Archive | Funding

3-way partnership to fund infrastructure for next big subdivision at Wainui

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

Housing & Urban Development Minister Phil Twyford.

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.

Link: Millwater & Milldale website

Attribution: Ministerial release.

Continue Reading

Transport agency sets out project list

Published 3 September 2018

Transport and Housing & Urban Development Minister Phil Twyford.

Transport Minister Phil Twyford – who’s also Housing & Urban Development Minister – said on Friday a record $5.7 billion transport investment over the next 3 years “will get Auckland moving and deliver a safer, better connected & more resilient transport system”.

Mr Twyford’s comments accompanied the NZ Transport Agency’s publication of details of the planned programmes of investment in transport around the country, totalling $16.9 billion over the 3 years.

Auckland projects make up the bulk of the story below, followed by Northland, Waikato & the rest of the national programme.

There’s a lot of it – some brief detail of specific projects, and a number of lists to skim through.

If such an array can be summed up it’s this: Major road spending reduced, more attention away from large metropolitan areas, metro focus on public transport as best option to reduce congestion.

Dollars are generally separated from initial project mentions and I haven’t got them together again. Most of the relevant dollar figures are toward the bottom of this story.

The details are set out in the 2018-21 national land transport programme. The funding will be generated through 3 channels:

  • $12.9 billion from the National Land Transport Fund, generated through fuel excise, road user charges & other revenue sources
  • $3.4 billion from local government, generated through rates & Auckland’s regional fuel tax, and
  • $547 million in other Crown investment.

Mr Twyford said the $5.7 billion for Auckland was 23% more than under the 2015-18 plan and 44% more than under the 2012-15 plan.

The NZ Transport Agency’s forecast for Auckland access infrastructure spending over the next 3 years includes:

  • Maintenance & operations $1.2 billion
  • Public transport $1.9 billion
  • Walking & cycling $149 million
  • Targeted at safety, 15%

Mr Twyford emphasised road safety, along with alternatives for reducing congestion other than building more roads, although road-building will continue: “We are putting a much stronger focus on public transport, and making record investments in road safety, local roads, walking & cycling.

“Safety is a top priority for the Government, and $875 million will be spent on programmes & projects in Auckland that will save lives. This will include revamping intersections to stop collisions, installing median barriers in high risk areas and increasing road policing.

“We are committed to delivering a rapid transit network for the city so we can unlock critical housing & urban development opportunities, and give people better access to jobs, health, education & recreation. With the $459 million set aside for the development of rapid transit and $266 million for transitional rail, we’re investing in light rail to Mangere, extending the Northern Busway and supporting the introduction of more electric trains.

“To ease congestion and make Auckland a healthier place to live, $1.9 billion will be invested in public transport, a 56% increase from 2015-18, and $149 million for walking & cycling, a 30% increase from 2015-18. This will create great walking & cycling routes in the city, including the SeaPath walking & cycling connection between Northcote Pt & Esmonde Rd, the SkyPath project across the Auckland Harbour Bridge, and the Glen Innes-Tamaki Drive shared path.

“The significant $1.5 billion investment in state highways in the city reflects the Government’s continued commitment to this vital part of our transport system. The Northern Corridor project will complete the motorway connection for the Western Ring Route to the north, the Southern Corridor improvements will result in a safer route between the city centre & the south, and the Transport Agency will continue to build the 18km extension of the Northern Motorway (State Highway 1) from Puhoi to Warkworth.”

The big public transport projects hinge on upgrades to the rail network, much of it an extension of the network spreading out from the city rail link (listed starting in the south):

  • Papakura-Pukekohe electrification
  • Puhinui bus-rail interchange
  • Wiri-Quay Park corridor improvements
  • City centre-Mangere light rail
  • City centre-north-west light rail

Other corridor improvements:

  • Southern corridor (road & rail)
  • Southern & eastern airport access, State Highways 20 & 20B
  • Ameti (Auckland-Manukau eastern transport initiative) eastern busway
  • Glen Innes-Tamaki Drive shared bike-foot path
  • City centre bus improvements
  • Skypath over harbour bridge
  • Seapath around Northcote foreshore
  • State Highway 16, Brigham Creek-Waimauku safety improvements
  • Northern corridor
  • Ara Tuhono, Puhoi-Warkworth 18km highway extension construction

The transport agency said Auckland’s population was expected to grow by 300,000 over the next 10 years and was forecast to reach 2.3 million by 2043 – an increase greater than the rest of New Zealand’s population growth combined and requiring 400,000 new homes.

