Archive | Funding

Ministers explain infrastructure funding deal

The Government said yesterday it would repurpose its ultra-fast broadband company to co-invest up to $600 million alongside local councils & private investors in network infrastructure for big new housing developments.

Finance Minister Steven Joyce & Local Government Minister Anne Tolley said yesterday: “Crown Fibre Holdings Ltd will be renamed Crown Infrastructure Partners Ltd [though that name has been reserved for a new entity], and bring the investment skills & experience gained through the Government’s world-leading ultra-fast broadband rollout to the job of attracting private investment in roading & water infrastructure that open up big new tracts of land for more housing development.”

Crown Infrastructure Partners will set up special purpose companies to build & own new trunk infrastructure for housing developments in return for dedicated long-term revenue streams from councils through targeted rates & volumetric charging for use of the infrastructure by new residents.

Mrs Tolley said: “This innovative new funding method will be made available to cash-strapped councils who are struggling to fund new long-term infrastructure from their own balance sheets.

“Councils will have the option of buying back the infrastructure at some point in the future, but won’t have to commit to doing so. This is all about introducing outside capital to build this infrastructure, so current ratepayers don’t get burdened with all the costs of growth.”

2 of the earliest projects to be assessed by Crown Infrastructure Partners for investment will be projects in the north & south of the Auckland region previously which Auckland Council said would require investment outside the council’s own balance sheet.

“These 2 large projects can provide an additional 5500 homes in Wainui to the north of Auckland, and 17,800 homes across Pukekohe, Paerata & Drury to the south of the city.”

Mr Joyce said the Government was prepared to be an investor alongside the private sector and take up some of the early uptake risk: “We learnt from the ultra-fast broadband programme that if we derisk some of the early stages of the investment, we can bring in private sector investors to take on much of the heavy lifting as the investments mature. We would expect the Crown’s investment in each project to be matched with at least one-to-one with private sector investment over time.

“This new model is another way in which we are helping councils in our fastest growing cities to open up more land supply so more Kiwis can achieve the goal of home ownership.

“Crown Infrastructure Partners is the logical next step in infrastructure funding following the Government’s Housing Infrastructure Fund, which will deliver 60,000 houses across our fastest growing population centres over the next 10 years.”

Link:
Infrastructure funding detail

Attribution: Ministerial release.

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New Crown entity will advance housing infrastructure

The Government has lodged the documents to establish a new company, Crown Infrastructure Partners Ltd, to support development without breaching local council debt constraints.

Auckland Council has been tiptoeing just below its debt:revenue ratio limit of 265%, and put the concept to the Government of a special purpose vehicle to fund infrastructure in a way that recognises those debt constraints.

Instead of the council funding infrastructure for new development, it will come from the Crown company. Auckland mayor Phil Goff said yesterday this would enable construction of 23,300 homes in the north & south of the region to be brought forward.

Mr Goff said the announcement was made at Drury, in South Auckland, because that was likely to be the first place the new funding would be used, for 700 homes.

Mr Goff said: “The initial investment of $387 million in transport & water infrastructure in Drury South & West, Paerata & Pukekohe will enable the construction of 17,800 dwellings much earlier than would otherwise be the case.

“A further major development will be around Wainui in north Auckland, with $201 million in infrastructure funding required for an additional 5500 dwellings.

“The new investment vehicle will provide capital from the Government & the private sector which will not be debt on the council’s books. It will be funded through development contributions & targeted rates within the new housing developments.

“Auckland is growing by 45,000 new residents/year and requires unprecedented levels of infrastructure growth to keep up with demand. Increasing the supply of housing is a critical part of overcoming our housing shortage and slowing price rises caused by demand exceeding supply of housing.

“The new unitary plan ensures there is adequate land – greenfield & brownfield – to meet demand, but infrastructure servicing that land is necessary for homes actually to be built.

“Special purpose vehicles are another tool in our toolbox to enable us to lift the scale & pace of new housing development.”

Attribution: Mayoral release.

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Council gets $300 million infrastructure package, balance sheet-beating deal to come next

Auckland will get $300 million from the Government’s new Housing Infrastructure Fund, which will bring forward construction of 10,500 homes in north-western suburbs Whenuapai & Redhills.

Auckland mayor Phil Goff and Finance Minister Steven Joyce announced the funding package yesterday.

It will enable investment in transport, wastewater & stormwater projects which Auckland Council has earmarked as priority, fast-track initiatives.

