National’s infrastructure announcement

New leader Judith Collins announced the first chunk of National’s infrastructure policy yesterday – $30 billion to be spent over 10 years on roads, rail, buses and tunnels, with about half in the top of the North Island, particularly addressing congestion in Auckland, and including a full four lane highway from Whangerei to Auckland and to Hamilton and Tauranga.

They also plan on scrapping the currently dysfunctional RMA and replacing it with something that doesn’t restrict anmd slow down development so much.

National had been criticised for not having much policy, but after this announcement the pressure is now very much on Labour to respond.

While I have my doubts about some of what is in the policy I think there’s a lot of worth\while projects to consider.

Opponents were quick to criticise the emphasis on roads and car congestion, including Green Minister Julie Anne Genter, but the simple fact is that road congestion is a major problem in the north and cars won’t suddenly disappear.

A big problem with the Green led push to walk and bike is that it is happening slowly and is limited. In Dunedin most commuter cycle lanes are barely used. Recreational walking and biking is becoming more popular, but weekday congestion is still a huge problem and won’t be fixed by disrupting traffic flows with more cycleways and footpaths, especially when noot separated from cars and trucks.

A big point of difference with Labour is that instead of putting light rail lines down a busy road in Auckland they will branch the existing railway line to the airport. Seems a sensible option.

The National announcement won’t make me suddenly be a supporter of them this election, but it is a welcome bit of beef that should force Labour and other parties to front up with substantive policy of their own that we can then decide on.

The announcement (edited):  Delivering Infrastructure – Upper North Island

Today’s infrastructure announcement is one part of National’s Plan to Get New Zealand Working that we released last week. Today I intend to focus on transport infrastructure.

In the coming weeks, you will hear more about our plans for schools, for hospitals, for water storage, and broadband. But today is all about transport.

There is a congestion and infrastructure crisis in Auckland. It is a crisis caused by decades of short-term thinking and expedience. And that same congestion and infrastructure crisis extends to much of the rest of country.

National’s approach to infrastructure is simple: Make decisions, get projects funded and commissioned, and then get them delivered, at least a couple of years before they are expected to be needed. That is the approach that transformed the economies of Asia from the 1960s.

Today, though, being in Auckland, my focus is on transport – including within Auckland City, and across the whole upper North Island.

This city is broken by congestion. Every Aucklander and every visitor to Auckland knows it. Congestion costs Aucklanders over $1 billion per year. That’s the strict economic loss. It represents lost production, lost productivity, lost opportunity.

But congestion is far worse than that. Congestion means unreliable journey times. It means frustration at sitting idle on the motorway. It means goods being delivered late to our ports. It means Mum being late to pick up the kids from rugby practice. It means a tradie only doing two, rather than four, cross-town trips per day. That’s fewer jobs for him; less income, and less economic activity.

Upper North Island Transport Package

First, National will build a four-lane expressway network from Whangarei in the north to Tauranga, connecting 50 per cent of the country with high-quality and safe expressways.

Second, we will complete the Auckland Rapid Transit network, including massive new investments in busways and our rail network.

Third, we will build a second crossing across the Waitemata Harbour in Auckland.

These things can’t all happen at once. But we will also begin immediately, by pumping $300 million into digger-ready projects in Auckland and throughout the country in 2021 – like fixing potholes, roundabouts, and crash corners.

Together, our plan, which you can find in detail on our website, is a 20-year vision for transport infrastructure in Auckland and the upper north. Our total funding for new transport projects across New Zealand will be $31 billion over the next decade. Around half of that – $17 billion – will go to today’s Upper North Island Transport Package for the half of the nation’s population who live here. To fund our overall $31 billion package, we have allocated $7 billion from the Government’s $20 billion Covid Fund.

In addition, National will change the way major transport projects are funded, from “pay-as-we-go” to an intergenerational approach. NZTA will be allowed to borrow significantly more on its own balance sheet, using the $4 billion it collects each year from fuel taxes and road user charges to service the debt. Initially, we will allow it to borrow up to $1 billion a year more.

Some of what I am announcing today will also be joint ventures with Auckland Council. The renegotiation of the Auckland Transport Alignment Project (ATAP) will begin with Phil Goff in our first two weeks in office. The first thing you’ll see, as previously announced, is that the Auckland regional fuel tax will be abolished.

Looking further ahead, if we and Auckland Council ever look at congestion charges in the future, my Government will insist they are only ever revenue neutral, with other fuel taxes reduced to compensate.

