Economic Security

The Economic Redress component of the Crown’s Settlement Offer – cash and mechanisms – gave Ngāi Tahu the capacity, right and opportunity to re-establish its tribal base. This asset base provides the platform to generate the funds required for the tribe’s social and cultural development.

Introduction

Economic losses to Ngāi Tahu from the Crown’s land purchases of the last century were valued at more than $20 billion in economic terms.

The Crown’s Settlement Offer of $170 million was clearly much less than this amount. However, in deciding whether the Crown’s Settlement Offer was acceptable, it was important to ask:

Was the offer ‘sufficient’ to re-establish the tribe’s economic base, in order for it to fund the social development of Ngāi Tahu?

Could the tribe do better by other means, and would these be more or less risky than the ‘Settlement Offer’? If the tribe could do better, when could these alternatives be achieved, and would they deliver cultural redress – such as mahinga kai – as well as economic redress?

The Ngāi Tahu Negotiators believed that the $170 million, with the ‘bolt-ons’, was sufficient redress to re-establish an economic base for the tribe.

Cash Compensation

The $170 million cash in the Crown’s Settlement Offer comprised:

• A $10 million non-refundable payment which was made ‘on-account’ in June 1996, to show the Crown’s commitment to achieving a final settlement.
• A second $10 million non-refundable ‘on-account’ payment, when Te Rūnanga o Ngāi Tahu accepted the Crown’s Settlement Offer.
• The balance of $150 million, payable once the Settlement Legislation was passed.

Interest was paid on the Ngāi Tahu Settlement amount between October 1996, when the Heads of Agreement was signed, and the date that the cash was paid. Interest totalling approximately $25 million was paid once the settlement legislation was passed.

Deferred Selection Process (DSP)

The Deferred Selection Process (DSP) mechanism allowed the tribe to buy if it chose to, Crown assets from a defined ‘pool’, within 12 months of Settlement Legislation being passed, up to a total value of $250 million. By doing so, the tribe had an opportunity to buy a range of assets, in a number of economic sectors and locations that best produced the income required for social development.

There were a number of Pre-Selected Assets that the tribe decided to buy from the Crown once the Settlement offer was accepted. Once the tribe bought these pre-selected assets, including the High Country Stations, they were able to use the remaining cash compensation to buy other available Crown assets of their choosing.

The pre-selected assets were:

• The High Country Stations
  (see Cultural Redress – Ownership and Control)
• Assets in the Ngāi Tahu ‘Land Bank’
  Eight other properties, such as properties currently owned by Telecom in Christchurch and Queenstown.

The ‘Land Bank’ was set up in 1991 as a protection for Ngāi Tahu while the Claim was still outstanding. As Crown agencies wanted to sell surplus lands the tribe had an opportunity to place those lands in the Land Bank, to ensure they were available for use in a settlement. The tribe has also been able to buy certain assets out of the Land Bank with its own money since 1994.

The range of assets in the DSP “pool” included:

• 55 commercial properties, including for example, the Christchurch and Dunedin Police stations
• 54 farms in the Ngāi Tahu rohe owned by Landcorp
• Certain Crown forestry assets in the rohe, including six Aoraki commercial forests, and 27 Crown Forestry Licence (CFL) lands

The DSP ‘pool’ provided the tribe with access to land and property assets, and the forestry and farming sectors. Ngāi Tahu could choose to buy those assets – whether the Crown wished to sell them or not. Some of the properties Ngāi Tahu selected are still required for use by the Crown – Police and Courts sites in Christchurch and Queenstown, for example. Consequently these properties are leased back to the Crown at market rentals. As these leases are with high quality tenants, they produce a sound cash flow.

In respect of the Aoraki forests Ngāi Tahu could have chosen to buy the land, the trees, or both. For the CFL lands Ngāi Tahu had the choice to buy the land, but not the trees on the land (since the trees are owned by private parties). By choosing to buy the CFL lands, the tribe could also obtain the associated accumulated rentals of around $20 million, as described above.

The DSP pool contained in excess of $400 million of assets. The tribe was able to use its cash compensation to buy DSP assets up to a total value of $250 million. Because the cash compensation was less than $250 million, the tribe needed to raise funds from other sources – for example from banks. An important point is that any assets not taken under the DSP are still covered by the Right of First Refusal.

An important feature of the DSP mechanism is that it gave the tribe time to select desired assets. All DSP assets were bought at their current market value as at the date the Deed of Settlement was signed. However, Ngāi Tahu had up to 12 months from the date of Settlement Legislation to inspect, value and choose which Crown assets, if any, it wished to buy from the DSP ‘pool’.

Right of First Refusal (RFR)

The Settlement included a Right of First Refusal (RFR). This mechanism, which will last forever, in respect of a defined range of assets ensures that Ngāi Tahu will have first opportunity to acquire a large range of Crown assets, at their current market value. These assets will become available to Ngāi Tahu as and when the Crown chooses to sell them. Among other things, the RFR gives Ngāi Tahu an opportunity to secure assets that it might not be able to get through other means and accumulate groupings of assets over time that can be used to the tribe’s advantage.

This RFR is triggered whenever Crown agencies decide to ‘dispose’ of the RFR assets. Dispose includes the sale of assets, and the issuing of long term leases over the assets (50 years, including rights of renewal). In certain circumstances the RFR is also triggered if the relevant assets are transferred into a company and that company is later sold.
The RFR applied to an extensive range of assets in the rohe owned by the Crown as at the date the Deed of Settlement was signed, but not to assets subsequently purchased by the crown.

RFR – Range of Assets

Notes

1. Crown Land – Departmental land (eg. Education, Defence, Corrections), Crown Land and Unallocated Crown Land (including Crown Forestry Land)
2. Airports – Crown’s 50% shareholdings in each of Dunedin and Invercargill airports, 25% shareholding in Christchurch airport (subject to existing pre-emptive rights) and the assets of Milford airport.
3. Other – Includes assets from DSP pool that are not taken under DSP, and land held by New Zealand Fire Service and Transit New Zealand.

As a safety mechanism memorials were added to the titles of RFR properties, telling Crown agencies and potential purchasers of the properties that these properties must be offered to Ngāi Tahu before anyone else.

Under the RFR, the Crown sets the offer price, terms and conditions for the assets being sold. However, as a sign of the new relationship between Ngāi Tahu and the Crown, the RFR process provides that both parties negotiate in good faith to agree the price, terms and conditions for a sale of the asset to Ngāi Tahu. Hence, Ngāi Tahu cannot be forced to accept any unreasonable price, terms or conditions. Nor can the asset be sold to others on more favourable price, terms, or conditions, without Ngāi Tahu first being offered the asset on the same basis.

Relativity Clause

The relativity mechanism was our insurance against the risk of the unknown, of being the first iwi to enter into a comprehensive Treaty settlement process with the Crown.

Read the background document on the relativity clause Relativity Speaking [PDF].