The mantra from the agency is this: “For Auckland to be successful, it needs a safe, reliable & integrated transport system, where people have choices about how they move around.

“The national land transport programme 2018-21 focuses on ensuring people have improved choice for how they access employment, education & services, today & tomorrow. This means continuing to develop strategic connections for public transport, private vehicles, walking & cycling into & across the busy urban centre, and shaping more liveable communities with appealing transport links that bring neighbourhoods together.”

The agency said one outcome from the Auckland transport alignment project between Auckland Council & the Government (ATAP) was “a new collaborative culture for prioritising the projects & initiatives that will deliver the best outcomes for Auckland. Together with its local government partners at Auckland Council and Auckland Transport, the Transport Agency is working to ensure the city grows in a smart way, with new communities being safely & effectively connected by a range of transport choices.

“Central to this is the need for a rapid transit network to unlock critical housing & urban development opportunities, giving communities better access to jobs, health, education & recreation.

“The project to deliver light rail between the city centre & Mangere is a first for New Zealand that will provide a modern, integrated public transport system with seamless connections. This is an opportunity to create a great transport system that can be part of the fabric of the city and can improve people’s lives, through transformational projects & initiatives that leave a legacy for future generations.

“The national land transport programme will invest in the infrastructure & operation of the public transport network as patronage continues to grow. This includes extending the Northern Busway and supporting the introduction of more electric trains.

“Key corridors around the city will continue to have strategic importance, especially as the city grows & changes. The Northern Corridor improvements project will complete the connection for the Western Ring Route to the north, the Southern Corridor Improvements will result in a safer route between the city centre & the south, and the Transport Agency will continue to build the 18km extension of the Northern Motorway (State Highway 1) from Puhoi to Warkworth.

“These investments will help to make Auckland a better place to live, work, visit & raise a family by providing safer transport choices, better access & a transport system that is easy to use.”

Rapid transit a network – not a single line

The agency makes it clear that rapid transit is intended to be more than a single light rail line down Dominion Rd and on to the airport, but a network, which started with the Northern Busway in 2008.

“The national land transport programme 2018-21 will invest in expanding Auckland’s rapid transit network. Moving forward, light rail is being investigated for several key routes. The Transport Agency is leading the delivery of the light rail programme. It is working in partnership with Auckland Council, Auckland Transport & the Hobsonville Land Co Ltd to give people more choice about how they travel and to support the creation of more accessible communities.

“The city centre-Mangere corridor will be light rail, and largely unaffected by road traffic & congestion. It will likely have fewer stops than current bus services, but provide a step change in capacity and more frequent, reliable services to improve access to 2 of the biggest employment areas in Auckland. Residents in neighbourhoods along the route, including the city centre, Dominion Rd, Mt Roskill, Onehunga & Mangere will benefit from better connections & amenities.

“Investment from the national land transport programme will also progress work on a second new rapid transit corridor to improve access to the growing north-western suburbs. This will provide a critical connection for these suburbs to provide a high capacity, frequent & reliable public transport service.

“The wider plan is for an integrated rapid transit network. For example, the Auckland Airport area will have more options to travel between the airport, the city centre & the eastern suburbs.”

The agency said its Southwest Gateway programme would build on the investment from the last 3-year transport plan to improve access to the airport & surrounding areas, including Airport-Botany rapid transit and 20Connect (referring to State Highways 20 & 20B, a programme intended to improve journey reliability and provide more travel choices between the airport & surrounding areas).

“Improvements may include bus priority along State Highway 20B to Puhinui rail station, an upgrade of the station, improved capacity & connections along State Highways 20 20A & 20B, interchange upgrades & rapid transit between the airport & Botany.”

Connecting communities as the city grows

The Transport Agency said its projects on Auckland’s public transport, road, walking & cycling networks were “increasingly integrated & creating a safe, connected a system that offers great transport choices”.

It said much of Auckland’s strategic road transport network was complete, but the agency was working to create targeted improvements at the same time as it prepares for the networks that will be needed to connect growth areas.

“In Auckland’s south, the Southern Corridor improvements project will deliver the widening of the Southern Motorway (State Highway 1) between Manukau & Papakura. The State Highway 1 Papakura-Bombay project will begin work to provide a third lane in each direction between Papakura & Drury, aiming to improve journey reliability, safety & network resilience.