Next up, in the next few weeks, is an announcement on overcoming the council’s balance sheet constraints.

In addition to wastewater & stormwater improvements, the $300 million will fund improvements to transport infrastructure, including an extension to Fred Taylor Drive & Northside Drive at Westgate, an update & realignment of Trig Rd, Whenuapai, and a new bridge crossing to the West Harbour ferry terminal.

Mr Goff said: “Over the last several months, I’ve met with the prime minister & other ministers to discuss the Housing Infrastructure Fund. I am pleased Auckland Council has been able to work with the Government to ensure the Government’s wider funding package for infrastructure aligns with Auckland Council’s financial constraints.”

He said Auckland’s bid for funds focused on a small number of highly development-ready areas where funding would accelerate priority projects and unlock housing growth quickly.

“Not only are we accelerating housing delivery, we are creating new centres for employment and increased accessibility across the Auckland region with improvements to Auckland’s transport system.

“Accelerating housing delivery in Auckland is a priority. I welcome the Government’s recognition of the growth challenges facing Auckland and their readiness to work with the council to address issues in our city for the benefit of all New Zealand.”

However, Mr Goff said the city would continue to need billions of dollars of extra investment to keep pace with its unprecedented growth: “Auckland has received most of what it sought from the Housing Infrastructure Fund. In the coming weeks there will be a further important announcement from the Government on new funding options for Auckland that take into account the balance sheet constraints the city faces. We have worked constructively with the Government to find innovative solutions to meet Auckland’s needs.

“The Housing Infrastructure Fund package will help significantly, but with ongoing growth and the pressing need for matching infrastructure, we will need to continue to work together to increase & bring forward investment to tackle Auckland’s housing shortage & growing congestion.”

Attribution: Council release.

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Joyce lifts infrastructure intentions and talks new operating mechanisms

New finance minister Steven Joyce (pictured early in his career as a sod-turner) looks to have increased the annual allocation to capital infrastructure spending from $900 million to $4 billion for the 2016-17 financial year, with the promise of upping the budget for the following 3 years by $4.3 billion.

Mr Joyce took over finance from Bill English in December, in the reshuffle following Mr English’s appointment as prime minister. The country goes to a general election on 23 September

Under the more conservative English programme, the allocation to capital infrastructure over the next 4 years was $900 million/year. Mr Joyce said yesterday the focus would be on the infrastructure that supports growth, and those annual allocations would rise to $2 million in the 2017-18 financial year and $2.5 billion in each of the following 2 years.

Both the Property Council & Infrastructure NZ focused on the $11 billion figure Mr Joyce waved in front of them, which included the $3.6 billion already budgeted.

Property Council chief executive Connal Townsend said a lot of the country’s infrastructure was at the end of its useful life and he expected asset replacement would feature prominently in the Budget: “Government’s announcement is a recognition that houses & commercial properties do not exist in isolation but need to be supported by infrastructure such as roads, schools & hospitals….

“Under-investment in infrastructure creates significant deadweight losses for the wider economy. Property Council is pleased that Government recognises this. Infrastructure spending must be seen for what it really is. It is an investment in our cities and a productive input into the wider production process, rather than a mere cost.”

Infrastructure NZ chief executive Stephen Selwood said: “This is a massive increase and the largest capital investment commitment by any government since the 1970s. But it must be said that New Zealand’s growth challenge is the highest it has ever been, and meeting population demands requires the services for a city larger than Nelson to be added every year.

“Added to the growth challenge is New Zealand’s historic under-investment in infrastructure. The reality is that it would not be difficult to spend $11 billion in 2017 alone.”

Mr Joyce said: “We are growing faster than we have for a long time and adding more jobs all over the country. That’s a great thing but, to keep growing, it’s important we keep investing in the infrastructure that enables that growth.”

“We are investing hugely in new schools, hospitals, housing, roads & railways. This investment will extend that run-rate significantly, and include new investment in the justice & defence sectors as well.”

Mr Joyce said the budgeted new capital investment would be added to the investment made through baselines & the National Land Transport Fund, so the total budgeted for infrastructure over the next 4 years would be about $23 billion.

He said the Government wanted to extend that further, with greater use of public-private partnerships and joint ventures between central & local government & private investors.

