The Infrastructure Funding and Financing Amendment Bill (Bill) has now passed its Third Reading and is awaiting Royal Assent. The Bill will make a series of targeted amendments to the Infrastructure Funding and Financing Act 2020 (the Act) that are designed to support greater utilisation of the off-balance sheet funding and financing model for public infrastructure enabled by the Act.

About the Act

The Act enables a special purpose vehicle (SPV) to raise finance for an infrastructure project on the strength of levies charged to those who benefit from the infrastructure.

To date, the Act has been used to help fund and finance a range of infrastructure projects, including the Western Bay of Plenty Transport Systems Plan, the Sludge Minimisation Facility in Wellington, and greenfields housing infrastructure at Te Awa Lakes in Hamilton.

The amendments made by the Bill are intended to make the Act easier to use and more practical for a wider range of infrastructure projects. In broad terms, the amendments are aimed at:

• removing unnecessary barriers to using the Act;

• making the model more viable for different types of infrastructure projects; and

• simplifying and streamlining the process for developing and approving levies.

How the model works

Under the Act, an SPV will be empowered to raise finance for an eligible infrastructure project. In most cases the SPV will be responsible only for funding and financing the infrastructure with another party responsible for procurement (for example, a local authority or a developer).

The SPV repays the finance it has raised through long-term levies, authorised under the Act, that are charged to those who benefit from the project.

Currently, the Act can be used for a range of infrastructure, including:

• three waters infrastructure, including water supply, sewerage, sewage treatment and stormwater drainage;

• transport infrastructure, including roads, cycleways, rapid transport, rail, walkways, ferries and associated infrastructure;

• community facilities, such as reserves; and

• environmental infrastructure, including infrastructure that manages, mitigates or avoids natural hazard risks and environmental restoration.

Removing barriers

The Bill removes several practical barriers that may have limited the use of the Act to date. It does this by making the Act, including its levy design rules, more permissive and flexible – which should allow the IFF funding model to be tailored for use in a wider range of circumstances.

A wider range of projects

While the Act was originally focused on supporting local authority-led infrastructure projects, the amendments will make the IFF model available for a broader range of projects, including three waters infrastructure delivered by a new water service provider under the Local Water Done Well reforms, as well as transport, community and environmental resilience infrastructure carried out by government agencies and state-owned enterprises such as New Zealand Transport Agency or KiwiRail.

Streamlining the process

The Bill also seeks to streamline the levy approval and recommendation processes, and simplify the matters that must be considered before a levy can be approved. These changes are designed to reduce the evidential burden and transaction cost of establishment an IFF funding and financing structure.

In practice, this should make the approval process more efficient and more predictable for developers, local authorities, water organisations and other infrastructure providers looking to use the IFF model.

Overall effect

The amendments in the Bill are designed to make the Act a more workable tool for funding infrastructure needed to support housing and urban development. They have been made on strength of the learnings taken from the initial IFF projects, and should enable the model to become a more integral part of the infrastructure funding and financing toolkit for local authorities, developers and government agencies.

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Special thanks to Quinn Benson-Gamble for his assistance in preparing this article.