Upper North Island Expressway Network

The first project I am announcing today is to connect Auckland, Whangarei, Hamilton and Tauranga with four-lane expressways. This will also include Marsden Point. We will also build the Hamilton Southern Links project to connect the southern part of Hamilton to the Waikato Expressway. And we will build a four-lane expressway from Tauranga to Katikati. Desktop work to get the four-lane expressways underway will begin immediately upon us forming a Government.

National will seek also to improve the rail networks between Auckland, Whangarei, Hamilton and Tauranga. National will extend commuter rail to Pokeno, beginning in 2024. That will then allow the possibility of proper commuter rail to Hamilton to be considered.

Auckland Rapid Transit

The second project I am announcing today as part of National’s Delivering Infrastructure Plan is Auckland Rapid Transit. We will measure our progress against those goals, of 30 minutes to get to work and one hour to get across the city.

We don’t support light rail. National believes light rail will be to the 2020s what monorails were to the 1980s. We do support completing Auckland’s existing train and bus system.

I am announcing, therefore, that there will be rail to the airport from Puhinui, starting in 2026, and then up to Onehunga, to create a rail loop. This was the plan for Auckland for decades, as Mike Lee will tell you.

Rather than just doing a third main rail line Quay Park to Wiri, we will do the third and fourth at the same time. This will allow the separation of commuter and freight traffic, and for express commuter services and regional rail.

Additional Harbour Crossing

I am announcing today that National’s Plan is that the crossing should be a tunnel or tunnels. Our Plan is that it should be for both road, rail and new public transport technologies that come on line. And, yes, the new tunnel will be tolled – but the existing bridge never will be.

In terms of a timeline, I am announcing National’s Plan is to fast-track the consenting so that work can begin in 2028.

In terms of cyclist and pedestrian access across the harbour, National is sceptical of the $360 million Labour plans to spend on Skypath 2. Unlike the Dominion Road Ghost Train, I am not announcing today that Skypath 2 will certainly be cancelled. But, the likelihood is that we will want to work with the experts on a more cost-effective way for cyclists and pedestrians to get across the harbour.

Resource Management Act Repeal

Aucklanders, and all New Zealanders, are sick of:

  • The diabolical processes and never-ending but insincere consultation.
  • The endless cost and delays the RMA gifts to seemingly every development.
  • Good projects falling-over in Court.

It has to stop.

…I am making a very firm commitment that the National Government I lead will repeal the RMA altogether. It won’t be “reformed” – it will go.

We will replace it with two new pieces of law: an Environment Standards Act, setting our environmental bottom lines; and an Urban Planning and Development Act, giving clarity and consistency. We will begin this work in our first 100 days. We will introduce new legislation by the end of next year.

That process, though, is too slow for the projects I have announced today – and those we will announce in the next few weeks. The RMA fast-track legislation passed in response to Covid-19 provides a useful interim framework.

National will make far more extensive use of the fast-track Act. New Zealand is facing an extraordinary jobs and economic crisis; and it demands a proportional response. We simply cannot let the RMA stand in the way of urgently needed infrastructure development. In Auckland and right around the country, we will work with local government to try to make existing RMA procedures more efficient.

But I want to tell you all right now, we will legislate for our projects if necessary. We will be respectful of local government and local stakeholders, most particularly mana whenua, and the likes of NZTA and the Infrastructure Commission.

More detail:

You can view National’s Auckland Transport Plan here

You can view National’s Transport Funding Summary here

You can view National’s Upper North Island Infrastructure Package Q & A here

Infrastructure handouts announced

$3 billion aimed at fast tracking infrastructure projects to try to boost recovery from the economic effects of the Covid-19 pandemic were announced yesterday.

Infrastructure investment to create jobs, kick-start COVID rebuild

A new package of infrastructure investments will help kick-start the post-COVID rebuild by creating more than 20,000 jobs and unlocking more than $5 billion of projects up and down New Zealand.

That is presumably an estimate of job numbers. There is no indication whether people with the right qualifications and skills  are available to do the jobs, or if they will need to be trained – which would take time.

Finance Minister Grant Robertson and Infrastructure Minister Shane Jones today outlined how the $3 billion infrastructure fund in the COVID Response and Recovery Fund will be allocated across regions, following extensive engagement with local councils and businesses.

The investment package includes about $210 million for climate resilience and flood protection projects, $155 million for transformative energy projects, about $180 million for large-scale construction projects and $50 million for enhanced regional digital connectivity.