“As a country we are now growing a bit like South-east Queensland or Sydney, when in the past we were used to growing in fits & starts. That’s great because we used to send our kids to South-east Queensland & Sydney to work, and now they come back here. We just need to invest in the infrastructure required to maintain that growth. Budget 2017 will show we are committed to doing just that.”

Mr Joyce will give details of the initial increase in the May Budget.

Attribution: Ministerial release.

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Clochemerle lives again – in Tekapo

It was a grand event on the scale and with the gravity, pomp & national importance of Clochemerle, the opening of a public urinal in a French village made famous by a 1972 BBC television series, and it came with a grand Government media release headed, New Tekapo toilets open for business.

The narrator in that television series, the multi-talented Peter Ustinov, would have done the opening of the new Government-sponsored public toilets in Tekapo proud, but he wasn’t available, having died in 2004. So the job of officiating fell to Associate Tourism Minister Nicky Wagner, there to espouse the benefits to humanity of the Government’s Regional Mid-sized Tourism Facilities Grant Fund, which co-funded Tekapo’s 2 new toilet blocks, one near the Church of the Good Shepherd and the other in the Mackenzie country township.

She may have proudly muttered “Every second longdrop is ours” on her way to this splendid event, but I can’t confirm that as I was safely ensconced in the Auckland Town Hall listening to the debate & presentations on council long-term plans for even more magnificent infrastructure.

The Mackenzie District Council received $405,000 from the fund last year for the construction of the Tekapo toilet blocks – manna from an outfit which, to me, seems to have been ever so slightly tightfisted in parting with any largesse arising from the growing gst windfall it’s received from New Zealand’s rising tourist numbers.

Ms Wagner told her audience: “Tekapo is an iconic Kiwi location, but this little town of around 400 people receives in excess of 100,000 visitors/month in the summer season, and we were seeing high demand for new facilities.

“It’s great to see this fund in action, helping smaller communities like Tekapo respond to growth in visitor numbers by developing new & enhanced infrastructure.

“There is no doubt tourism benefits the area — international & domestic visitors spent around $723 million in South Canterbury in the year to January, an 8% jump on 2016. Tourism drives growth & job creation in this region, as in so many others around the country.”

The Government developed the Regional Mid-sized Tourism Facilities Grant Fund as part of its tourism strategy “to help regions benefit from growth while managing the pressures it places on communities & infrastructure”.

The Government allocated $12 million – over 4 years – for the fund in its 2016 Budget and announced an additional $5.5 million this month. The Tekapo toilets are one of 14 approved projects from the first funding round, held last year. A second funding round is open until 12 April.

Deputy Prime Minister & Tourism Minister Paula Bennett flushed most of a $1.4 billion council wish list for tourism-related projects down the toilet 2 weeks ago, saying most of the listed projects were “either already funded by other areas of Government, are not considered a priority or should be funded by local councils”.

She recognised that tourism had become a $14.5 billion/year export earner and that these visitors “are incredibly important to our economy, particularly in the regions.”

But the return to those regions trying to cope with record tourist numbers is a drop in the bucket, on Local Government NZ president Lawrence Yule’s count. He said the gst contribution to the Government from international visitors rose from $950 million in the March 2015 year to $1.5 billion in the March 2016 year.

Local Government NZ & major tourism organisations want a national tourism infrastructure levy which, between the industry and matching Government contributions, would generate $130 million/year to fund local tourism infrastructure needs.

Clochemerle was a 1934 satirical novel by French author Gabriel Chevallier on the conflicts between Catholics & Republicans during the French Third Republic, which ran from 1870 until it collapsed at the start of the Second World War.

Link:
Grant fund

Earlier story:
16 Mach 2017: Bennett rejects councils’ tourism infrastructure funding list

Attribution: Ministerial release, Wikipedia.

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Bennett rejects councils’ tourism infrastructure funding list

Deputy Prime Minister & Tourism Minister Paula Bennett thanked Local Government NZ yesterday for its $1.4 billion tourism wish list, but said she “rejects that most of these should be funded by Government”.

Local Government revealed details on Tuesday of a survey commissioned by Tourism Industry Aotearoa, which identified $1.4 billion of local infrastructure projects that might be useful in responding to ongoing tourism growth.

Mrs Bennett said: “I absolutely agree that there are some areas of tourism infrastructure that need to be addressed and that some of these will need help from central government. However, the list Local Government NZ has referenced includes things like town halls, council facilities, airport runway extensions, airport upgrades & expressways.

