Ann Brower: Land-rich farmers get double bonus

Last week, the Herald sports page described a huge transformation of South Island landscapes that has been flying under the public radar for 15 years.

It described a scheme in which the Government is giving away clear title to the most developable Crown land in the high country, while taking the rights to graze the poorest Crown land. And we're losing millions in the deal - $15.6 million so far, with just 20 per cent of deals completed.

This scheme, called tenure review, is splitting 20 per cent of the South Island - presently owned by the Government, with grazing and occupation rights leased to farmers.

In this land reform, the Government buys grazing rights from the farmers - 214,000ha so far - for high-altitude unproductive land. Afterwards, the Crown can remove the sheep and establish conservation parks.

The farmers buy clear title - to 276,000ha so far - to the most valuable land. Afterwards, the farmer owns thousands of hectares and is free to apply for local council consent to develop, subdivide, irrigate and build.

Here's the kicker - the farmers not only receive land representing millions in development potential, but pocket an average of $186,000 in cash.

Some receive millions on top of the land, some of which has a value of $7 million a hectare if subdivided.

The Government is not just enabling subdivision. It is subsidising subdivision.

Why were details of this scheme on the sports page? The new owners of some newly privatised land at Glendhu Station have proposed an 18-hole golf course, villas for 200, and 50 houses. This was Crown land until 2003. And it's on the shores of Lake Wanaka.

In 2003, the Glendhu lessees gave up rights to graze 280ha and acquired freehold title to the remaining 2936ha.

So they relinquished grazing rights to the 9 per cent of the land that is least grazeable and acquired rights to develop the 91 per cent that is most developable.

As a political scientist analysing the policy, I asked how much they had paid for the right to develop the shores of Lake Wanaka. I discovered that rather than paying, the lessees were paid. It was only $5000, but I wish my landlord would do that.

As a Fulbright scholar, I spent a year digging into the politics and economics of this obscure but huge transfer of wealth and resources.

I found that what the farmers get in the deal is far more valuable than what the Crown gets. And it is surprising that the Crown would pay millions.

It is hard to explain why the Crown would privatise land and pay the new owners, but the farming lobby has paid two Victoria University economists to claim that it is reasonable for farmers to receive land and cash.

The trouble is, the economists used the wrong numbers. They selected only nine of 16 deals from 2005, and wrongly assumed they represented the whole year.

They also assumed this six-month period accurately represented a 15-year timespan. But these nine were uncharacteristically favourable to conservation. The economists' sample boasts a 60 to 40 per cent conservation-freehold split, instead of the actual 44 to 56 per cent split.

Using the economists' calculations, but with the real data for all 15 years, the results would disappoint the farmers. Their calculation suggests the farmers should have paid $110,635,600 instead of receiving $15.6 million.

The farmers' economic research reveals that tenure review is a huge giveaway. Farmers leave tenure review far wealthier than they enter.

I have examined the previously secret prices negotiated in tenure review deals, which discredit the farmers' theory that the Crown's interest in the land is worth little.

Analysis reveals that the more land the Crown gives away the higher the price it pays to the recipient. That's right - he who gets the most land gets the most generous price.

Why would the Government offer a bulk discount while privatising valuable lakefront land?

It's not ministers or bureaucrats who negotiate deals for the Crown. Private contractors close these deals. There is no reserve price and no commission. They're not paid to close a good deal, just a deal.

The numbers suggest that the Crown and its contractors are willing to close a deal at any price. What better way to close a deal than to offer a generous price?

Politics is an exercise in strategic hypocrisy. Tenure review is no exception. Last year all the interest groups pulled an abrupt about-face on tenure review. For 15 years, conservation and recreation lobbies had supported it, but farming lobbies had staunchly opposed it, claiming they were victims of a Crown land-grab.

In August, the Crown privatised 9km of the Lake Tekapo shoreline and paid $325,000, in exchange for the least-valuable 40 per cent of Richmond Station. Not surprisingly, the conservationists called for this to stop.

This proposed moratorium suddenly threatened the greatest giveaway to hit the high country. Not surprisingly, the farming lobby did a U-turn. Instead of arguing theft, they were forced to defend tenure review or risk losing it altogether.

Successive National and Labour Governments have clung to the myth that tenure review is outside politics, administered neutrally. It is easier to claim neutrality than to stand up to powerful interests.

Who would blame them? What government would want to defend a policy giving away the shores of Lakes Wanaka, Pukaki, Tekapo, Hawea, and Wakatipu and subsidise their development?

Instead of defending a policy yielding nonsensical and expensive results, the governments have claimed neutrality.

This leaves no one as advocate for the Crown's financial interest in the land. Failure to stick up for yourself is a tacit but surefire agreement to lose.

Until the conservationists called the farmers' bluff, tenure review had been touted as win-win - but only because the Crown was agreeing to lose.

Now the farmers stand alone in their defence of the tenure review giveaway. Go figure.

* Ann Brower is a political scientist specialising in natural resource management (PhD from Berkeley, and masters from Yale).

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