Chief Minister Andrew Barr has pushed back against claims that lease variation charges are an unreasonable barrier to investment, arguing he would be "lynched" if he ceded to developer's wishes and overhauled the tax.
Mr Barr appeared at a Property Council lunch on Thursday, as he continues to spruik his 2019-20 budget.
Front of mind for the developers and property owners in the room was the impact of lease variation charges - the tax paid when the government approves the rezoning of a block of land.
The government generated $43.6 million from lease variations in 2018-19, more than double the amount it received in 2016-17.
During a question and answer session at the lunch, one attendee told Mr Barr that the charge was the "antithesis of investment", and that if any more taxes should be abolished it should be that one.
Mr Barr hit back at the claims, saying it was entirely reasonable to tax developers who saw their land values increase "at the stroke of a planners pen".
He expected revenue from lease variation charges to increase in the coming years, as more inner-city land was rezoned in order to meet the government's ambitious urban infill targets.
"If the government was unable to capture any of that windfall, we will have a dramatic reduction in services," he told Thursday's event at the National Gallery of Australia.
"I know it is not popular in this room, but I would get lynched if I said, 'no, we are doing away with the LVC' because what needs to happen is that everyone who rezones get all of that benefit of the rezoning."
"The community would just go bat shit crazy."
The government will implement some changes to the lease variation scheme, including introducing a 25 per cent remission for community housing providers. The monetary threshold for developers and property owners to access the government's deferral scheme has halved from $100,000 to $50,000.
Mr Barr used his address on Thursday to reiterate how burdensome the Mr Fluffy clean up has been on his government's capacity to commit funding to major projects.
The issue reemerged earlier this week after Mr Barr said long-awaited plans for a new sports stadium in Civic could be fast-tracked if the federal government agreed to waive the amount remaining on its $1 billion Mr Fluffy loan.
Liberal Senator Zed Seselja rubbished the request, saying Mr Barr should take "responsibility for the mess he created".
Mr Barr's spokeswoman said the chief minister would soon write to Treasurer Josh Frydenberg with the request. She said the government would argue for a full or partial waiver of the loan on the basis that the origins of the Mr Fluffy saga pre-dated self-government.
She said the government was also considering refinancing the loan, which has cost the territory about $25 million in interest repayments this year.
The government still has $900 million of Mr Fluffy debt on its books. It plans to pay off $50 million next year and $100 million in the two following years, before paying off the remainder as a lump sum in 2024.
The chief minister's spokeswoman said that schedule could be varied in light of "current market conditions and the ACT's broader balance sheet".
The government has spent about $770 million buying back and demolishing the Mr Fluffy blocks, an amount the spokeswoman said was "lower than expected". About $504 million had been generated from land sales as of December 2018, with the government estimating the "net cost" of the program at $295 million.
When asked whether, in hindsight, the $1 billion taken out in 2014 was too much, the spokeswoman said the "size of the loan reflected initial estimates of the capital costs of the program".