“These are either already funded by other areas of Government, are not considered a priority or should be funded by local councils. My priority is to support smaller councils with low rate bases with essential facilities. I am currently working with officials to establish how best to do this.

“Government is working with local councils to help with tourism infrastructure. Today we opened another round of the regional mid-sized tourism facilities grant fund of $5.5 million to help cofund things traditionally funded by local councils like public toilets, carparking facilities & freedom camping facilities. This comes on top of the $12 million announced in last year’s budget.

“I think most taxpayers would agree that restoring old council chambers is not a priority in terms of tourism infrastructure.”

Mrs Bennett said the Government “recognised the challenges that have come with growth in tourist numbers and are assisting where appropriate. With tourism now a $14.5 billion export earner, and 188,000 people working in the industry, these visitors are incredibly important to our economy, particularly in the regions.”

Local Government NZ says tourism needs well beyond communities’ resources

Local Government NZ said on Tuesday the survey of 47 councils revealed over 680 mixed-use infrastructure projects valued at $1.38 billion that were being developed.

Local Government NZ president Lawrence Yule said it was well beyond the resources of local communities to fund these projects, which included the development & ongoing operation of toilets, wastewater systems, carparks, access roads & wifi, and that a new funding mechanism was needed.

“The arguments for a new, sustainable way of funding infrastructure for tourism are undeniable. We just need to get on with it now, and these figures provided by just over half of our councils further illustrate the scale at which we need to act.

“There is much that could be done to protect & enhance the visitor experience, and provide some relief for our communities, many of which have a small ratepayer base. If we don’t act and with the right level of investment, we will be in no position to cope with the forecast growth of tourism – 4.5 million annual visitors by 2025. ‘Just in time’ infrastructure can mean ‘just too late’.”

For tourism, Mr Yule said: “Cofunding, with contributions from central government, councils & the industry in a way that allows for maintenance & operational costs, is required.”

He said the gst contribution from international visitors rose from $950 million in the March 2015 year to $1.5 billion in the March 2016 year.

Local Government NZ issued a discussion paper on funding in February 2015 and, last December, welcomed a report commissioned by the chief executives of Air NZ, Auckland International Airport Ltd, Christchurch Airport & Tourism Holdings Ltd on the tourism infrastructure gap.

That report called for the creation of a national tourism infrastructure levy which, between the industry and matching Government contributions, would generate $130 million/year to fund local tourism infrastructure needs.

Mr Yule said then: “The major issue for local government is ensuring that any new funding goes where it is really needed, which is not only on toilets, freedom camping facilities & carparks but also on major infrastructure like wastewater, which are some of the most costly pieces of work small communities are faced with.”

Link:
Local Government NZ funding review discussion paper, February 2015

Attribution: Ministerial releases, Local Government NZ.

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Property Council joins call for new infrastructure funding

Property Council chief executive Connal Townsend said today central & local government “need to develop a range of innovative funding tools beyond rates & individual project funds. To be sustainable those tools should be linked to growth.”

He agreed with mayor Phil Goff, who told a Property Council breakfast last week funding infrastructure with rates wasn’t sustainable: “Rates are a limited & extremely blunt way of raising income. The property industry continues to have issues with rates & the development contributions system. It is not an effective or sustainable way to fund local government.

“Yes, Central Government should & does make significant financial contributions to individual projects. But that is not sustainable either.”

Mr Townsend’s solution – partnership between the 2 levels of government – is at last on the way in 2 forms, though neither is adequate to meet the challenge.

One is the formation of the Auckland transport alignment project last year, when the Government & Auckland Council joined in establishing long-term priorities. However, there would be a long-term deficit and there’s been no resolution of how that should be funded – the project calculation has started with a $24 billion funding need, and a $4 billion shortfall projected.

Mr Goff said: “Auckland Council would need to come up with at least $200 million/year to meet the shortfall. I’m not going to ask ratepayers to shoulder that burden, it’s not viable nor is it equitable.”

Secondly, the Government has announced its proposal for urban development authorities, which would be project-related and combine the forces of both levels of government. Those authorities would focus on regeneration in a specific area and close down on completion, though it would make sense to retain the same governance structure and enable an authority to switch to the next project rather than start afresh.