“On the North Shore, the Northern Corridor improvements will see substantial progress (estimated completion 2022), completing the final section of the Western Ring Route and providing a new continuous motorway link between the Northern & Upper Harbour Motorways. Improvements along the Lake Rd corridor will provide a better corridor between Devonport & Takapuna.

“In Auckland’s west, improvements will be made to Lincoln Rd to accommodate additional transit/bus lanes, intersection & safety improvements and footpath widening.”

The agency has established the Supporting Growth programme to investigate, plan & deliver the transport services needed to support future urban growth areas over the next 30 years: “Through this collaborative programme with local government, the national land transport programme will invest in the initial preferred network that has been identified, including the Matakana link road connection between Matakana & State Highway 1 near Warkworth.

“The Transport Agency will continue a staged programme of route protection processes, and future delivery of projects will then follow in line with the Auckland transport alignment project’s priorities & the release of new land for growth.”

Improving walking & cycling

The agency said 38% of Aucklanders rode bikes this year – over 518,000 people now cycling: “The walking & cycling programme will be strategically planned & delivered to achieve maximum impact for short trips to the city centre, public transport interchanges, schools and local & metropolitan centres. A new footpaths regional programme will construct new & widened footpaths.

“A number of key infrastructure projects will enable more active ways for people to move safely & easily. SkyPath & SeaPath are key links in Auckland’s walking & cycling network which will both be delivered by the Transport Agency, enabling project efficiencies & improved co-ordination. There will be investment to progress the SeaPath project, a shared path between Esmonde Rd & the Auckland Harbour Bridge, as well as SkyPath, a shared path across the bridge itself. Work will continue on the Glen Innes-Tamaki Drive shared path, and investigations will begin into a Manukau Harbour crossing dedicated to walking & cycling (to replace the old Mangere bridge).”

Enhancing public transport

Auckland’s public transport users are making about 90 million trips/year on buses, trains & ferries, the highest patronage recorded in the city.

The transport plan will continue to invest in Auckland’s public transport network, with new electric trains to provide for growth and reduce crowding that would otherwise occur. The rail line from Papakura to Pukekohe will be electrified, a third main line will be added between Westfield & Wiri and the Westfield rail junction will be upgraded to provide better separation of passenger & freight services.

A programme to improve the performance of the city’s rail network includes an upgrade of the Onehunga line to accommodate higher frequency services & longer trains. The works also include progressive improvement & removal of road/rail level crossings to better manage safety risks, allow for more train services & reduce road congestion.

The agency will invest in city centre bus improvements (with Auckland Transport). They include bus priority lanes along Wellesley St and a new Learning Quarter bus interchange. In the downtown area, there will be new bus interchanges on Quay St East and Lower Albert St in conjunction with the City Rail Link & Auckland Council’s downtown projects.

The Auckland-Manukau eastern transport initiative (Ameti) will deliver new dedicated busways & cycleways to improve access & safety, unlocking housing development opportunities. Over the next 3 years work will focus on the Eastern Busway from Panmure to Pakuranga, including the Reeves Rd flyover.

The Northern Corridor improvements will deliver an extension of the successful Northern Busway to the Albany park-&-ride, running in both directions along the eastern side of the Northern Motorway. A new station is also proposed to be added at Rosedale.

There will also be new & expanded park-&-ride facilities, completion of the future ferry strategy for Auckland and redevelopment & construction of a new downtown ferry terminal.

More resilient & efficient

A key strategic approach of ATAP is to make better use of the existing network, and to explore new opportunities to get more out of what is already in place: “This means looking at the whole Auckland transport system and understanding the way people want to interact with it, as well as a programme of optimisation to improve the efficiency & reliability of people’s journeys.”

The agency said new technology was opening up opportunities to do this: “Transport Agency investment in the intelligent transport systems programme will use emerging technologies to better manage congestion, improve safety and influence travel demand. The network optimisation programme will provide a package of targeted small-to-medium-scale infrastructure projects to optimise routes through synchronisation of traffic signals, optimising road layout, dynamic traffic lanes & managing traffic restrictions. Another key initiative is the bus route priority phase 1, which involves implementation of bus priority measures along the frequent service network to improve capacity & speed.”

While the agency said its Auckland Transport Operations Centre was able to effectively manage incidents & emergencies, there’s a programme to strengthen its capabilities to reduce disruption & delay: “Core technology upgrades will support & enhance systems such as Journey Planner, web & mobile applications, asset management, CCTV & network upgrades to improve performance, resilience & safety of customers.”