The COVID Response and Recovery Fund (CRRF) set out in Budget 2020 earmarked $3 billion for infrastructure projects. Cabinet’s initial decisions on this allocation include:

  • Housing and urban development: $464m
  • Environmental: $460m
  • Community and social development: $670m
  • Transport (cycleways, walkways, ports and roads): $708m

The projects are in addition to the $12 billion New Zealand Upgrade Programme and existing Provincial Growth Fund investments.

Infrastructure Minister Shane Jones said the pipeline of projects would create immediate economic activity in the metropolitan centres as well as the regions.

Cabinet has now made initial decisions about key sectors it would like to support and general regional distribution of funds, with more than 150 projects worth $2.6 billion being approved in principal. Officials are now undertaking final due diligence to ensure projects are viable and offer the benefits stated by applicants.

That doesn’t sound like ‘immediate economic activity’.

About $400 million has been set aside as a contingency as the Government takes a responsible approach to managing spending on behalf of taxpayers. Funds not required in the contingency will be put towards further infrastructure projects, providing an incentive for local councils to deliver the approved projects on time and on budget, as this would unlock a further potential $400 million of investment.

Large infrastructure projects have a habit of running over budget, especially when the investigations and planning of them is rushed.

Rushing projects also raises the risks of them being ill-conceived and chosen so the Government is seen to be doling something.

And there are suggestions the announcements that the announcements are more timed for the election than practical progression of the projects. This announcement included government self promotion:

“This is about creating jobs as we recover and rebuild from the recession caused by the global COVID-19 pandemic. Because we went hard and early with our health response, we’ve been able to open up the economy quicker than other countries and get a head start on our recovery,” Finance Minister Grant Robertson said.

“This package will provide Kiwis with confidence that the Government is backing them in this challenging economic environment by creating new jobs and opportunities in communities around the country.”

Infrastructure Minister Shane Jones said the pipeline of projects would create immediate economic activity in the metropolitan centres as well as the regions.

“Both are critical to our economic and social recovery from the COVID-19 crisis,” Shane Jones said.

“Not only has this massive undertaking provided us with the largest stocktake of infrastructure projects we’ve ever had but it’s enabled us to partner with central and local government, the private sector and community groups to deliver projects for all Kiwis.

“The specific projects we’re announcing today are examples of the sort of projects we’re supporting – from nationwide investments in flood protection and better digital connectivity to civic facilities that we know form the bedrock of our communities.

“I am extremely proud of the depth and breadth of this unprecedented piece of work,” Shane Jones said.

Jones may also be hoping this unprecedented piece of work will help his electorate election chances, and Robertson may be hoping it helps Labour’s chances of being re-elected (but he may not be hoping for NZ First to interfere with them governing again next term).

It will be well after the election before the worth of the projects being pushed have been money well spent, or squandered.

Infrastructure spending splash – conservativeness disappointing

The Government announced details of $12 billion of infrastructure spending, splashing big money mostly around Auckland and the North island, and a lot of it in roading, but despite Jacinda Ardern promoting it as “a once in a lifetime opportunity to invest in New Zealand” it is really quite a conservative, and it’s lack of innovation and it’s failure to prioritise the supposed ‘biggest problem of Ardern’s generation’, climate change has been very disappointing for some, including myself.

Much of what is being funded could have been included in normal budget announcements, but this is clearly packaged to kick off an election campaign.

Labour and National have ended up arguing about who deserves the credit for the many roading projects to be funded – (so much for Ardern’s positive politics promise.

Rail gets some funds, but scratches the surface of alternatives to fossil fuel use.

The South Island gets a disproportionately small amount, with Orago and Southland just about missing out altogether apart from a few million dollars to try and sort out Queenstown traffic problems.

NZ First get another billion dollars or so to dish out on top of the Provincial Growth Fund so no doubt hope that this helps attract (buy) a few more votes.

The Greens have tried to talk up their ‘wins’, but must disappointed with the huge focus on roading, and they get much less to play with for their preferred projects than NZ First. There is some funding for converting schools from coal to wood heating, but just 8 schools out of the 200 or so using coal furnaces will get initial funding.

Many of of the big spends are on roading projects that had been announced (but not funded) by the last National government and dumped by Labour when they took over.

So this looks like a big splash of cash on ‘same old’ type projects, with Labour and National arguing about semantics, making this appear largely like a Tweedledum/dee Labourlite/Nationallite sort of iniative, with little initiative used in applying the big borrowing to transformative future looking projects.