The mayor has proposed in the council budget that the hotel sector be charged for tourism infrastructure. Mr Townsend commented: “If we are serious about Auckland becoming a global city we need a partnership between central & local government. They need to develop a range of innovative funding tools beyond rates & individual project funds. To be sustainable, those tools should be linked to growth.”

The flipside of that is that, when there’s a downturn, the industry wouldn’t pay for what would be long-term infrastructure provision.

And the other potential source of funds, not mentioned, is the hike in gst which the Government retains in good times, inadequately funding local infrastructure required to support the tourism growth.

My conclusion: It’s scary, really, that we have so many political & business leaders with not one new or innovative idea among them on alternative funding, that the same issue is raised often without any thought of resolution.

The one solution, a variation on a bed tax, is a more expensive way of doing what a slice of gst could do more easily & neatly.

The world has cities which have created infrastructure to meet these kinds of needs, and the world has potential infrastructure funders. They’ve been walking through the mayor’s office in Auckland for a decade.

Attribution: Property Council release, my thoughts.

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Housing infrastructure fund enters final submission round

High-growth councils have submitted $1.79 billion of proposals to the Government for support from its $1 billion Housing Infrastructure Fund, but ministers said on Wednesday they weren’t happy with what they’d seen.

The councils have until 31 March to submit final proposals for a share of the fund, and Infrastructure Minister Steven Joyce and Building & Construction Minister Nick Smith said they wanted councils to be more ambitious in their final proposals.

Mr Joyce said: “Only a small number of the 17 proposals received through the expressions of interest phase would result in projects being advanced earlier than previously planned by the councils. We want to see more ambitious projects that will have a greater positive impact on housing supply over the next 5 years.”

Dr Smith said the Government had set up the fund last year because council constraints in financing the necessary infrastructure – the water supply, stormwater, wastewater & roading – could slow the opening up of new housing areas. He said the fund could support construction of 50,000 new homes, depending on which final proposals were supported.

The 2-stage process had enabled councils to ‘test drive’ & refine their ideas before the final proposal stage: “The final proposals will be assessed by an independent panel, with priority given to those initiatives that enable the most new housing. We expect to announce the final allocations later this year.

“The Housing Infrastructure Fund is part of the Government’s comprehensive plan to grow additional housing supply alongside special housing areas, the new Auckland unitary plan, the national policy statement on urban development, reforms to the Resource Management Act, the Crown land programme & the HomeStart scheme. We have been successful in more than doubling the house build rate from 15,000 to more than 30,000/year.”

When the Government set up the fund, it highlighted the growth areas it was looking at:

Auckland: Helensville, Waiuku, Pukekohe, Pokeno (Waikato) & Clevedon
Tauranga: Tauriko (in the Kaimai foothills)
Hamilton: Taupiri & Cambridge
Christchurch: Kaiapoi, Rolleston & Lincoln
Queenstown: Arthurs Point, Lower Shotover-Lake Hayes-Arrowtown & Jacks Point.

Link:
Housing Infrastructure Fund

Earlier stories:
8 January 2017: Housing infrastructure fund call for final proposals imminent, and panellists required
3 July 2016: PM talks $1 billion infrastructure fund, English talks payback frame, Smith talks grabbing more power

Attribution: Ministerial release.

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Housing infrastructure fund call for final proposals imminent, and panellists required

The Ministry of Business, Innovation & Employment will open its call for final proposals under the new $1 billion Housing Infrastructure Fund on 31 January and expects those proposals to be submitted by 31 March.

Meanwhile, applications close on Monday 23 January for membership of the independent assessment panel advising ministers initially on recommended proposals for the fund, and subsequently on the results achieved by those projects.

The final proposals will be evaluated from April to June, but the panel will be appointed for a 3-year term. Panellists will be appointed in February to start in late March. In the first year, the chair is expected to work 50 days and panel members 30 days, reducing to 20 days for the chair, 10 days for members, in the last 2 years.

The process so far

The Government announced the one-off fund in July, aimed at fast-tracking development for housing in selected high growth regions by providing interest-free loans to councils for new water & transport infrastructure construction.

When Building & Housing Minister Nick Smith called for indicative proposals in September, he said councils would be expected to include information on the type of development for which funding assistance is being sought & its location, estimates of how many additional dwellings the infrastructure is expected to help provide, and the estimated value of funding sought.

They must be related to roading projects (including public transport & council-nominated NZ Transport Agency projects), water, wastewater or stormwater infrastructure and intended to support the building of new dwellings.