As the climate changes, the agency will investigate how to address the impacts of sea level rise on Tamaki Drive, and improve the resilience of state highway & local road networks.

Investment highlights:

The wide array of budgets includes money under Te Tupu Ngatahi Supporting Growth Alliance collaborative programme, to confirm & protect transport networks needed to support the development of new urban growth areas over the next 30 years. Projects (including those under the alliance):

Ameti improvements, $240 million
Northern Corridor improvements, $500 million
State Highway 16, Brigham Creek-Waimauku safe system enhancement, $67.2 million
Dome Valley north of Warkworth, safety improvements, $33 million
Matakana link road connection $46 million
State Highway 1 Papakura-Bombay, $140 million
SeaPath, $31 million
SkyPath, $67 million
Glen Innes-Tamaki Drive shared path, $56.6 million
Third main line between Westfield & Wiri and upgrade of Westfield rail junction to provide better separation of passenger & freight services, $119 million
Lincoln Rd, $68 million

Northland, $460 million total – $350 million national fund, $109 million local government:

Northland projects include providing funding for an investigation into the opportunities to carry more freight in the region by rail, and enable the completion of improvements to State Highway 1 through Whangarei.

Waikato, $1.6 billion total – $1.27 billion national fund, $270 million local government, $59 million in direct Crown funding:

Completion of Hamilton section of the Waikato Expressway, $235 million
Mt Messenger bypass on State Highway 3, $109 million
Local road improvements, $164 million (more than doubled)
Public transport, $75 million, including funding to explore an inter-regional rail commuter service between Hamilton & Auckland

National programme, $16.9 billion:

Regional roads $5.8 billion, up $600 million, reversing the focus of the last 3 years on big-city projects
Metro roading, $5 billion
Regional non-roading projects to improve freight connections to ports, airports & distribution centres, $300 million
Public transport, rapid transit & rail, $4 billion
Walking & cycling, $390 million (including SkyPath & Seapath)
State highway projects, $3.5 billion, maintenance $2.2 billion.

NZTA, 31 August 2018: $16.9 billion investment in the future of NZ
NZTA, 31 August 2018: National land transport programme, 2018-21
NLTP regional summaries
Auckland land transport plan summary

Earlier stories:
29 June 2018: Cabinet approves 10-year transport spend, and Selwood highlights its inefficiency
19 January 2018: Collins raises scare about “road tax” diversion, but government fund already $½ billion in red
Attribution: Twyford releases, NZ Transport Agency.

Continue Reading

Council approves quest for $300 million of government housing infrastructure money

Against the possibility of rejecting $300 million of state support for housing development for reasons not clearly enunciated, Auckland Council’s governing body voted yesterday to apply for the money through the Government’s Housing Infrastructure Fund.

I left yesterday’s council meeting towards the last round of an interminable debate on fuel tax (which was approved), having gone to the meeting hoping for a quick decision on the tax and a good explanation of why the council shouldn’t accept Government funding to support suburban housing expansion.

At the end of the infrastructure money debate, the council agreed to apply for $300 million from the infrastructure fund, which would yield 6200 new homes in Auckland’s north-west.

About $130 million of it will be an interest-free loan, saving the council an estimated $50-60 million in interest over 10 years. This part will be reflected in the council’s financial liabilities, but the council can accommodate it within its prudential debt limits.

The council will repay the money from the fund through a combination of development contributions, infrastructure growth charges & developer agreements.

Financial policy principal advisor Bobbi Parkinson & Development Programme Office infrastructure funding agreements head Fiona Docherty Wright said in their report to the governing body the council must submit its detailed business case to the Ministry of Business, Innovation & Employment before the end of this month, and funding agreements between the council & ministry must be completed by June.

They added: “If further changes to costs undermine the benefits of continuing with the proposal or developers are unwilling to meet their commitments, then Auckland Council will have the option not to proceed.”

If the business case is accepted, the Housing Infrastructure Fund will support the development plans set out in the Auckland Plan development strategy, the Auckland unitary plan, the future urban land supply strategy and the transport for urban growth programme business case.

Former prime minister Sir John Key announced the fund in July 2016, to accelerate the supply of new housing.  It was intended to provide an interim funding source to bring forward specific transport & water projects for high-growth councils with infrastructure financing constraints – specifically Auckland, Hamilton, Tauranga, Christchurch & Queenstown.

Auckland Council’s governing body considered its final proposal in March last year, estimating it would unlock 37,100 dwellings in 4 areas at an estimated cost of $973 million.

