![A section of Federal Golf Club which is part of the proposal to rezone. Picture by Graham Tidy A section of Federal Golf Club which is part of the proposal to rezone. Picture by Graham Tidy](/images/transform/v1/crop/frm/8WgcxeQ6swJGymJT6BMGEL/8479f907-80c8-4ed4-9537-d756f16bf62d.jpg/r0_113_4256_2506_w1200_h678_fmax.jpg)
The ACT government is currently considering a Draft Variation to the Territory Plan, which involves, among other things, the rezoning of two parcels of land currently leased to the Federal Golf Club for golfing and related purposes.
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The larger of these parcels comprises about 10 hectares on the northern edge of the course, and is indistinguishable from the adjacent bushland in the Red Hill Nature Reserve.
This parcel is to be rezoned and returned to the reserve, where it will continue to be used, as now, by bushwalkers and nature lovers.
The other parcel of land - a bit over five hectares - is located on the course itself, on two of the existing fairways.
Although this land is also to be surrendered by the club, in this case it will be rezoned for residential use and, rather than being returned to the government, will effectively be sold by the club to a real estate developer, Mbark, which will create a retirement village on it.
There has been a long process of public consultation regarding this second proposed change to the use of the club's land. The focus has been mainly on possible environmental impacts in and around the golf course - particularly on endangered bird species - and also on additional local traffic generated by the village.
By contrast, there has been no attempt to consult the public about the financial aspects of this land rezoning. These aspects, in contrast to the local impacts, are relevant to the entire ACT population.
As I understand the current lease, ACT ratepayers will experience a roughly 12 per cent reduction in lease payments to their government by virtue of the club relinquishing about 12 per cent of its leased land, but this amount is trivial.
Much more importantly, by allowing the club to sell its entitlement to use the five-hectare parcel to the developer in the form of a sub-lease paid entirely in advance, the ACT government - and thereby its ratepayers - risk foregoing the capital gain resulting from its rezoning.
Instead, there is an expectation that this gain will be shared by the club and the developer. Club members have been informed that if the targeted 125 village units are approved, the club will receive some $18.75 million from Mbark.
![An artist's impression of Federal Golf Club's original proposal. Picture supplied An artist's impression of Federal Golf Club's original proposal. Picture supplied](/images/transform/v1/crop/frm/8WgcxeQ6swJGymJT6BMGEL/718ddb2f-25f9-406c-9d9b-858b562e3ec6.jpg/r0_195_2577_1644_w1200_h678_fmax.jpg)
It intends to use this windfall for investments in a new irrigation system, new dams, modifications to the golf course, renovation of the clubhouse and repayment of its borrowings.
Virtually overnight, members' equity in the club will jump from about $1 million to $20 million.
An inquiry into land tenures in Australia in 1973 addressed the problem of unearned gains from land rezoning, recommending that: Land policy must ... leave ... organisations ... with the fruits of their enterprise while reserving for the whole community the benefits which flow from public authority decisions over land use.
In the present context the government could ensure that the benefits of the proposed rezoning would flow to the whole community by imposing a sufficiently large fee on the club: that is, a lump sum payment in return for allowing the club to turn this parcel of land over for high-value residential use rather than golfing.
Indeed, the big unknown for the informal FGC-Mbark consortium is the "Lease Variation Charge" (LVC) it will confront if the village gets the go ahead from the government.
There have been suggestions that this charge might be around $4 million, but this may reflect wishful thinking on the part of the consortium.
The fact that the developer is willing to pay Federal almost five times this amount for the land suggests that the government may in fact set the LVC much higher than this so as to capture something like the full rezoning gain for ratepayers.
A valuation process is required to assess the before and after values of the lease and thus determine the applicable LVC. Under the present lease conditions, the land has almost no value - it cannot be sold, and it generates only small lease payments from the club.
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Compare this with the value of five hectares zoned for residential use in the neighbouring Hughes-Garran area: perhaps $50 million or so.
A sufficiently large LVC would soak up the club's prospective unearned gain from the land sale net of the cost of the necessary modifications to the course architecture. Pushing the LVC higher still would force the club to require even greater compensation from the developer for giving up its land.
Ultimately the developer would be left to make whatever profit it could solely from the "fruits of its enterprise", and none at all from the rezoning. The entire capital gain would flow to the government.
If this strategy were to be followed by the government the club would be back where it found itself in 1983 when the then government made land available to it under a highly concessional lease in order both to support the game of golf and to ensure the continued existence of a large patch of green to soften Canberra's built environment.
There was then an implicit understanding that this was to be the limit of the government's support. Beyond that, whether the club would survive depended on how badly its members wanted it to do so.
In this respect, nothing has changed.
The government would be perfectly entitled to the view that if it proves impossible for the club to manage its finances sustainably there is no justification for expecting ratepayers to bail it out.
- Ross McLeod is an honorary associate professor in ANU's Crawford School of Public Policy.