The Labour leaning The Standard post on the announcement – The Government’s $12 billion infrastructure package – is slammed by the greener participants. The first comments:

Sacha

I am disgusted. What a wasted opportunity.

Building more roads is utterly the wrong thing to do if these clowns were serious about climate action. Another win for the dinosaurs. Young people will be well pissed off.

weka

I can’t even rally the energy to try and blame some of it on Peters.

Ad provides their analysis here including:

There’s a tiny bit for Green special projects like removing a few of the 200 coal-fired boilers from school heating systems.

https://www.scoop.co.nz/stories/PA2001/S00124/flicking-the-switch-on-a-clean-powered-public-service.htm

There’s nothing on a signature scale like the CRL was from National in October 2016. Nor anything about shifting the Auckland port, given the Prime Minister stated that it will move. Nothing on light rail for Auckland – just a general hint that every time we pay a ticket we support our own superannuation.

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12292277

Not a whole bunch of national plan or coherence to it all.

But they are all projects that needed doing.

Projects that probably should have been happening already, but lacking in anything bold.

It’s a lot of money to underwhelm with.

Beehive blurb:


Roads, rail, schools and hospitals will be built and upgraded across the country under the $12 billion New Zealand Upgrade Programme announced today, Prime Minister Jacinda Ardern says.

Minister for State Owned Enterprises Winston Peters says the funding of four major rail projects under the New Zealand Upgrade Programme is yet another step in the right direction for New Zealand’s long-term rail infrastructure.

A new programme to build and upgrade roads, rail, schoo

The Government’s programme of new investments in roads and rail will help future proof the economy, get our cities moving, and make our roads safer.

The New Zealand Upgrade Programme to modernise the economy includes new and expanded child health, maternity and mental health facilities as part of a package of priority health investments.

Infrastructure and Regional Economic Development Minister Shane Jones says today’s capital investment announcements show the Coalition Government is the Government of Infrastructure.

Our Government’s programme to upgrade infrastructure and modernise the economy will help more communities to be part of the solution to climate change through a clean-powered public service.

 

Government announces $12b infrastructure spending,

The Government has announced $12 billion in infrastructure spending, but haven’t given a lot of details yet. Specifics won’t be revealed until next year.

$12 billion in extra infrastructure investment

The Government is lifting capital investment to the highest level in more than 20 years as it takes the next step to future-proof New Zealand.

Finance Minister Grant Robertson has announced $12 billion of new investment, with $8 billion for specific capital projects and $4 billion to be added to the multi-year capital allowance.

The $8 billion includes:

  • $6.8 billion for new transport projects, with a significant portion for roads and rail.
  • $400 million one-off increase to schools’ capital funding
  • $300 million for regional investment opportunities
  • $300 million for District Health Board asset renewal
  • $200 million for public estate decarbonisation

The specific projects will be announced in early 2020.

The extra $4 billion to be added to the multi-year capital allowance takes it to $8.4 billion, with allocation of that money to be announced over coming Budgets.

“The new investment is forecast to increase the size of the economy by a further $10 billion over five years, with further positive impacts on GDP beyond that period,” Grant Robertson says.

With debt low and borrowing costs at record lows, the conditions are right for the Government to invest to future-proof New Zealand.

So they intend borrowing to spend on infrastructure, but at the same time have announced a surplus of the same amount over the next four years.

Strong economy, careful spending gives $12bn of surpluses

The Government is forecast to run $12 billion worth of surpluses across the four years to 2023/24 as the economy continues to grow.

The surpluses will help fund day-to-day capital requirements each year. These include fixing leaky hospitals, building new classrooms to cover population growth and take pressure off class sizes, and putting aside savings in the Super Fund for future retirement costs.

The new forecasts are in the Treasury’s 2019 Half Year Economic and Fiscal Update. This was released alongside the Government’s $12 billion plan for new infrastructure investment to future-proof the economy, and the 2020 Budget priorities.

Across the four years from 2020/21 to 2023/24, the annual surplus is forecast to rise to 1.5% of GDP. This delivers a total of nearly $12 billion of surpluses.

“The Government has committed to running a sustainable surplus across an economic cycle, and today’s forecasts show we are delivering on that,” Finance Minister Grant Robertson says.