Alternative funding arrangements were presented due to financing constraints on the council. The proposal included directly accessing the Government fund for the north-west & Northcote, and using a special purpose vehicle for the north & south.

However, the ministry assessed that only the north-west area complied with fund criteria and made the indicative assignment to Auckland Council of $300 million, which was intended to unlock 10,500 dwellings.

The ministry rejected proposals for the north & south because they were contingent on the special purpose vehicle arrangement, which was outside the criteria the Government had set. The Northcote proposal was not big enough.

According to the council report, to fully unlock Redhills & Whenuapai would cost substantially more than $300 million, but would enable about 13,000 dwellings. The report authors said: “This would not fit within the indicative fund assignment of $300 million or within council’s debt constraints. Choosing to unlock just one of these areas over the other would not maximise the dwelling yield for the funding available.”

However, they added: “In the absence of Housing Infrastructure Fund funding & subsequent infrastructure provision, some development would still occur in Whenuapai & Redhills in accordance with the unitary plan. Development on this basis will not progress housing & development outcomes and will not allow council to ensure that the wider transport network effects would be addressed.”

One of the problems the council has had with accepting the Government money now has been that it was likely to result in a less efficient development programme. Another was that costs in one area would be reduced, but could escalate in the next suburb to be developed.

The report authors suggested: “Proceeding with the detailed business case & completion of the funding agreements enables Auckland Council to progress with the Housing Infrastructure Fund process until further information on risks associated with potential cost escalation & developer commitment can be further assessed.”

They said the provision of $300 million would result in a cost of about $48,000/dwelling, and added: “Further enabling the remainder of the zones in the north-west area will require significantly more investment for a comparatively lower dwelling yield. Enabling the higher density areas now at a lower cost will result in the lower density areas facing higher costs in the future when compared to an average cost of enabling the entire area and averaging the costs across all land owners.”

Governing body, Housing Infrastructure Fund agenda report
MBIE, 21 August 2017: Housing Infrastructure Fund fully allocated

Attribution: Council agenda & release.

Continue Reading

Regional fuel tax law introduced

Transport Minister Phil Twyford introduced legislation yesterday to allow regions to apply for a regional fuel tax, initially for Auckland.

The Government’s programme should allow the bill to come into force before Auckland Council’s next budget takes effect, on 1 July.

Mr Twyford said in a release yesterday: “The Land Transport Management (Regional Fuel Tax) Amendment Bill will enable Auckland Council to seek funding for specific transport-related projects. It would allow funds raised in Auckland to be spent only in Auckland.

“Auckland is at a standstill and the Auckland Council understands the frustration of its ratepayers who are spending hours of their day stuck in traffic.

“Auckland has gone through massive population growth in recent years and its current infrastructure can no longer support the city. Improving infrastructure in Auckland is vital for its businesses & its people for whom just getting to work, school & about their daily activities can be a struggle.

“Solving Auckland’s traffic gridlock is also important for the rest of New Zealand, with congestion in the city between 2015-17 estimated to have cost the economy $1.3 billion/year in lost productivity.

“Under the bill, Auckland Council must first consult with residents on the proposed projects it wishes to fund. It must then obtain Government approval before the regional fuel tax can be implemented.

“The bill will go to a select committee for public submissions. We expect the law to be passed in June, ready for potential implementation in the Auckland region from 1 July.

Goff sees $1.5 billion for transport infrastructure

Auckland mayor Phil Goff said the timing would allow the council to put the fuel tax in place when the 3-year interim transport levy expires: “A fuel tax will provide up to $1.5 billion to invest in critical transport infrastructure in Auckland.

“Aucklanders understand that, with huge population growth and hundreds of extra cars on the road every week, the response of doing nothing simply leads to more congestion & gridlock, and billions of dollars in lost productivity.

“A fuel tax is cheap to administer, contains a user-pays element for road usage and raises twice as much money as the interim transport levy, which expires on 30 June this year.

“It can only be spent on transport infrastructure and people prefer that transparency around its use.

“The equivalent rates increase needed if there were no fuel tax would be an 8-9% rates increase on top of the general rates increase of 2.5% plus any other targeted rate.

“Aucklanders can’t expect other New Zealanders to meet our share of the contribution towards solving our transport problems.

“During the mayoral election campaign, I told every meeting that if people wanted a solution towards stopping greater congestion they would need to contribute towards it. I strongly advocated for a regional fuel tax and said that if people thought they could get something for nothing they should consider voting for someone promising that, but that I did not believe that was honest.

