Government support for infrastructure funding ahead of the next big residential development between the Hibiscus Coast & Kumeu is recognition that Auckland Council doesn’t have the capacity to provide the works immediately, for recovery over the longer term.
Image above: Housing developed over the last 5 years below the Millwater Parkway.
Through the immigration explosion of the last 5 years, the council’s debt has risen to be a wafer short of its limit, although the same issues of infrastructure funding have been staring politicians in the face for 2 decades.
The last government chose major roads as its best option for infrastructure funding, and watched on as former mayor Len Brown told Wellington the Auckland council would go it alone in starting the city rail link. The Government later joined in, to become a full partner.
Offroad transport is the greatest apparent need to defuse the congestion steadily bringing Auckland to a more widespread standstill, at all times of the day. But, as the net inflow of migrants into the region remains above 30,000/year, a change in how subdivision preliminary works are funded was equally imperative.
3-way partnership, outlay recouped through targeted rates
The answer from Housing & Urban Development Minister Phil Twyford came on Wednesday, when he & Auckland mayor Phil Goff announced a 3-way partnership to fund $91 million of roading & wastewater infrastructure to support the building of 9000 homes at Wainui, immediately west of the Millwater subdivision rapidly being built out between Silverdale, Orewa & State Highway 1 40km north-east of downtown Auckland.
Along with the council & Government entity Crown Infrastructure Partners Ltd, the Government special purpose vehicle (SPV) will have Fulton Hogan Land Development Ltd as the third partner.
Mr Twyford said the Milldale project (an extension beyond Millwater, which began in 2007 with Fulton Hogan as one of the partners) “demonstrates an approach to funding that allows private investment in new infrastructure, with the debt sitting on a balance sheet that is neither the council’s nor the Government’s.
“The Milldale project is an example of the innovative new approaches to financing infrastructure that the Government is developing through the urban growth agenda. This funding model can be used in other high growth areas affected by the housing crisis to help more houses to be built more quickly.
“This could include private investment in infrastructure, funded by a charge on the properties that benefit from the infrastructure.
“This new infrastructure funding model will result in a large number of homes being built much sooner than otherwise would have been the case.
“One of the major roadblocks to our towns & cities growing is the lack of ready access to finance for the infrastructure that allows for new urban growth, for greenfields or brownfields developments.”
Mr Goff said addressing the shortage & unaffordability of houses was a priority: “We’ve zoned much more land for housing, but we need the infrastructure before we can build on it. Using Crown Infrastructure Partners to fund that infrastructure enables us to build roads, water & wastewater services without overburdening the council with debt and exceeding our debt:revenue ratio.
“We can build more homes sooner and tackle the housing crisis quicker than would otherwise have been possible.
“This project enables nearly 4000 new dwellings in Milldale, and the infrastructure can support another 5000 dwellings in the surrounding areas as well. It’s a big step towards meeting Auckland’s housing needs.”
Fulton Hogan Land Development has already started work on Milldale.
Crown Infrastructure Partners has secured long-term fixed-rate debt from the Accident Compensation Corp, and the special purpose vehicle will provide $48.9 million towards the infrastructure, with the Crown contributing less than $4 million.
The council contribution will total $33.5 million.
The SPV funding will be repaid over time, partly by Fulton Hogan Land Development and partly by section owners as an ‘infrastructure payment’ collected as a targeted rate through council rates bills.
Mr Twyford said: “This new model of infrastructure financing means that long-term debt can be raised through the SPV to enable the building of largescale infrastructure, which is needed to step up the rate houses are being built at, and to assist councils which are nearing their debt limits.
“The Milldale development will be a modern, contained urban development with green spaces & parks, a town centre, cycleways & walkways, and potentially education facilities, and will be connected to the northern busway.
The infrastructure includes a new arterial road & bridge connecting Wainui Rd to the State Highway 1 interchange & Dairy Flat Highway at Silverdale, intersection upgrades, a roading extension & bridge to the Highgate Parkway business precinct on the eastern side of the motorway, and wastewater tunnels.
Construction of the wastewater tunnel has started, and the first residential sections will be released in the early new year.
Mr Twyford said the infrastructure funding & financing pillar of the Government’s urban growth agenda would enable responsive infrastructure provision & appropriate cost allocation, including the use of project financing & access to financial capital.
Through this agenda, he said the Government aimed to reform infrastructure funding & financing by:
- providing a broader range of tools & mechanisms to enable net beneficial bulk & distribution infrastructure to be funded
- rebalancing development risk from local authorities to the development sector, and
- making long-term debt finance available to developers willing to take on the commercial risk, with the debt serviced by revenue from the new properties in a development.
Attribution: Ministerial release.