The Government inherited net debt at 22.9% of GDP. The forecasts show net debt of 21.5% of GDP in 2021/22, falling to 19.6% in 2023/24 – within the new 15%-25% range. This includes the impacts of the additional $12 billion infrastructure investment that the Government announced today to future-proof the economy through a package of new transport, education and health infrastructure.

But they are actually going to borrow $19 billion.

I guess the additional $7 billion will be for more election year spending.

But bragging about surpluses while announcing borrowing much more seems like a bit of a PR job.

Government to borrow more, boosting spending on ‘infrastructure’

Minister of Finance Grant Robertson has announced that the Government will take advantage of low interest rates and borrow more so they can increase spending in infrastructure. Details will come later.

RNZ: Government signals big new infrastructure spend, looser purse strings

Finance Minister Grant Robertson flagged extra spending in his speech to the Labour Party’s annual conference in Whanganui.

He said Cabinet had committed to a boost to infrastructure as part of the short to medium term spending plan.

“We are currently finalising the specific projects that the package will fund but I can tell you this – it will be significant.”

The government had heeded the calls from the construction industry for “greater certainty” about the pipeline of transport projects from 18 months’ time, he said.

“We will give that certainty”.

It made sense to take advantage of low government debt and the very low cost of borrowing, said Mr Robertson.

“Right now, we can borrow at an interest rate of 1.3 percent for ten years. Just think about that for a minute – when we came in to office, this was up at 3 percent,” he told delegates.

“We have the lowest borrowing costs in New Zealand’s history, so it is time to invest.”

There will be no details until the next update on the government books – the Half Year Economic and Fiscal Update on December 11 – when Mr Robertson will release more details about the areas of spending, and the price tag.

Greens are keen (they have been wanting this for some time):

It should give the economy a good boost for election year. A first term Government overseeing and stimulating a thriving economy will be hard to defeat.

Q+A: Phil Goff on funding infrastructure and free speech

This morning Phil Goff will be interviewed on Q+A.

Goff says that one way of dealing with local government funding problems is to have the GST on rates returned to councils for them to do as they wish with.

On free speech, Goff says that he has a responsibility to ensure Auckland is an inclusive city – by excluding some speakers?

Super Fund proposal to build and operate Auckland light rail

The Government has revealed an ‘unsolicited proposal’ from the New Zealand Super Fund to design, build and operate two light rail projects in Auckland.

Grant Robertson and Phil Twyford: Auckland light rail a step closer

A modern, rapid transit light rail network to transform Auckland is a step closer with Cabinet agreeing to launch a procurement process, Transport Minister Phil Twyford and Finance Minister Grant Robertson announced today.

“The Government is committed to progressing light rail to transform Auckland. It will be a magnet for private investment in urban renewal and will be able to carry 11,000 commuters per hour – the equivalent of four lanes of motorway,” Phil Twyford says.

“We are investigating innovative solutions to tackle congestion and build a vibrant and modern city.”

“The New Zealand Transport Agency will now set up a robust process to explore a range of possible procurement, financing and project delivery options. This process will invite and assess all potential proposals and report back to the Ministers of Finance and Transport. The Transport Agency will work with the Treasury and the Ministry of Transport in this process,” Grant Robertson says.

The procurement process covers both the city to Mangere and the city to North West lines. The recently announced 10-year transport plan for Auckland earmarked $1.8 billion in seed funding with the option of securing private investment in the network.

“Last month, the Government received an unsolicited proposal from the New Zealand Superannuation Fund, which proposed they would form an international consortium to design, build and operate Auckland’s light rail network,” Phil Twyford says.

“The Government will not be commenting further on the proposal other than to say that we welcome the strong interest in light rail and acknowledge that any investors will require a reasonable commercial return. The procurement process agreed by Cabinet will review all other proposals in the same way as the Super Fund’s proposal is assessed.

“It’s good to see that investors recognise this project will be a game-changer for Auckland commuters and the first step in tackling Auckland’s ever-increasing congestion,” Phil Twyford says.

This would be a variation on a public-private partnership, with in involvement in the Super Fund  working alongside international investors in a consortium.

The Super Fund is a Government owned fund – that means a taxpayer owned fund. The new Government has just resumed putting more money into the fund after the National Government suspended payments when the Global Financial Crisis struck – it didn’t make sense to borrow heavily and put money aside as an investment at the same time.

The Super Fund explains it’s purpose and mandate:

In response to the challenge of New Zealand’s ageing population, the NZ Superannuation and Retirement Income Act 2001 established:

  • the New Zealand Superannuation Fund, a pool of assets on the Crown’s balance sheet; and
  • the Guardians of New Zealand Superannuation, a Crown entity charged with managing the Fund.