“Council is currently consulting on its 10-year budget and half of public submissions on the regional fuel tax so far received support it.

“Aucklanders will soon get another chance to have their say on how we tackle congestion in Auckland when we consult with residents on the proposed transport projects we want to fund.”

Link: Land Transport Management (Regional Fuel Tax) Amendment Bill

Attribution: Twyford & Goff releases.

Continue Reading

Trump infrastructure budget about mindset change

US president Donald Trump’s proposed extra infrastructure budget, announced yesterday, falls well short of the $US1 trillion he’d been talking about and he’s come in for widespread criticism because of that.

But what Mr Trump’s proposal is about is a mindset change.

He’s proposed $US200 billion of federal money for infrastructure – for now – and said it would be structured “to incentivise additional non-federal funding, reduce the cost associated with accepting federal dollars and ensure federal funds are leveraged such that the end result is at least $US1 trillion in total infrastructure spending”.

In his speechnotes, however, Mr Trump trumped that, saying his plan “will lead to at least $US1.5 trillion in investments to rebuild our failing infrastructure and develop innovative projects”.

According to a fact sheet that went out with the budget proposal, Mr Trump’s goal is to secure long-term changes because “the current system is not working”.

The fact sheet cited underperformance in many areas, “from our congested highways, which costs the country $US160 billion annually in lost productivity, to our deteriorating water systems, which experience 240,000 water main breaks annually”.

The response from Mr Trump: “We will re-evaluate the role for the federal government in infrastructure investment. For example, in the interstate system, the federal government now acts as a complicated, costly middleman between the collection of revenue and the expenditure of those funds by states & localities. Put simply, the administration will be exploring whether this arrangement still makes sense, or whether transferring additional responsibilities to the states is appropriate.

“As the administration develops policy & regulatory changes, and seeks statutory proposals working with Congress, we will focus on proposals that fall under the following key principles:

1, Make targeted federal investments: Focusing federal dollars on the most transformative projects & processes stretches the use & benefit of taxpayer funds. When federal funds are provided, they should be awarded to projects that address problems that are a high priority from the perspective of a region or the nation, or projects that lead to long-term changes in how infrastructure is designed, built & maintained

2, Encourage self-help: Many states, tribes & localities have stopped waiting for Washington to come to the rescue and have raised their own dedicated revenues for infrastructure. Localities are better equipped to understand the right level – & type – of infrastructure investments needed for their communities, and the federal government should support more communities moving toward a model of independence

3, Align infrastructure investment with entities best suited to provide sustained & efficient investment: The federal government provides services that non-federal entities, including the private sector, could deliver more efficiently. The administration will look for opportunities to appropriately divest from certain functions, which will provide better services for citizens, and potentially generate budgetary savings. The federal government can also be more efficient about disposing underused capital assets, ensuring those assets are put to their highest & best use

4, Leverage the private sector: The private sector can provide valuable benefits for the delivery of infrastructure, through better procurement methods, market discipline and a long-term focus on maintaining assets. While public-private partnerships will not be the solution to all infrastructure needs, they can help advance the nation’s most important, regionally significant projects.

System gone awry

What Mr Trump is talking about is a system gone badly awry: “The federal government inefficiently invests in non-federal infrastructure. In part, our lack of sustained progress has been due to confusion about the federal government’s role in infrastructure. During the construction of the interstate system, the federal government played a key role – collecting & distributing federal tax revenue to fund a project with a federal purpose. As we neared the completion of the interstate system, those tax receipts were redirected to projects with substantially weaker nexus to federal interests.

“The flexibility to use federal dollars to pay for essentially local infrastructure projects has created an unhealthy dynamic in which state & local governments delay projects in the hope of receiving federal funds. Over-reliance on federal grants & other federal funding can create a strong disincentive for non-federal revenue generation.

“At the same time, we continue to apply federal rules, regulations & mandates on virtually all infrastructure investments. This is despite the federal government contributing a very small percentage of total infrastructure spending. Approximately one-fifth of infrastructure spending is federal, while the other 4-fifths are roughly equally divided between state & local governments on one hand and the private sector on the other.

“Given these challenges, the administration’s goal is to seek long-term reforms on how infrastructure projects are regulated, funded, delivered & maintained. Providing more federal funding, on its own, is not the solution to our infrastructure challenges. Rather, we will work to fix underlying incentives, procedures & policies to spur better infrastructure decisions & outcomes, across a range of sectors.”

