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Unlocking the local authority infrastructure funding puzzle

July 18, 2018

Contacts

Partners Jonathan Salter, Josh Cairns, James Hawes, Simon Vannini, Padraig McNamara

Local government Infrastructure funding Urban transformation

The need for New Zealand’s local authorities to plan for a sustainable future has become increasingly difficult in recent times.

Growth continues to accelerate and outpace the critical infrastructure required to support it. For many of our population centres, this growth has also brought with it the increasingly familiar issues of traffic congestion, housing unaffordability, and inefficiency.

Essentially, the problem lies in a lack of ability to generate the funds necessary to deliver infrastructure sufficiently, primarily as a consequence of debt ceilings, a system which perpetuates downward pressure on rates and a lack of incentives for growth, and inadequate external sources of funding.

Understanding the nature and origins of the current infrastructure issues is important. By framing the discussion, a range of measures can be identified that will help to deliver the solutions our communities deserve.

Incremental solutions, including minor adjustments to rates and debt arrangements, could be effective to resolve issues for many areas affected by population growth.

More radical solutions include Special Purpose Vehicles (SPVs), value capture financing, and greater use of external (including taxpayer funded) sources. These ideas hold great potential, and have been successfully implemented internationally to good effect; however, some would require quite significant statutory change.

The starting point, however, must be a recognition by Government of the true value in the contributions made by local authorities in the New Zealand growth story, and a firm understanding of their role and the framework they operate within.

Simpson Grierson’s report, launched at the LGNZ Conference, discusses the puzzle that is local authority infrastructure funding, and looks at some of the solutions.

To read the paper click on the link below.