The Government uses the Fund to save now in order to help pay for the future cost of providing universal superannuation. In this way the Fund helps smooth the cost of superannuation between today’s taxpayers and future generations.

The Guardians of New Zealand Superannuation is the Crown entity charged with managing and administering the Fund. It operates by investing initial Government contributions – and returns generated from these investments – in New Zealand and internationally, in order to grow the size of the Fund over the long term.

Government contributions to the Super Fund were suspended between 2009 and 2017. In December 2017 contributions resumed, with an initial payment of $500 million planned for the financial year to 2018. From around 2035/36, the Government will begin to withdraw money from the Fund to help pay for New Zealand Superannuation. The Fund will continue to grow until it peaks in size in 2070s.

The Fund is therefore a long-term, growth-oriented, global investment fund.

So for the Super Fund to invest in Auckland’s light rail projects they would have to see them as growth orientated. This would be a financial risk, unless the Government guaranteed a reasonable rate of return.

If light rail gets superceded by other more flexible and more economic forms of transport like electric buses and cars, or if less centralised work arrangements (like working from home) become more prevalanet, it could become an expensive white elephant. The Government could end up propping up light rail to protect the Super Fund investment.

How unsolicited was the Super Fund proposal? Investing in New Zealand infrastructure projects has been proposed before – by Winston Peters.

On re-establishing contributions on 18 July 2017:  Only One Party Can Be Trusted on NZ Super

“Labour, like National, has a record of flip flopping on NZ Super,” says New Zealand First Leader and Northland MP Rt Hon Winston Peters.

“No party can be trusted on NZ Super, except NZ Super’s long standing friend – New Zealand First.

“We’ll restore contributions in full to the NZ Superannuation Fund, so there will be a nest egg to cushion demand, which was the original purpose for its establishment.”

On investing in infrastructure on 28 September 2017: Cullen Fund Performs, But National Taxes It

“New Zealand First would encourage the fund’s managers to invest in infrastructure in New Zealand so it works for New Zealand’s long term interests,” says Mr Peters.

Maybe that’s where the NZ Super Fund got the idea from.

Investing in Auckland light rail will only be in New Zealand’s long term interests if it is financially viable.

Will the NZ Super Fund only consider big city projects, or will they also consider investing in regional projects?

They will need to be careful they don’t come to rely too much on local government projects. Andy investment fund should spread it’s risks.

Further boom in tourism forecast, infrastructure warning

The Ministry of Business, Innovation and Employment has forecast up to a 40% increase in tourist numbers by 2024 (that’s just 6 years away). The opportunities have been welcomed by Local Government New Zealand, but they have warned that already stretched infrastructure will be put under more pressure.

Tourism Minister Kelvn Davis: Tourism growth forecast to continue

Tourism Minister Kelvin Davis has welcomed new forecasts showing international visitor spending is expected to grow 40 per cent to $14.8 billion a year by 2024.

The New Zealand Tourism Forecasts 2018-2024 were released today by the Ministry of Business, Innovation and Employment.

“New Zealand’s tourism sector is forecast to grow steadily over the next seven years, reaching 5.1 million visitors annually by 2024, up 37 per cent from 2017,” Mr Davis says.

“We expect to see numbers climb fairly rapidly over the next two years, due to favourable economic conditions and better air connectivity, but over the longer term growth will be more moderate.

Mr Davis says a healthy tourism industry is great for New Zealand, though there is work to do to ensure the sustainability of the sector.

“It is important that the Government, councils and industry work together to meet the challenges that accompany the forecast growth.”

It’s worth remembering that John Key was Minister of Tourism for much of the last decade.

Local Government New Zealand (LGNZ): Predicted tourism boom could push infrastructure to breaking point

LGNZ President Dave Cull says that a new forecast predicting an international visitor increase of 37% to 5.1 million annually by 2024 will be a great boost to regional economies across New Zealand, however infrastructure is already under pressure and much more is needed to ensure a fair funding division is achieved between tourists and local ratepayers.

“The tourism sector is predicted to grow rapidly over the next two years, but as evidenced last summer infrastructure it is extremely stretched in many regions, with provision of public toilets, car parks and basic potable and waste water infrastructure coming at a substantial cost to communities,” says Mr Cull.