The New York Times said the $US4.4 trillion Trump budget proposal would add $US7 trillion to the federal deficit, but was largely irrelevant because the spending bill Congress passed last week outlined priorities.

It may be irrelevant in the immediate context, but not in the way the country functions long-term.

Among immediate measures to unshackle the population from the “federal government pays” thinking, Mr Trump would hand the nation’s air traffic control system over to the private sector, and expand the Veterans Affairs Department’s authority to lease out its vacant assets for commercial or mixed-use purposes and to speed its ability to pursue facility renovations & improvements: “Future [Veterans Affairs] reforms will encourage public-private partnerships and reduce barriers to acquisition, contracting & disposals.

Likewise, he’d sell the federal Power Marketing Administration’s transmission assets and lift the share of costs paid by commercial navigation users of inland waterways.

The Trump budget proposal contains examples of measures that would overcome limits on finance for transport projects, and on the potential for public-private partnerships’ participation, a measure to incentivise innovative approaches to mitigating traffic congestion, a change to the interstate highway tolling policy to open investment up, and changes to a clunky system that prevents private entities from making upgrades to federal facilities which would increase the rent on them.

Mr Trump’s appointment of a climate change denier, Scott Pruitt, as administrator of the Environmental Protection Authority – and subsequent elimination of climate change information from the authority’s website – has attracted attention.

The budget proposal puts forward a number of reforms to the environmental review & permitting process, which the Trump fact sheet describes as “fragmented, inefficient & unpredictable. Existing statutes have important & laudable objectives, but the lack of cohesiveness in their execution make the delivery of infrastructure projects more costly, unpredictable & time-consuming, all while adding little environmental protection. The administration will seek several proposals that will enhance the environmental review & permitting process.”

Mr Trump’s statement about his budget proposal indicates he’s more concerned with floss – the highways – than with the dross underground that is more likely to cripple aging communities – the utilities that need replacing, but which many communities no longer have the population, or working population, to fund.

Links: Budget infrastructure initiative fact sheet
White House announcement, 12 February 2018: Building a stronger America: President Donald J Trump’s American infrastructure initiative
Full Trump budget proposal

Attribution: White House, New York Times.

Continue Reading

Trump changing longstanding rules of play on infrastructure

US president Donald Trump will win support for his infrastructure plan from those who want more self-help from cities on providing – and paying for – infrastructure.

The Axios website released a link (see below) to a draft of the infrastructure plan last week and the president may release detail of the actual plan in his state of the union address (starting 3pm today NZ time).

Strong Towns founder set the scene

The founder of the Strong Towns website in the US, Charles Marohn, wrote to the new president, Donald Trump, last January explaining how the normal method of federal money funding new infrastructure projects didn’t work, and the result was a nation of broken infrastructure.

It seems Mr Trump may have listened to some of that message – though more likely adopting his own view that just because he announced a $US1 trillion programme didn’t mean his sources would fund it.

Mr Marohn explained: “To borrow a real estate term, America’s infrastructure is a non-performing asset. For nearly every American city, the ongoing cost to service, maintain & replace it exceeds not only the available cashflow but the actual wealth that is created.

“For example, we did a deep financial study of the city of Lafayette, Louisiana. We found that the city had public infrastructure – roads, streets, sewer, water, drainage – with a replacement cost of $US32 billion. In comparison, the total tax base of Lafayette is just $US16 billion. Imagine building a $US250,000 home and needing an additional $US500,000 in infrastructure to support it. This seems incredible. But not only is it common, it is the default for cities across America.

“This imbalance is caused by incentives we embed in our current approach. When the federal government pays for a new interchange or the extension of utilities, local governments gladly accept that investment. The city, while spending little to no money of their own, has an immediate cash benefit from the jobs, permit fees & added tax base. The only thing the local government must do is promise to maintain the new infrastructure, a bill that won’t come due for decades.

“Here’s the catch: when we look at that bill, our cities almost always can’t pay it. Cities never run a return-on-investment analysis that includes replacement costs. Cities never even compute the tax base needed to financially sustain the investment. There’s no incentive to do it and every reason not to.”

Mr Marohn’s 4 principles for a solution:

  • Prioritise maintenance over new capacity
  • Prioritise small projects over large
  • Spend far more below ground than above, and
  • Prioritise neighbourhoods more than 75 years old.

