The audit found the Milapuru purchase, as well as the Fairvale and Lands End acquisitions, did not meet tests six and seven in now-defunct agency's land acquisition policy, while the Milapuru deal also did not meet test five under the rules.
Test five dealt with the need for the "proposed purchase price" to be consistent with the "independent market valuation", or "value for money"; while test six said that if a commercial outcome was sought from the deal, a business case must be prepared "that demonstrates that a satisfactory commercial return will be realised".
Test seven under the policy also said that if a "non-commercial outcome" was sought - such as using the land to house future community facilities - that "any holding costs, redevelopment costs and opportunity costs have been demonstrated to be reasonable and not onerous".
Mr Barr, who last week was referring all questions on the audit to Suburban Development Minister Yvette Berry, said this week he approved the Milapuru because a business case on the acquisition, prepared by the LDA, "indicated that the value uplift associated with residential redevelopment of this property was more than $100 million".
"The government needs to continue to make provision for the future supply of new public, community and private housing in the territory," he said.
"The advice provided to the chief minister was that an independent valuation had been commissioned and the LDA had reached an in-principle agreed purchase price of $7 million.
"Furthermore, the purchase had been endorsed by Treasury after consideration of the business case, as required."
However, it appears that while the business case satisfied Treasury, Mr Barr did not seek to actually read it, instead saying his decision was simply following the Treasury's advice.
But the business case did not satisfy ACT Auditor-General Dr Maxine Cooper of the merits of the purchase at $7 million, above the original valuation of the property "at fair value" of $3 million.
While the former LDA and Mr Barr approved the purchase, on the basis "market dynamics", given a potential competing offer to the seller, the audit office found the "value for money" test was a "strict application" and "does not expressly facilitate market dynamics being incorporated".
The Suburban Land Agency, which has replaced the LDA's role in green-field development, also seems to be interpreting the test along the same lines as the former LDA, telling the auditors the suburban agency believed "it is appropriate that potential rezoning was considered".
Irrespective of the differing interpretations, the audit office report that "what needs emphasising is that the former LDA should have clarified how the [policy] principles and tests were to be applied; this did not occur".
Mr Barr said the LDA bought the property to provide for "the future supply of housing in the ACT", and that the $3.3 million loss incurred on the transaction would be made up for by the estimated $100 million worth of land sales once it was released.
However, asked whether he was aware of the valuation of the property at $3 million at the time of approving the purchase - a detail included in the business case - Mr Barr said "No".
Opposition Leader Alistair Coe said Mr Barr's justification for the "outrageous" deal was "rubbish", and it was just there were "too many unexplained, secret [land] deals that have cost Canberrans millions of dollars".
"By their logic, they could’ve paid up to $100 million for this block," he said.
"Given the government controls zoning and development, their justification is flawed.
Mr Coe said that in any other jurisdiction, Mr Barr's conduct would "bring down a government", and he needed to more fully explain why he agreed to this and "many other outrageous land deals".
“He still has not explained why his government relinquished up to $2.65 million in value to the CFMEU-linked Tradies in the scandalous Dickson deals, even when the Auditor-General couldn’t rule out criminality," Mr Coe said.
