Tauranga City Council could become one of the first New Zealand local authorities to utilise the Government’s Infrastructure Funding and Financing Act (IFF) to fund major infrastructure investments.

At Tuesday’s (24 May) 2021-31 long-term plan amendment deliberations meeting, the Council’s commissioners adopted resolutions to proceed with IFF proposals to help fund the city’s Western Bay of Plenty Transport System Plan projects and enable the development of 2,000 homes in Tauriko West. The IFF approach means a Crown-owned company borrows money for an approved project and then makes that money available to the Council to fund the investment concerned. Repayments are made using levies on the properties benefiting from the project and the transaction stays off the Council balance sheet, leaving debt headroom which can then be used to fund other important community investment priorities.

Commission Chair Anne Tolley said inclusion of the IFF proposals in the long-term plan amendment doesn’t commit the council to using the new funding approach. “We first have to establish that IFF funding makes economic sense and we won’t know that until Crown Infrastructure Partners has tested these projects with the private investment sector,” Anne said. “If IFF generates better overall outcomes than our traditional funding sources, the Council will submit a proposal to government to take-up this innovative funding approach.”

IFF funding could provide $200 million for a suite of major city transport projects, such as Cameron Road Stage 2, which will continue the upgrading of the city’s main southern corridor from 17th Avenue to Barkes Corner and beyond. Because the whole city would benefit from this type of investment, levies would apply to all properties, offset by reductions in the council’s transportation targeted rate.

A further $60 million could be raised to help fund Tauriko West infrastructure, with repayment costs levied on the new properties created within this growth area.

Commissioner Stephen Selwood said IFF would “bring more capital to the table” and could provide an innovative funding and financing solution. “Private financing would mean that development contributions on the new properties in Tauriko West could be lower and homeowners could therefore benefit from lower capital and mortgage costs, but that would be offset by ongoing annual levy charges,” he explained.

“This has the potential to place us at the leading edge of doing something truly innovative to address the city’s chronic housing shortage, which would be a great fit with the Government’s urban development policy, but at the same time, a lack of funding certainty caused by misaligned transport funding legislation is constraining the progress we can make and that’s an ongoing frustration that only the Government can fix.”

Sharing the cost of growth
Planned increases in the citywide development contributions on new homes and commercial premises – which are designed to ensure that “growth pays for growth” – will be the subject of a further report to the Commission prior to adoption next month. The report will set-out changes to the proposed development contributions policy which address the submission points raised through community consultation.

Key policy change proposals include a 15% increase in citywide contributions for residential developments, which would take the fee for a three-bedroom house from $28,557 to $32,754, taking effect from 1 July this year; lesser increases for local development charges in the Pyes Pa West and West Bethlehem catchments; and minor changes to the rules specifying when development contributions will be charged.

Development contributions are used to fund both new infrastructure and improvements to existing infrastructure and community facilities required to meet the needs of the city’s growing population.

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