Dr Smith said: “Funding will be available only for the capital cost of the projects and cannot be used for maintaining, replacing or running infrastructure.”

Government wants councils to find new funding mechanisms

He said the fund was a one-off because, “longer-term, councils need to find new ways of funding infrastructure through existing funding tools or potentially coming up with new ones. This is a short- to medium-term fund to enable the acceleration of new houses in high-growth areas rather than an ongoing subsidy to councils.”

A ministry explanatory note said urban areas would continue to be considered high-growth if, as at 2 December 2016, Statistics NZ projected population growth of over 1%/year for the next 10 years.

“For transport infrastructure, an accelerated approach similar to that used to bring forward some recent improvements to Christchurch local roads is expected to be used. This works by the NZ Transport Agency paying for all or most of a project upfront, with a council’s cashflows adjusting in subsequent years through reduced funding assistance for other projects.

“Use of a special-purpose vehicle is being considered for water, wastewater & stormwater infrastructure. Further information on funding mechanisms will be provided as part of the call for final proposals.

“For the transport component of any project or works for which funding assistance under the Housing Infrastructure Fund is sought, information will be required to satisfy National Land Transport Fund investment criteria relating to strategic fit, effectiveness & cost-benefit.”

Ratios an important aspect of assessment

It won’t be a case of biggest (Auckland) takes all. Assessment criteria include dwelling yield as a proportion of projected demand, the spend/dwelling, how far the fund support will enable a project to advance, and the degree the proposed infrastructure could support or complement other investments or economic growth.

“It is likely that some infrastructure projects will also have benefits broader than speeding up the supply of housing. In some cases, there may be benefits to businesses & the economic growth of an urban area through improved accessibility or additional water, wastewater or stormwater capacity. The ability to provide benefits broader than simply additional housing supply would be considered favourably in instances where 2 proposals are otherwise evenly matched.”

Government wants fast payback

In addition, the Government wants to know how soon it will be reimbursed, either through payback or by a council shifting the whole project into a special-purpose vehicle: “In providing assistance through the Housing Infrastructure Fund, central government takes on a degree of financial & development risk. That risk increases the longer the Government has to wait for reimbursement, particularly if there is a downturn in the property market.

“From the Government’s point of view, recovering its expenses within 10 years of incurring the costs is important to minimise negative impacts on Crown accounts. It is the general expectation that territorial authorities would seek, as far as practicable, to purchase water infrastructure from the Government’s special-purpose vehicle within 10 years.

Transport front-loading means less for later projects

“For transport infrastructure, it is intended that assistance would be provided through the NZ Transport Agency paying for all or most of a project upfront (front-loading the project) from the National Land Transport Fund by increasing the territorial authority’s funding assistance rate (FAR) payments for that project. Territorial authorities would match the NZ Transport Agency’s investment in later years through receiving reduced FAR payments on a further package of related works. The overall result would be that total NLTF/FAR payments over the 10-year period would be equivalent to what would have been received if no front-loading had occurred.

“Access to the FAR approach is dependent on territorial authorities formally agreeing to receive the reduced FAR over the period the NZ Transport Agency is offsetting its costs. This may mean the territorial authority reduces some programmes over the offsetting period, or otherwise increases its investment to cover the shortfall during this period.”

Implicit zoning override

The last 2 sections of the Government’s note on how councils can meet the new fund’s loan requirements relate to a zoning override and achieving national policy statement development capacity targets.

The assessment includes assessing councils’ commitment to removing barriers to development, with evidence on the current status of the land to be developed and any existing impediments to development, and a schedule of steps, processes & timing of initiatives to be undertaken to remove those impediments.

“Restrictions on development in an area may not be solely related to a lack of infrastructure. Territorial authorities will be expected to show they have removed, or have committed to removing, other barriers to development that are within their ability to control. Such barriers could include:

  • inappropriate zoning
  • lack of other types of infrastructure not covered by the Housing Infrastructure Fund
  • restrictive bylaws, and
  • other land use restrictions (for example, lifting reserves status where appropriate).

Councils will be expected to estimate how much more serviced land is required to meet the ‘sufficient development capacity’ targets under the national policy statement, and the land supplied by using the fund should be expressed as a proportion of that figure.

If a council already has enough development capacity under the policy statement, the ministry said it would want to know why they considered more infrastructure investment was necessary.

