The New Zealand Infrastructure Commission continues to lead the shaping of New Zealand's infrastructure future with the recent release of its Aotearoa New Zealand Infrastructure Strategy Consultation Document (see here). Identifying the crunchy issues that need to be tackled for New Zealand to address the gap between infrastructure to meet the needs of our future communities and what we can afford, the document's purpose is:
to share the Commission's proposed vision for New Zealand's infrastructure over the next 30 years;
to outline guiding principles for investment decisions; and
to identify of areas where change is needed.
Submissions on the document close on 24 June 2021.
The Commission recognises the challenges currently facing the infrastructure sector, and accompanies a list of priorities to address them with a series of "Needs" for infrastructure in New Zealand which are categorised into three action areas:
Delivering infrastructure that is resilient and ready for change.
Ensuring the infrastructure system supports the needs of people and improves connections within New Zealand and overseas.
Step change in planning, designing, funding and delivery of infrastructure.
The Consultation Document steps through the Commission's commentary on the action areas and raises specific questions for feedback. Key areas for which the Commission has proposed options and is seeking feedback include:
Climate change is identified by the Commission as the defining challenge of this century. Considerable emphasis is placed on how the infrastructure strategy can assist to attain New Zealand's 2050 net-zero carbon emissions target. Crucial to this are reducing greenhouse gas emissions through moving to cleaner, electrified modes of travel and to active travel, decarbonising heating used for industrial purposes, planning projects which incorporate sustainable design and materials, delivering projects with effective waste management front of mind as well as favouring the construction of renewable energy sources, including in New Zealand's territorial waters. The quick action required to meet New Zealand's carbon emissions target is also emphasised with improvements in the planning system and in project planning and delivery identified as assisting in decreasing time taken to deliver infrastructure.
Funding and Financing
The Commission observes that funding and financing can have significant impacts on the delivery of infrastructure projects. There are unique considerations when looking at funding models for infrastructure projects compared to other sectors – its long lifespan, the shared nature of services and the interaction between public and private stakeholders to name a few. The Commission comments that New Zealand has a track-record of creating new financing models to improve the delivery of infrastructure, including the mixed-ownership model, public-private partnerships, special purpose vehicles and the Infrastructure Funding and Financing Act to access private capital to improve New Zealand's infrastructure.
The Commission also observes that, in addition to these models, there may still be scope to consider other mechanisms for funding infrastructure. There are large differences in how infrastructure is funded in various sectors and there are some contemporary issues to consider with infrastructure funding in New Zealand. Examples of these issues include the exemption of Crown land from paying general rates (taking away from repayments on funding) and the requirement for the Crown and local authorities to fund depreciation on their assets. There are also important issues to consider around intergenerational equity and how infrastructure is paid for (ranging from revenue streams paid by end users to non-commercial public funding through taxation and rates).
The Commission is seeking feedback around what the Government at both local and central level could do to make better use of existing funding and financing tools to deliver on infrastructure projects, and whether existing funding and financing tools are suitable for responding to today's infrastructure challenges.
Another recurring theme is reform of Three Waters infrastructure. The Commission calls for management of drinking water, stormwater and wastewater to proactively enable urban development. Linking to the ongoing Three Waters reform, the Commission discusses the establishment of an economic regulator for the sector, empowered with the ability to allow new water entities to use their balance sheet capacity to finance infrastructure for growth. Also discussed is the need to clarify the interface between new water entities and developer-financed water infrastructure, and ensure that developers can benefit appropriately from the provision of three waters infrastructure that has spare capacity.
Supporting housing supply
Housing supply concerns permeate the entire document, with the Commission including a variety of suggestions to improve the quality and quantity of housing in New Zealand. Following the overarching theme of integration, calls for standardised national planning rules accompany the wider push for regional spatial planning and combined plans to improve future provision of housing. The intent is to enable authorities to pinpoint locations where planning restrictions considerably impact housing supply and set targets for housing development opportunities. The proposed approach does not necessarily require the construction of new infrastructure, instead utilising existing infrastructure where possible and adopting policies which increase competitiveness in urban land areas.
The Commission sees a strong need to optimise the planning process to formulate systems and standards that are consistent and coordinated. The Consultation Document cross references the current resource management reform process promoting the use of regional spatial plans and combined plans. Helpfully, the Commission raises the option of central Government funding and resourcing to support regional spatial plan development and seeks that funding arrangements be clarified as part of the reform process. Other options proposed by the Commission to aid in protecting land for further infrastructure are to extend the lapse period of designations to 10 years and to allow designations to be granted based on concept plans.
Improving project planning, procurement and delivery
The infrastructure deficit is well known. Given cost constraints, the Commission reiterates the importance of the right projects proceeding based on informed decision making. Scarce money needs to be spent correctly.
To achieve this the Commission considers both alternatives to major capex decisions as well as the unique considerations of infrastructure assets compared to other assets when determining value – the long life-span of assets, the value to future wellbeing and broader environmental and amenity benefits not easily quantifiable nor accounted for in typical investment decision making frameworks.
Also well known is that comparatively construction costs in New Zealand are high and rising, the iron law of mega projects is cost overrun and there is a skills shortage. The Commission takes a back to basics approach advocating for good project and commercial management based on project controls (a well-defined scope of work for example), options to increase productivity (scale and repeatability rather than bespoke processes) and tools to ensure that the client and contractors are capable of and have the capacity to deliver the required infrastructure (such as published programmes of work to allow contractors to plan and tools to monitor market utilisation).
The Commission's vision for New Zealand's infrastructure strategy analyses how the system should benefit, partner and utilise people. Changing demographics are a key concern, as infrastructure must adjust to suit the needs of a growing, ageing and urbanising population. Partnership with Māori is also marked as a priority, with the Consultation Document seeking the creation of more meaningful relationships and the adoption of te ao Māori in the national approach to infrastructure. Finally, decision-makers are called upon to ensure their processes are transparent and consultative, placing emphasis on providing notice and allowing scrutiny of their judgement.
Coordination is repeatedly highlighted as being crucial to the Commission's infrastructure approach for the next 30 years. This is reiterated in variety of contexts throughout the Consultation Document, from collaboration across regions, coordination between local and central government and integration of the housing, water and land sectors. Means for achieving this include avoiding the traditional siloed approach through regional spatial plans, standardising district planning through national planning rules, and enabling transparent information sharing through the infrastructure pipeline.
Engaging with consultation
A final Infrastructure Strategy will be tabled by the Minister for Infrastructure in Parliament before the end of March 2022. At this stage, there is no indication that there will be provision for public feedback on the draft strategy itself. Accordingly, the Consultation Document is the key opportunity to submit on the Commission's vision for New Zealand's infrastructure over the next thirty years. Once tabled in Parliament, the strategy is intended to provide decision-makers with a basis for bold reform and policy change, informed by independent, evidence-based analysis. It will be a guiding document for Government policy rather than a binding set of obligations.
Please contact us if you would like to discuss the potential implications of the strategy for your business or if you would like any assistance in drafting submissions.
Submissions on the document close on 24 June 2021.