The Government threw more money at its Auckland problem yesterday as a high-powered campaign to persuade it to do a lot more to address infrastructure shortfalls in the city has begun to make itself heard.
”It’s a crisis,” Infrastructure New Zealand CEO Stephen Sellwood told POLITIK.
“It’s time to wake up and smell the coffee.”
Clearly, the Government is beginning to get the message.
Finance Minister Steven Joyce yesterday announced that it has decided to invest $11 billion in new capital infrastructure over the next four years including $4 billion in this year’s budget.
At the half-year update, the Government decided to increase the new capital spend for Budget 2017 from $900 million to $3 billion. “We have reviewed that figure again as we prepare for Budget 2017 and our total new capital spend for each year over the forecast period,” he told the Wellington Chamber of Commerce.
“In Budget 2016 we were forecasting just $3.6 billion in new capital spend between Budget 17 and Budget 20 compared to $11 billion now,” said Joyce.
“The $11 billion is additional spend on top of investments already planned by the Government.”
Joyce – in reference to the work that is going on in the Infrastructure Committee of Cabinet Ministers – said the Government wanted to extend that further, with greater use of public-private partnerships, and joint ventures between central and local government, and private investors.
He got applause for the announcement.
The Auckland Employers’ and Manufacturers’ Association said it was a step in the right direction.
But its CEO, Kim Campbell said there was a need to look at new funding options for local government.
“Also, where is the discussion around using tools other than relying on central government coffers, to enable this?” he said.
“We know there are many ways to access capital and there are investors waiting in the wings. Bond issues, congestion charging and public-private partnerships are just some of the ways to raise this capital.
“And don’t forget, local authorities can also look to sell non-core assets to show willing to invest locally too.”
Business New Zealand, CEO Kirk Hope said: “Also encouraging is the Government’s intention to use public-private partnerships and joint ventures in building appropriate infrastructure.
“The challenge of Auckland’s infrastructure demands a creative approach that can be better achieved by public-private partnership.”
Sellwood said it was a very positive announcement.
“But inevitably I have to say much more will be needed; he told POLITIK.
“You could spend the $11 billion in one year just on the list of projects in Auckland.
“But I don’t want to be churlish; the reality is the Government is fronting up.”
Where all the parties involved in infrastructure agree is that there has to be new ways found to finance the growth that is going to be needed to cope with the record population growth in the city.
“There will have to be a combination of Government and private capital to cut the mustard,” said Sellwood.
Considerable work by the Auckland Business Forum (which includes business, infrastructure and transport entities in the city) is going on in the background to prepare a case to put to both the Government and the Auckland Council to open the doors to new funding.
Already preliminary results from some of the research based on data from commercial vehicles’ GPS’s shows that the city has had a decline of around 20% in productivity due to traffic congestion alone.
And there are suggestions that transport and traffic congestion is becoming as big as housing as a key issue in the runup to the election campaign.
“We’ve got to lift our vision and our commitment beyond business as usual,” said Sellwood.
As part of the Business Forum campaign, its chair, Auckland Chamber of Commerce CEO, Michael Barnett, in an opinion piece in “The Herald”, suggested three new ways the Council and Government could fund more transport infrastructure:
- The Council could find away around its debt to revenue ratios.
- Both the Government and Council could spend the sums they pay out in cash now for infrastructure to service debt.
- Infrastructure bonds could be issued.
But Sellwood has just led a delegation to Britain and seen what innovative ways of funding have been able to do for projects like London’s Crossrail where targeted rates along the rail route are paid straight to the entity financing and building the line.
He says the same could be done here and the Council could agree to rezone land for residential land only after the developer had agreed to accept a deal which included receiving revenue from targeted rates as part of the financing of providing infrastructure like waste water and roads.
In a way what Joyce announced yesterday was the easy bit.
But the Government can not continue to throw more money at Auckland.
Barnett points out that the Government already provides Auckland with around $1.2 billion a year for transport compared to Auckland Council’s $650 million; “a share that government argues is declining in proportion to its increased revenue from ratepayers.”
As POLITIK has reported, Joyce is chairing a high powered Ministerial Committee to look at the kind of options proposed by Sellwood and Barnett.
What the Business Forum are trying to impress on him is that there is no time to waste.