Highlighted growth areas:

Auckland: Helensville, Waiuku, Pukekohe, Pokeno (Waikato) & Clevedon
Tauranga: Tauriko (in the Kaimai foothills)
Hamilton: Taupiri & Cambridge
Christchurch: Kaiapoi, Rolleston & Lincoln
Queenstown: Arthurs Point, Lower Shotover-Lake Hayes-Arrowtown & Jacks Point

Links:
October 2016, MBIE: Call for indicative proposals
22 September 2016, ministerial release: Next steps
3 July 2016, ministerial release: $1b fund to accelerate housing infrastructure
Ministry for the Environment: National policy statement on urban development capacity

Earlier stories:
26 October 2016: Goff talks up growth along with cutting congestion and revising funding
19 August 2016: Government says it’s already implementing land for housing recommendations
11 July 2016: Little sets out 8 planks to remedy housing issues
3 July 2016: PM talks $1 billion infrastructure fund, English talks payback frame, Smith talks grabbing more power

Attribution: Ministerial releases, ministry documents.

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Goff talks up growth along with cutting congestion and revising funding

As Statistics NZ published its latest migration figures last Friday – a net inflow just 46 short of 70,000, and a net 32,700 into Auckland – new mayor Phil Goff was talking up growth while proposing faster measures to cut congestion, and telling the Government it needs to shift at least some of the financial burden from ratepayer to taxpayer.

The Government has been running a programme to encourage regional economic growth, but not in the concerted way needed to reduce imbalances. And it has done none of the exercise needed to restructure the funding of infrastructure.

The Auckland transport alignment project, between the Government & Auckland Council, is a very tentative step towards part of this necessary revision. But it’s predicated on Auckland continuing to grow apace, it’s a tally of tasks & setting of a priority order.

Transport alignment, and what it’s not about

It’s not about examining Auckland’s apparent needs from a wider perspective – looking at housing not just as a centre-outward programme but as part of the creation of communities & new economic centres, looking at local business as an integral feature of growth instead of being a chance occurrence, looking at access as an efficient way to move between economic centres and between those centres & homes.

Carpeting an overpriced landscape with homes is not the answer to a problem but an escalation of the problem. Growth for its own sake has rightly been characterised as a Ponzi scheme.

Silverdale, in the north of the region, is an example of how improvements to local government can send progress astray. Under the old Rodney District Council, which needed more sources of rates, some of the land now being gobbled up by an expanding Millwater housing subdivision was intended for a business innovation park. A tertiary education relationship would have followed, naturally.

The jobs in Silverdale & Millwater are in shops. The strength of the greater perspective has been defeated.

“Growth is good”

New Auckland mayor Phil Goff.

New Auckland mayor Phil Goff.

Mr Goff told the Council for Infrastructure Development (renamed yesterday, now Infrastructure NZ) about his travails on the campaign trail of guessing when he might turn up, because of congestion.

But his central themes were that “Auckland is a great city – that’s why so many people want to live here”, “New Zealand needs a city of international scale”, and “New Zealand needs a major city which can retain the best & brightest of its own new generation and can attract talent from abroad”.

“Growth is good,” he told his infrastructure-oriented audience. Where have you heard a similar phrase, the first word changed?

Mr Goff has 3 central answers. First, the economic imperative founded on growth & skill; second, overcoming the housing price spiral and providing the infrastructure to support it; third, changing funding structures. They all need a lot more work.

“Auckland has to be a centre of learning & innovation,” he said. “It is our best prospect for building a diversified & high technology economy. To attract & retain the talent we need, the city has to provide high paid jobs in high value-add enterprises and also needs to be a good place to live.”

He said local & central government had to work together to address the infrastructure deficit underlying housing unaffordability & traffic congestion: “For housing, there are some issues of demand management which are largely within the scope of central government which could take some of the pressure off. Longer term, it is about increasing supply.

“Around 60% of housing costs are the land, and increasing the supply & better utilisation of land is vital. The new unitary plan, when it is fully implemented, is a big step towards tackling the problem of land supply and therefore cost.”

At that point Mr Goff raised the catch-cry: “We need to go up & out.”

“Up & out” inherently a conflict

Sounds great, but it’s inherently a conflict where pricing is integral. Old Auckland City wanted intensification because it had nowhere to expand, while the rest of the region’s old territorial councils wanted expansion in their areas to improve their economies by boosting their populations.

