Legislative Assembly for the ACT: 2003 Week 6 Hansard (17 June) . . Page.. 1971 ..
Instead, the government has proposed a transitional approach that will allow a limited number of licences to be released each year in response to demand. Details are specified in the formula contained in the regulations that should accompany the legislation. The limit on the number of licences available each year, together with the reserve price determined by independent valuation, will ensure that licence values do not fall dramatically. While it is very likely that the rate of return for investors will progressively decline, there will not be any sudden or significant loss in value. Most operators will for many years to come continue to enjoy returns on their original investment over and above those available in today's investment market.
We have done more than just manage the impact that additional licences may have. The government will also return to existing licence holders the net proceeds from the sale of any new licences purchased at auction. The return of these funds to the industry will assist those most affected by the changes. The government has indicated that it would be prepared to continue to return funds to the industry for up to five years.
The availability of licences each year at auction will put some downward pressure on lease fees. As the cost of leasing a licence falls, the operating cost of a taxi will be reduced. The intention is that these savings will be able to be passed on to customers through reduced fares. The lower costs will also make it affordable for taxi drivers to operate their own cab. Not proceeding with this legislation or deferring the decision will ensure that the current downward trend in taxi hirings will continue indefinitely and there will be no benefit to the industry or the community.
The issue is not whether the industry should be reformed but rather what is a reasonable, sensible approach to reform. It is now eight years since the ACT agreed to review the taxi and hire car industry. There have been two major independent reviews and an Assembly committee review of the hire car industry. The government's reform program incorporates the vast majority, though not all, of the recommendations from those reviews. Further review by an Assembly committee would only delay matters. It would extend and exacerbate the climate of uncertainty that has characterised the industry for many years.
I have some interesting statistics. Around half of the 217 ACT taxi licences are leased from investors who have no involvement in the industry. Several industry investors have written to me, and I guess to you, on how they would be affected by the government program. Many complain that the proposed reforms will affect their lifestyle and retirement plans. The circumstances of investors do vary, but one that I believe is not uncommon is reflected in correspondence I received from an investor now living in Queensland.
He purchased his licence in 1989 for $37,500. In today's terms, that would equate to $56,500. Based on the present value, the investor is currently receiving a return of 46 per cent each year on the investment, and that considerable return is at the expense of the ACT community. He also stands to make a very considerable capital gain. Others who have paid historically high prices, around $260,000, are currently receiving a return of 10 per cent a year, more than twice the long-term bond rate. As I stated earlier, licences do not provide any benefits to customers or operators, yet impose substantial costs.