Parker rejects Treasury advice
By Richard Harman (author)
The Government proposed that purchasers of sections (valued at up to $4.5 million each) in the controversial up-market Northland Te Arai development would have the right to sell their property to offshore buyers any time over the next 15 years.
They would have been able to do this because of an exemption the Associate Minister of Finance, David Parker, wanted to be included in the overseas house buyers' ban legislation.
That has now been struck out by the Speaker.
If the overseas buyers had got the exemption, they would have been the only residential landowners in New Zealand with a right to sell their property offshore and could have reaped a windfall gain because of that.
Otherwise, New Zealand citizens may not sell residential property offshore under the Overseas Investment Amendment Bill currently before the House.
Treasury warned Parker that If the Bill was enacted and provided for specific developments to be exempt, it could lead to an increase in prices for any exempt developments, thus creating windfall profits for those developers.
Parker has emphasised in Parliament that the exemption was proposed because the Government was concerned about the position of Te Uri O Hau which had recorded an impairment loss of $14 million on its main settlement asset, the Mangawhai Forest.
In 2006 it had sold the forest to a joint venture it had formed with a Queenstown property developer, John Darby.
It held 25% of the shares in the joint venture.
But it appears it received no cash for the sale and was reliant on the proceeds of the property development for its return.
But Treasury said there was no legal obligation to compensate iwi who had incurred losses over land granted to them as part of a Treaty settlement.
Parker yesterday released the Treasury advice which had been sought under the Official Information Act.
Development of the land was stalled until recently because various proposals failed to get planning consent.
Finally, consent was granted for 46 sections -- and for another 100 at an adjacent site which forms part of the overall Te Arai development.
Treasury in a report to Parker said: “Although the Bill may impact on the commercial value that may be realised from the divestment of land transferred to iwi as commercial Treaty settlement redress, there is no legal obligation to exempt Te Uri o Hau or Ngati Manuhiri from the Bill.”
(Ngati Manuhiri have bought an adjacent forest as part of their 2011 Treaty settlement and have also joined with Darby to develop 60 luxury beachfront sections. In effect, Te Uri O Hau, Ngati Manuhiri and Darby are the joint developers of the land.)
Treasury was obviously worried about the precedent that might be set if the Government exempted treaty settlement land because, after the settlement, the relevant Maori entity had suffered business loss on the land.
“On balance, we do not recommend an exemption for residential development on land acquired through a Treaty settlement," it said.
“This recommendation is based on prioritising policy effectiveness of the overseas investment regime for residential land.
“Furthermore, an exemption tied to Treaty settlement land would present precedent risks in terms of other government actions that may negatively impact on the value of settlement assets.”
And in advice to the Minister on how he should explain the exemption, Treasury says: “As there is no legal requirement to exempt Te Uri o Hau and Ngati Manuhiri’s land, any exemptions made for land received through Treaty settlements should be phrased as policy choices rather than legal or Treaty settlement obligations.”
In other words, any decision to exempt the land would be entirely political.
Treasury said, therefore, that there should be no exemption for Te Arai.
“This would reduce economic development potential for Te Uri o Hau and Ngati Manuhiri.
“However, it would align with the general purpose of the Bill and provide for consistent treatment, including decisions not to exempt luxury homes, lifestyle property or some regions.”
Otherwise, it said it might be possible to create a power to regulate to provide exemptions in the future.
“This option would provide more time to investigate whether the Bill would have a similar impact on other iwi/Māori entities,” it said.
Parker, however, rejected this advice.
Instead in an undated memo to the Chair of the Finance and Expenditure Committee who were considering the legislation, he said: “I consider the special circumstances of this development and the stage of the process of this particular development are special and warrant being addressed. It is important, however, that precedent risks are mitigated.
“In particular, it should be clear that a decision to exempt this development is not due to the fact that the land was provided as Treaty redress.”