Without those old boundaries, the reasons for those numbers games change. Suburban intensification can be justified where there is amenity and where work is available at a range of skill levels, so concentration in centres well away from the cbd will then work. Carpeting the landscape without adequate activity centres – jobs, education, sports facilities, entertainment, not just shops – means the dominance of the car will continue.

Mr Goff said reviewing Auckland’s consenting process would be a priority. From the council’s perspective, “we need to have a resource consenting system that is fast, efficient & responsive to the needs of our city while maintaining the integrity of the process”.

Infrastructure funding

But, he said, the bigger problem was the cost of providing infrastructure so land zoned for housing can be developed: “I am pleased that central government recognises the cost of providing infrastructure cannot be funded from the narrow revenue base of rates. Nor can infrastructure needs be funded in local government as they are in central government by simply borrowing & increasing debt.

“Auckland is constrained in its infrastructure investment by the need to maintain prudent levels of debt, in particular in its debt to revenue ratio. Currently, the maximum ratio set by Standards & Poor’s is 270% and Auckland’s current ratio is approaching 250%. Our debt currently stands at $8 billion and will grow by another $2 billion over the next 3 years, and this is within the prudential limit by our credit rating agencies.

“With the need to meet half the cost of the city rail link – some $1.5-1.7 billion over the next few years – Auckland’s ability to take on new debt is constrained.

“Breaking the debt:revenue ratio would put at risk our AA credit rating and potentially add millions to the council’s interest costs. Treasury & central government agencies understand the scale of Auckland’s infrastructure needs, which come from unprecedented growth and the revenue constraints on the city to meet that growth.

“We can look overseas for better models, such as in Sydney, where infrastructure needs are met not just by local government but in large part by the state government, which has broader sources of revenue.

“I welcomed the Government’s announcement of its Infrastructure Fund a couple of months ago. It was an acknowledgement that high growth areas need additional assistance. However, that $1 billion spread over 5 growth areas won’t accelerate housing construction in Auckland to the levels needed to meet housing demand. I also acknowledge that the onus is on Auckland Council to demonstrate to the Government that we have our house in order for extra capital to be made available.”

Failure to solve funding hugely expensive

None of that spiel on infrastructure needs & funding matches what the “out” part of “up & out” will do to infrastructure demand. Auckland needs closer attention given to a mix of public & private infrastructure provision, and particularly to how it’s managed. Management needs to be non-partisan and, while the public sector theoretically has no favourites, it can be extremely partisan & jaundiced.

Funding by the taxpayer is no different from funding by the ratepayer: same pants, different pocket. Upfront funding by the developer adds hugely to cost, as does the uncertainty of how long getting consent will take. Plenty in the public sector continue to regard “the developer” as a greedy parasite, ignoring the cost of uncertainty and the value of that gift of upfront funding.

Those costs feed into land prices and into all inputs of housing. And they feed into the costs of business, and especially into transport.

Mr Goff said congestion was costing Auckland an estimated $1.5-2 billion/year in productivity losses: “Technology such as Uber car sharing & driverless vehicles will help, but we shouldn’t sit back and expect that to be the only solution when our population will grow by another million. Motorway investment can help, but no great city has built its way out of congestion with roads. Cycleways to allow kids to get safely to school could take up to 10% of traffic off the roads during rush hour. Increasing our public transport, heavy & light rail and busways is critical to relieving pressure on our roads, as it is in almost all international cities.

New transport priorities

“The developments we need here are, in many cases, not even within the next 10-year plan, 2018-28. As mayor, I will prioritise the development & signing off of a business case for rapid light rail in the isthmus to bring it into the long-term plan.

“Auckland must also plan for rail from the city centre to the airport, given we have 3.5 million tourists/year, growing to 5 million, and the airport region and cbd are our fastest-growing areas of employment.”

Mr Goff said funding was critical to bringing transport developments forward, but there was a national funding imbalance: “Many Auckland roads, which carry much heavier vehicle loads than roads elsewhere that are classified as roads of national significance, get half the funding of other regions. The city rail link, likewise, gets only 50% funding with the rationale not obvious for this.”

He said Auckland needed a regional petrol tax now and congestion charging later.

It might be unreasonably selective to focus on one speech out of hundreds made over an election campaign and into the start of a mayoralty, but this is when the speeches actually count, and this is when the detail needs to be provided.

Attribution: Goff speech, Statistics NZ.

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