“Those communities with scale can share the burden across many rate payers, but smaller ratepaying bases are picking up big bills to accommodate visitor demand and the lack of infrastructure is resulting in tension among communities.”

Mr Cull contends that the increase in international visitor spend should be harnessed to provide tourism infrastructure.

“This is about fairness. It’s not right to burden ratepayers with subsiding the entire cost of infrastructure which is used by tourists, and there needs to be a new mechanism for tourism to support itself.”

LGNZ is advocating strongly to Government on councils’ behalf that the Government introduce a Local Tourist Tax to raise the necessary funding to meet the capital and operating costs associated with tourism mix-used infrastructure future demand, thus alleviating the financial burden on local ratepayers.

Without the necessary funding tools to ensure the needs of both locals and tourists are met, New Zealand faces the prospect of over promising and under delivering in a sector that is so critical to our economic future.

“New Zealand should be known as a high-quality tourist destination with fit-for-purpose facilities to handle the expected increase in numbers and a country that welcomes and embraces their visit.”

The forecast is both promising and challenging.

Possible property ‘value capture’ tax to fund infrastructure

Finance Minister Grant Robertson is thinking about a tax targeting people who will get an advantage from improved infrastructure to help fund projects like rail links.

Rather than ‘user pays’ this is ‘benefactor pays’ – but it could become contentious deciding who benefits and by how much and how much extra tax they should pay.

Would property owners who are adversely affected by new rail lines and roads get tax reductions? Property values may go up close to new railway stations, but values may go down if a property suddenly has trains whistling past them.

The very fact that property values are changed by infrastructure projects will already affect the level of rates they pay, which is already a local body tax on property.

Stuff: Finance Minister Grant Robertson considering property ‘value capture’ tax to fund rail

Speaking at the Auckland Chamber of Commerce/Massey University annual finance lunch at the Pullman Hotel in Auckland, Robertson said the Government was investigating “innovative” ways to bridge the funding gap to pay for the rail and roading infrastructure the country needs, especially in Auckland.

“Between the balance sheets of the Auckland Council and the Government, we still don’t have enough,” Robertson said.

“Minister Phil Twyford and I are actively looking at opportunities for how to do that.”

“If we are going to make big investments in things like [Auckland’s City] Rail Link, and a series of different rail links, people will benefit from that. How do we capture the value of that, and use that to fund the development?” Robertson said.

In March last year, the Productivity Commission gave an example of how that might work.

If the land value of a property benefiting from a new rail link increased in value from $100,000 to $250,000 over five years – a 150 per cent increase compared with a rise of 120 per cent in land values in the wider area – a tax could be levied on the $30,000 gain attributable to the infrastructure improvements.

The tax could be levied alongside of rates, the commission suggested.

This would amount to double taxing – increased property values mean higher rates, but this proposes slapping another tax on top of that.

Sounds very complicated, and it would be very contentious.

People who don’t use rail and don’t sell their properties will end up paying more for nothing. This is likely to particularly affect retired property owners who don’t commute and who are unlikely to move except to the cemetery – perhaps old people living close to cemeteries should be taxed higher.

Mayors divided on regional fuel tax

Dave Cull, Dunedin mayor and also president of Local Government New Zealand, has suggested that a regional fuel tax ”might” be something that could be used outside Auckland, both other Otago mayors have different ideas on raising more money.

ODT: Regional fuel tax might work: Cull

Dunedin Mayor Dave Cull says a fuel tax such as that proposed for Auckland may be something that could raise money for infrastructure in Dunedin, but mayors in the rest of the region have not supported the idea.

Mr Cull pointed to the Port Chalmers cycle/walkway as one project a regional fuel tax could help pay for.

He said such a tax was appropriate for funding transportation infrastructure, but other mechanisms would be more appropriate for other needs.

”Across the country there are instances where there are transportation infrastructure needs, and there’s even money within the NZ Transport Agency available, but there’s not sufficient resource in the local body to match the funding, so nothing happens.”

The cycle/walkway to Port Chalmers was an example where a lack of resources was the problem.

”That would be a candidate for that sort of funding.”

”It’s about all road users contributing to make the whole system safer and more efficient.”

It seems to be more about trying to find ways of funding projects without having to keep raising rates so much.

The amount of money spent on cycleways and the disruption to traffic is already a contentious issue in Dunedin. Hundreds of car parks in or near the CBD have been removed or are planned to be removed to make way for cycle lanes on streets, including on both main streets running right through the city.