Asked to comment on the leaked infrastructure plan this week, Mr Marohn commented: “My nightmare scenario was another Obama-style stimulus bill ($US831 billion total with $US105 billion spent on infrastructure) only focused on handing out federal dollars primarily for new highways, interchanges, frontage roads & other build-it-and-they-will-come kinds of investments. This is nowhere near that. Breathe a sigh of relief.

“Half of the undisclosed amount of money (widely believed to be in the $US200 billion range) would go into something called the Infrastructure Incentives Initiative. This has all the hallmarks of the worst of federal infrastructure spending: anything infrastructure-related is eligible, any government or public authority can apply, scoring is heavily weighted to induce local governments to take on lots of debt and there is only faint concern for long-term maintenance costs or return on investment. Yuck!

“But the plan has one provision that changes all of this: Grant awards can’t exceed 20% of total project costs… For a state or local government to get the federal money, they will need to have some serious skin in the game to the tune of 80% of the funding. If that provision makes it through Congress (count me doubtful), it would be transformative.

“With state & local governments picking up 80% of the tab, I suspect projects will naturally gravitate towards those of the smaller maintenance variety, particularly projects that have a positive return on investment (small, underground, and in older neighbourhoods).”

For this article, I’ve provided links to Axios & Strong Towns here, followed by further links & comment below that.

Axios, 23 January 2018: Scoop: Read the draft White House infrastructure plan
Axios, leaked draft
Strong Towns, 29 January 2018: A review of the White House infrastructure plan
Strong Towns, 23 January 2017: A letter to POTUS on infrastructure

Other views on infrastructure changes

Daniel Vock wrote on the Governing website: “At a time when many state transportation officials are clamouring for more financial help from Washington, an outline of the president’s infrastructure plan depends heavily on an influx of state & private funds.”

Governing, 22 January 2018: Leaked Trump infrastructure plan would put onus on states

In a second story, about where the money would come from and its journey to the user, he wrote: “When big-city mayors met in Washington last week, one of their primary messages regarding infrastructure was that the federal government should send new money directly to cities, rather than through states. The Trump administration seems open to the idea.”

Politico said: “The president’s long-awaited infrastructure package will expect cities & states to pick up much more of the costs for their projects.

In its coverage of the plan, Laura Gardner wrote: “President Donald Trump won the White House promising a $US1 trillion, 10-year blueprint to rebuild America — an initiative he said would create millions of jobs while making the nation’s highways, bridges, railroad & airports ‘second to none’.

“But the infrastructure plan he’s poised to pitch in Tuesday’s State of the Union is already drawing comparisons to The Hunger Games.

“Instead of the grand, New Deal-style public works programme that Trump’s eye-popping price tag implies, Democratic lawmakers & mayors fear the plan would set up a vicious, zero-sum scramble for a relatively meagre amount of federal cash — while forcing cities & states to scrounge up more of their own money, bringing a surge of privately financed toll roads, and shredding regulations in the name of building projects faster.

“The federal share of the decade-long programme would be $US200 billion, a sum Trump himself concedes is ‘not a large amount’. The White House contends it would lure a far larger pool of state, local & private money off the sidelines, steering as much as $US1.8 trillion to needs as diverse as highways, rural broadband service, drinking water systems & veterans hospitals.”

Politico noted that what the Trump plan did signal was a move away from the policy of the federal government deciding everything, and trickling tax money back to the states, with tags. Laura Gardner wrote: “The White House defends its approach as an overdue shift from decades of federal spending & control.”

She quoted a statement from deputy White House press secretary Lindsay Walters: “The Washington establishment still thinks that infrastructure can only be built correctly if they make all the decisions and control the purse strings, but one look at the crumbling bridges & roads across America shows that approach has failed.

“Instead of sending taxpayer money to DC only to have it eventually trickle back down to communities along with a host of new restrictions & requirements, the president wants to allow communities to keep more of their funds and make their own decisions, and to simplify the federal bureaucratic maze.”

Governing, 29 January 2018: Mayors sceptical of trump infrastructure plan
Politico, 28 January 2018: Trump’s $US1 trillion plan inspires ‘Hunger Games’ angst
Politico, 9 November 2016: Donald Trump victory speech 2016, full video

Attribution: Axios, Strong Towns, Politico, Governing.


Continue Reading

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.”

Infrastructure funding detail

Attribution: Ministerial release.

Continue Reading

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.

Continue Reading

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.

Continue Reading

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.

Continue Reading