10 March 2005 Media Statement

Tourism infrastructure scheme criteria announced

Tourism Minister Mark Burton today announced details of the Tourism Demand Subsidy Scheme (TDSS) and invited applications. The TDSS will help qualifying small communities to fund the water and wastewater infrastructure they need to maximise benefits from New Zealand's thriving tourism sector.

The Tourism Demand Subsidy Scheme is targeted at communities with high tourism numbers and small resident populations of between 100 and 10,000 people. It will subsidise investment in quality water and wastewater infrastructure to meet tourism demand.

Applications will go through a two stage process. Final applications will be assessed by the Sanitary Works Technical Advisory Committee, which also evaluates applications to the SWSS. This will maintain co-ordination between the two schemes. The committee will evaluate applications on their public health and environmental benefits, affordability, tourist flows and the percentage of tourist driven costs.

"New Zealand is forecast to receive an extra 30 million international and domestic visitor nights by 2009. These visitors will rightly expect effective, infrastructure that delivers hot showers, clean drinking water, and functional toilets, whether they are in Auckland, Wellington, Kaikoura or Franz Josef."

"Our Government understands that rapid growth in tourism can place pressures on some smaller communities, particularly where rating bases are small. The investment needed to build water and sewerage infrastructure to meet the needs of visitors can be much higher per capita than in larger cities." Mark Burton said.

The criteria for the scheme have been developed in consultation with councils, district health boards, community groups and the tourism industry. The TDSS will co-ordinate as closely as possible with the existing Sanitary Works Subsidy Scheme (SWSS) administered by the Ministry of Health on behalf of the Minister of Health. The Ministry of Tourism worked collaboratively with the Ministry of Health, the Department of Internal Affairs and Local Government New Zealand throughout the development of the TDSS.

To be eligible for the subsidy, applicants will need to have contracted a scheme after 14 May 2004. For information on the criteria and application process for the Tourism Demand Subsidy Scheme interested parties should visit the Ministry of Tourism website www.tourism.govt.nz

Tourism Demand Subsidy Scheme (TDSS)

Questions and Answers

The questions and answers below provide information to support the media release by the Minister of Tourism. They are not a substitute for reading the full "Tourism Demand Subsidy Scheme: Detailed Criteria and Processes" paper and accompanying Tourism Demand Subsidy Scheme spreadsheet for applicants, both of which are available on the Ministry of Tourism website (www.tourism.govt.nz).

1. Why was the TDSS created?

A 2003 study commissioned by the Ministries of Tourism and Economic Development helped to clarify an issue raised with central government by a number of local authorities. The report showed that that Councils are designing and implementing appropriate rating and financial contribution regimes to ensure fair recovery of costs from the tourism sectors that impose the costs. However, the study identified that small communities with high tourism numbers faced difficulty funding the initial capital investment required to expand or build water and sewerage infrastructure to meet visitor demand.

Tools are available to councils to require financial contributions from new developments and to rate differentially to fund capital investment. However, for some small communities, the per capita costs are likely to be so high that the ability and willingness of property owners to pay becomes an issue. This is particularly relevant for property owners on fixed incomes, such as pensioners, and for businesses that face substantially higher rates payments than their competitors in nearby towns or districts.

2. What does the TDSS fund?

The TDSS helps communities to invest in either new or upgraded water or wastewater treatment and reticulation infrastructure. The TDSS does not fund infrastructure maintenance or renewals, nor the provision of public toilet blocks.

The Ministry of Tourism is aware that other types of infrastructure, such as public toilets, can also be affected by tourism demand. The Ministry has an ongoing work programme around infrastructure, and is collecting information on relevant issues as a basis for advising future decisions on whether central government may have a role.

3. How much money is available?

$11 million is available for the TDSS over three years. $1 million is available in this financial year, and $5 million in each of the two following years.

4. Who is the TDSS for?

The TDSS is targeted at small communities with high tourism flows. For example, the TDSS applies to communities with a normally resident population of between 100 and 10,000.

Applications are invited from the private as well as the public sector, but private sector applicants must provide a territorial authority guarantee for the ongoing operation of the scheme. City councils and government owned schemes are specifically excluded from applying to the TDSS.

5. How does the TDSS relate to the Sanitary Works Subsidy Scheme?

The Sanitary Works Subsidy Scheme is an existing subsidy scheme administered by the Ministry of Health on behalf of the Minister of Health. The SWSS was announced in 2002 and provides up to $15 million per year in funding. The SWSS funds assistance for wastewater reticulation and treatment infrastructure and water fluoridation works only. It is aimed at improving wastewater treatment and disposal for small, largely rural communities that are unable to fund the necessary upgrades to meet public health and resource management requirements, or new works for communities that wish to add fluoride to drinking water supplies. SWSS evaluation criteria are weighted primarily on public health and environmental risk (68%), the ability to pay as measured by the deprivation index (30%) and whether any previous subsidy funding has been obtained (2%).

The TDSS has been established to assist small communities with high tourism flows to invest in water and sewerage infrastructure to sustain their tourism industry. The TDSS will assist in funding both water and wastewater reticulation and treatment infrastructure, but only for the tourism driven component of demand. TDSS evaluation criteria therefore focus primarily on tourism demand related issues (55%) and affordability issues (30%). Public health and environmental benefits are given a weighting of 15%.