There is low usage of the cycle lanes. I was talking to someone yesterday who was parked for half an hour on state highway one during the busiest traffic time of day, and they saw three cyclists. I daily drive on streets where all car parks have been converted to cycle lanes that are only occasionally used by cyclists, most days I see none.

I think that fuel is already quite a bit more expensive down here. Slapping a tax on it to fund pet council projects would likely be very unpopular.

Other mayors in the area want more money other than from rate hikes but not from a fuel tax.

Queenstown Lakes Mayor Jim Boult…

…said the fuel tax might work for Auckland but not for Queenstown, which had 5million visitor nights and just 16,000 ratepayers.

”Large numbers of people fly in here on aeroplanes, arriving on tour coaches, so their ability to contribute to our economy is limited through a petrol tax.”

Instead, he wanted a visitor levy, something he had said before ”constantly”.

Central Otago Mayor Tim Cadogan…

…said the area’s fuel was already more expensive than Auckland’s, so he did not support a fuel tax.

Paying for expensive infrastructure was a problem.

The planned Cromwell wastewater treatment plant had a budget of $10 million and the Lake Dunstan water supply project would cost up to $17 million.

”We’ve got 20,000 people living here; that’s pretty tough.”

Using a fuel tax to pay fore waste water treatment and water supply would be ridiculous. Cromwell is increasingly popular for tourists, and also operates as a satellite town for Queenstown and Wanaka. It is also the centre of a thriving wine region.

Clutha Mayor Bryan Cadogan…

…said local government ”needs something”, but he did not support a fuel tax.

The issue Clutha had was paying for infrastructure related to its tourism industry, which was ”not as advanced as most”.

The area had a declining and ageing population and the council could not keep going back to them for more money.

”It just seems so simple to put a tax on for tourists when they come in. We need it, and we need it now.”

Clutha District includes the Catlins area that is increasingly popular for tourists (for good reason, it’s a great area to visit).

However all these areas have different situations and needs.

Fuel is already taxed heavily in New Zealand:

  • 59.524 cents – National Land Transport Fund
  • 6 cents – ACC Motor Vehicle Account
  • 0.66 cents – Local Authorities Fuel Tax
  • 0.3 cents – Petroleum or Engine Fuels Monitoring Levy
  • 9.9726 cents GST on the above taxes

We pay a total of 26 cents GST on $2 of petrol (diesel is taxed differently).

Just under a half of the cost of fuel is tax already.

From the AA:

It is now government policy for all of the petrol excise tax motorists pay to be directed to the National Land Transport Fund for investment back into New Zealand’s road and transport system. The AA lobbied hard on behalf of motorists for many years to have all the taxes devoted to road building and maintenance, road safety education and enforcement, and subsidies for public transport.

Previously, about 19 cents per litre of the tax motorists paid on petrol was diverted by the government to non-road and transport related projects.

For far too long there has been significant under-investment in the nation’s road and transport network, and tax diversion has been unfair and at the expense of motorists.

Motorists must not be selectively taxed or treated as an easy source of tax revenue to pay for projects that would be more fairly funded by other sources such as rates or general taxation.

We don’t support regional petrol levies that unfairly target motorists to subsidise the transport decisions of others. The future funding of public transport must not be another tax on motorists added to current taxes and charges, but has to be independently justified in terms of defined benefits to motorists.

Back to Cull:

On the Government’s commitment to reviewing local government costs and revenue, Mr Cull said LGNZ had been saying the revenue stream from rating property was not sustainable.

Perhaps it is extravagant spending wishes of councils that is unsustainable.

One could cynically suggest that mayors and councillors want to divert attention from them raising rates far more than inflation.

Our fuel is already taxed heavily. Perhaps mayors need to look more at user pays – but that’s never likely to happen for cyclists.

There’s a good case for some cycleways. A recently partly built harbour side cycleway here in Dunedin is popular and well used – mostly recreationally. One problem is the escalating cost of extending this all the way to Port Chalmers – estimates have over doubled.

Were initial estimates hopeless, or do rules and regulations and ideal requirements blow out the costs? There are suggestions that cycleway construction is lucrative because councils pay whatever it takes. The Dunedin Council wasted half a million dollars on a poorly designed cycleway that had to be redesigned and is still hardly used.

Getting sensible mayors, councillors and planners may be more important than finding ways to hide how much we are increasingly taxed and rated.

Talking of rates – they are about $2000 a year for an average house in Dunedin – how does that compare to elsewhere?