Commission was granted independence and wide-ranging responsibilities. Its sphere of
influence included urban services such as the police, healUi services, and education as well as
development and construction. The FCC was expected to provide Uie Commonwealth with a
financial return. Section 17 of Uie Act established a Seat of Government Fund, financed by
appropriations from consolidated revenue and Commonwealth Cash and Conversion Loans.
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The Commission was required to repay all monies spent on the Seat of Government prior to 1924 plus 2.5 per cent interest, while ail later funds would incur an interest rate of 5.5 per cent. The Commission began its activities with a debt of almost £4 million. From its inception the FCC was required to conduct its work as a business undertaking.
Under (later Sir) John Butters the FCC was a dynamic and effective body. In the 30 months to June 1927, when Parliament sat in Canberra for the first time, the Commission spent £9,360,000 and employed 4,000 tradesmen. At its peak it had a staff of 480. Not only did the FCC bring Parliament to Canberra, but it also managed to provide accommodation for 1,100 public servants and their families. The most ambitious plans of the Sulman Committee had envisaged the transfer of only 560 households. On one occasion Butters even managed to force the Board of Governors of the Commonwealth Bank to accept residential leases as security against housing loans. The FCC would have achieved more if it had not been required to reduce its outlays in 1926-27 and again in 1927-28 because of national economic problems.
The FCC's single greatest asset and source of revenue was land. Leasehold for the city area had been introduced into the federal territory in 1918. Rural land had been leased back to farmers since the commencement of the land acquisition program but these arrangements were not an important part of the development of the capital. The Lease Ordinance 1918 was the first legislation to deal with leases in the city area. It allowed for the sale of leases for 25 years with an annual rent of five per cent of the capital value. This legislation contained only the barest oudine of the leasehold system. A more substantial version of leasehold was promulgated through the Leases Regulations 1919 and City Leases Regulations 1921, which spelt out the basic conditions of leasehold: the legislation gave the responsible Minister the right to determine (or take back) the lease if the lessee was in breach of any conditions attached to the site, annual rent was set at five per cent of the block's unimproved capital value, land values were to be reappraised after 20 years for rental purposes in the first instance and then every 10 years; and, lessees were required to erect a dwelling within one year of the purchase of the lease.
The first urban land was released under the City Leases Ordinance 1924. No blocks were released under the 1918, 1919 or 1921 legislation although they did form the basis of later ordinances. There were three innovations witiiin tiie 1924 legislation. Firstly, it set the term of the leases at 99 years. Secondly, it established auctioning as the the method of land disposal and decreed that unimproved land values would be set by the prices paid at auction. Thirdly, it established die reassessment of leases after 20 years in the first instance and every 10 years tiiereafter. The terms and conditions associated witii leasehold were of considerable
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significance. The Commonwealth's decision to auction land was a reflection of its desire to ensure large financial returns. Fifty years later the Department of the Capital Territory (DCT) commented in its submission to the Commission of Inquiry into Land Tenures
'The Government adopted the auction system of land disposal rather than the equally available application system. It seems clear its policy was to set high values on the land to maximise revenue from land rent' (DCT, 1973, pl2).
The Commonwealth Government did not simply organise leasehold to its advantage. The 1924 legislation gave lessees greater rights and prospects for material advancement than would have been acceptable in an earlier period. The decision to set a 20 year period for land value reappraisals was especially contentious. The extension of lease contracts to 99 years also gave lessees far greater rights than envisaged originally. An amendment to the legislation in 1925 even allowed, at the discretion of the Minister, the sale of dwellings before the erection of a permanent structure. Brennan (1971) estimated that approximately 130 sites were exchanged privately under these terms. It is therefore likely that a substantial proportion of the first blocks to be released in Canberra were sold later for a speculative gain. Brennan (1971) considered that this amendment resulted in inflated land prices as speculative investors purchased leases in anticipation of resale at a later date. The leasehold legislation throughout this period did not exclude the sale of a lease for a profit after construction. The vestigal intent of the 1924 legislation was to prohibit speculation in raw land. No attempt was made to limit the ability of lessees to benefit from their residential property once a permanent structure had been completed.
The first auction of City Area leases was held on the 12th of December 1924, just prior to the commencement of operations by the FCC. Three hundred residential and two hundred business leases were released. The second auction of leases, and the first under the.FCC, was conducted on the 10th of February 1926. Auctions continued through 1926 and 1927. Auctions were abandoned as a method of land disposal in 1937 because of rising prices and did not reappear until 1951. Leases could also be acquired through private negotiations after the auctions. The auctions resulted in high prices. The 150 leases sold in December 1924 fetched a nominal capital value of £60,000 (Brennan, 1971). Lessees paid only the first year's rent (five per cent of the sum bid) upon the fall of the hammer. This aspect of uhe sale of leases meant that many purchasers were more willing to bid vigorously than otherwise would have been the case. Prices rose steeply in 1926 due to competition for land. Some 354 leases had been sold by the end of June 1926, the majority of which were for residential land.
Leasehold became a source of political friction within the territory. Many lessees were unhappy with the conditions attached to their properties. Commercial interests, especially those from Queanbeyan, chafed at the imposition of purpose clauses which restricted the uses