Towering cheek II: billion dollar squatters

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Exclusive: TV networks are squatting on Crown Land, freeloading. Nobody is game to take them on.

Every year, the secretive BAI Communications books hundreds of millions in revenue straight from the government, from the ABC and SBS to be precise. It is one of Australia’s great corporate welfare stories.

The national broadcasters outsourced their transmission, that is, they sold their TV towers and hill-top huts to a Macquarie Bank company for a one-off profit in 2002. This Macquarie company became Broadcast Australia, which later became BAI, and ever since, ABC and SBS have been paying BAI to do their transmission, and paying through the nose.

Meet Australia’s billion dollar squatters. For four years, BAI, its clients ABC and SBS, and other TV networks have not paid the NSW government “co-user” licence fees for operating on Crown Land, despite the recommendations of NSW regulators. Michaelwest.com.au has been unable to establish whether a similar situation is occurring in other states.

While the TV networks and BAI have given taxpayers the bird and refused to cough up four years on the trot, the likes of the NSW Volunteer Rescue Service and NSW Surf Lifesaving have been paying their dues. The volunteer minnows are the lifters, the media giants the leaners.

Towering cheek: taxpayers get the bird from freeloading TV networks

The short of it is, the ABC and SBS collect a combined $1.3 billion in government funding each year and pay roughly $280 million or one-fifth of it straight to BAI.

When contacted for this story, both networks said it was up to BAI to pay Crown Lands, not them. Both ABC managing director Michelle Guthrie and SBS head Michael Ebeid declined to be interviewed.

BAI was evasive, its chief executive Jim Hassell declined a number of interview requests. A response was finally provided, claiming our original story was wrong and demanding a retraction. We will get to this in due course.

Firstly, let’s take a look at the mysterious BAI, which is now owned by a Canadian pension fund. BAI makes more than half a billion dollars a year in cash but, thanks to an aggressive structure of related party loans, does not pay much tax.

Company searches show BAI’s head operating entity in Australia, Broadcast Australia Infrastructure Holdings Pty Ltd, booked cash receipts of $539 million last year. Thanks to $870 million in borrowings from its own related parties, BAI was able to soak up $92 million in interest payments on these loans to itself, wipe out a chunk of taxable profit and get its tax down to $22 million – which was $22 million higher than the year before.

The company had a setback in 2015. The broadcasters were paying through the nose for transmission. They knew BAI was making a killing at their expense and they renegotiated their contracts. According to a story in Crikey, there was no tender; which is pretty strange given the ABC is punctilious about tendering for other things like jobs. Apparently our ABC is more laissez-faire when it comes tendering one-fifth of its entire cost base.

In any case, It seems BAI may have taken a haircut on its deal with the broadcasters – though it is all a secret and none of the parties were in the least helpful for this story – and decided to get more belligerent on the tax front that year, jacking up related party borrowing costs from $80 million to $125 million.

Over the past four years, the consolidated accounts for Broadcast Australia Infrastructure Holidngs show group cashflows of $1.8 billion and tax expense of just $39 million. Salaries have risen from $51 million in 2013 to $65 million last year for a total of $239 million.

BREAK HEAD HERE

The figure in the most recent ABC annual report is $198.1 million for Transmission and Distribution Services. The majority but not all of this would go to BAI.

For SBS, “transmission commitments” in 2015 were $88 million; again most presumably going to BAI. Over five years the figure is $528 million.

This is hardly chump change. Since 2002, billions of taxpayer dollars have gone to this company yet all its arrangements are cloaked in secrecy.

Next stop is the commercial networks. If anyone would care to help, in the public interest, please touch base.

THE FOLLOWING ARE RESPONSES FROM THE CHIEF PARTIES TO THIS STORY:

SBS RESPONSE
An SBS spokesperson said: “SBS has a long term contract with Broadcast Australia to supply transmission services. Broadcast Australia is responsible for ensuring it has the necessary rights and permits to provide these services, and SBS does not typically have visibility of Broadcast Australia’s expenses in providing these services. Any matters relating to Broadcast Australia’s operational payments are a matter for Broadcast Australia.

“Details pertaining to contracts with individual suppliers are commercial in confidence. SBS’s annual expenditure is published each year in its annual report.”

ABC RESPONSE

A spokesman for ABC said: “The ABC has a contract with BAI for transmission services only. The issue you have reported on is a matter for BAI.”

BAI RESPONSE

Broadcast Australia maintains commercial agreements with NSW Crown Lands in relation to its occupation of Crown Land sites. Broadcast Australia pays annual Licence Fees to NSW Crown Lands required under those agreements. Broadcast Australia is not in dispute with NSW Crown Lands in respect to any outstanding payments, nor has Broadcast Australia received any invoices from NSW Crown Lands that have not been paid. The assertion that Broadcast Australia is refusing to pay NSW Crown Lands is untrue and we ask that you correct this story.

For absolute clarity, BA has an agreement in place with NSW Crown Lands for every site where BA has a tower on Crown Land. BA has receives invoices from NSW Crown Lands for every tower site in its portfolio and has paid these invoices.

We reiterate the assertion that Broadcast Australia is refusing to pay NSW Crown Lands is untrue, and we ask that you correct this story.

MICHAELWEST.COM.AU RESPONSE TO BAI STATEMENT

BAI has been given ample opportunities to comment and still refuses to respond on the following points: michaelwest.com.au accepts that BAI pays Crown Lands what are called “Infrastructure Provider Fees”. This is what BAI appears to be referring to in its statement.

Although it may be paying as a primary user, BAI however has not been paying “co-user fees” on behalf of the likes of ABC and SBS. BAI’s licence as a co-user has not been approved by Crown Lands. BAI has refused to comply with, and agree to, the recommendations of IPART and has left its clients ABC and SBS without a co-user agreement with Crown Lands.

If ABC and SBS are ignorant of this failure to pay Crown Land it is negligent. If they are aware it constitutes moral failure. The NSW Minister for Industry Niall Blair has also been approached for comment. He failed to respond.

RESPONSE FROM CROWN LANDS

“The NSW Department of Industry – Lands makes Crown land available under licence to a variety of organisations to construct and operate communication infrastructure.

In July 2014, the NSW Government adopted recommendations from the Independent Pricing and Regulatory Tribunal (IPART) into rental agreements for communication tower sites on Crown land.

Subsequently, land management agencies have been working together to implement the recommendations in a consistent manner and reconciliation of some of the tenancies is ongoing.

As organisations move on and off Crown Land, tenures are reviewed and clarified on an ongoing basis.

With regard to commentary on any individual ongoing cases these are commercial in confidence however we can confirm that any outstanding rents that are owed to the Department are being pursued.”

EDITOR’S NOTE

It sounds like Crown Lands, as the steward of public resources, had better get its invoices in quick-smart.