Applications for assistance with a water supply scheme can only be made through the TDSS, as the SWSS does not provide funding for water reticulation and treatment infrastructure. However, combined applications under the SWSS and TDSS are possible for sewerage schemes.

Co-ordination between the SWSS and TDSS is very important. Applications to SWSS are assessed by the Sanitary Works Technical Advisory Committee (SAWTAC). The Committee has also agreed to assess TDSS applications, meaning that all subsidy applications will be consistently assessed by the same body.

6. How were the TDSS criteria and processes developed?

The criteria and processes for the TDSS were developed collaboratively by a working group consisting of representatives of the Ministry of Tourism, Ministry of Health, Department of Internal Affairs and Local Government New Zealand. Following an advertised tender process, the working group appointed contractors to develop details of how the TDSS would work.

A discussion paper outlining the principles of the proposed TDSS and seeking feedback was posted on the Ministry of Tourism website and distributed directly to all local authorities, the New Zealand Water and Waste Association, Tourism Industry Association, Regional Tourism Organisations and others who had expressed interest in the scheme in October 2004.

Thirteen responses were received. After detailed consideration of this feedback by the working group some changes were made to the TDSS, and the TDSS has now been finalised.

7. What is an investigation grant?

Investigation grants are intended to assist communities with high need and limited resources to develop a quality application to the TDSS. Investigation grants will reimburse applicants for up to 80% of the external costs they incur in preparing their final application to the TDSS, to the value of $40,000 for one scheme or $60,000 for a combined water and wastewater scheme application. Up to $600,000 of TDSS funding will be available for allocation as investigation grants.

To be considered for an investigation grant, applicants must show that the direct tourist share of peak load on their scheme is 25% or higher, or that they have had an increase of at least 25% or more in overnight accommodation capacity in the last five years, from a base of at least 300 beds in their preliminary application. If either of these criteria is met, applicants will be ranked on the basis of the deprivation index rating for their community and local authority area. Priority will be given to applicants with the highest deprivation index rating.

Approval for an investigation grant does not prejudge the final subsidy scheme evaluation process in any way.

8. How does the preliminary application round work?

The preliminary application round is intended to give an early indication of the likely nature of successful applications and avoid potentially wasted efforts, given that the TDSS has limited funding to be allocated on a contestable basis. The preliminary application round requires applicants to determine the direct tourist share of total peak load on their water and/or wastewater system.

Preliminary applications also check off the basic requirements for eligibility for the TDSS, which include:

- a normally resident population of between 100 and 10,000 people;

- city councils and government owned schemes excluded;

- schemes eligible where contracts were not let before 14 May 2004;

- private sector applications require a local authority guarantee;

- funding of costs to service existing tourism demand and up to five years growth are eligible;

- expansion or upgrade of new or existing schemes are eligible, renewals and maintenance are not; and

- community reticulated schemes are eligible, public and roadside toilet facilities are not.

Preliminary applications will be assessed by the Ministry of Tourism with assistance from the SAWTAC Technical Advisor and appropriate tourism and local government sector expertise.

9. How does the final application round work?

There are two parts to the final application. All applicants must provide material to demonstrate planning and support for the project, including:

- supportive local tourism / economic development strategy;

- council commitment to long term operation of the scheme;

- evidence of council planning to fund existing demand and future growth;

- appropriate technical solution and preliminary design report; and

- preliminary Assessment of Environmental Effects.

In addition, applicants are required to provide material to enable evaluation of their application against the criteria identified in the table below:

Criteria Criteria

Weight

%

Public health and environmental benefits 15.0

Affordability

Diseconomies of scale 17.5

Ability to pay 12.5

High existing, high value tourist flows 20.0

Ratio of tourist upgrade to total upgrade cost 35.0

Final decisions on successful applications will be made by the Minister of Tourism, based on advice from SAWTAC and the Ministry of Tourism.

10. Why is there only one funding round?

It was decided to hold only one funding round as the TDSS funding is allocated over only three years. A single round will enable direct and equitable comparison of all applicants. Allocation of the entire available funding pool at one time will provide applicants with greater certainty.

11. Is the timeframe reasonable?

The Ministry of Tourism has received consistent feedback from councils that they would like the TDSS to be up and running as soon as possible. As a result, the Ministry has tried to speed up the process of establishing the TDSS. Applications to the TDSS are being invited six weeks earlier than initially anticipated. The timeframe for applications to be prepared has accordingly been kept fairly tight. Stakeholder feedback on the proposed timeframe was sought in the TDSS discussion paper released in October 2004.

12. What information is available to assist applicants?

A set of five worksheets that applicants are required to fill in and submit are provided in a useable spreadsheet on the Ministry of Tourism website. The spreadsheet sits alongside the "Tourism Demand Subsidy Scheme Detailed Criteria and Processes" document.

In addition, a guide for applicants is being prepared that will be available on the Ministry of Tourism website by 14 March. The guide will give more detail for applicants around some issues that might be challenging, focusing on obtaining tourism flows data.

The Ministry of Tourism will also ensure that any questions from applicants to clarify aspects of the TDSS, and the Ministry response, will be available for all applicants to view on the Ministry's website.

ENDS

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