Local councils are crying out for money to pay for basic infrastructure, saying many cannot borrow a cent more

The mayors of the four biggest cities in the north of New Zealand are pleading for help to fund and finance local infrastructure.

The mayors of Auckland, Tauranga, Hamilton and Whangarei said there were only three options to pay for basic community infrastructure like roads, utilities, parks and libraries: charging developers; asking taxpayers for support; or borrowing against the futures of their ratepayers.

Opening the big ReBuilding Nations infrastructure conference, Auckland Mayor Phil Goff said there was a $450 million hole in the Auckland Council budget, caused in part by the Covid-19 shutdowns and declining revenue. 

Who should pay for the infrastructure that supports new housing developments – developers, ratepayers or central government? Click here to comment.

This had forced them to lay off staff and cut spending – including, regrettably, putting less into capital projects than they had hoped. “It’s not enough,” he said.

What this meant was that although new houses were being built – there was an “all-time record” 15,470 building consents in the year to September – there wasn’t the infrastructure to support them.

An example is in Scott Point, west Auckland, where there are new houses, but the Ministry of Education hasn’t been able to build the school so about 100 children will start next year in prefabs. And the council has no money to build the promised sustainable sports park next door, which remains fenced-off wasteland.

The council had said the 16.4ha park would be “a flagship at the heart of the new development”, with 20,000 new residents expected to call Scott Point and neighbouring Hobsonville home. But the park is stalled, for now.

“We have a once in a lifetime opportunity to build back better.”
– Jacinda Ardern

Council debt caps have now been raised. Tauranga’s debt is $525 million, with a debt-to-revenue ratio of 195 percent, thought these are both forecast to rise considerably over the next 10 years.

Tauranga mayor Tenby Powell said his compact, growing city and the wider western Bay of Plenty needed $4.3 billion in infrastructure – it was important that the Government allowed councils to team up, and supported them with funding solutions.

His city’s top priorities are the $90m Cameron Rd multi-modal project, the $90m Memorial Park Aquatics and Recreation Hub, and the $83m Papamoa East Interchange to provide access to the SH2 Tauranga Eastern Link from Wairakei and Te Tumu.

Hamilton mayor Paula Southgate said the funding gap was huge. It was not just about discretionary projects, it was work that has to be done.

Hamilton’s debt-to-revenue ratio cap set, by the financial strategy, is 230 percent – but by 2028/29, the city’s net debt is forecast to hit $904m.

The city faces more than $1b costs for projects like the $250m Southern Wastewater, the $150m Rotokauri stormwater swale corridor, the Peacocke housing development with its new bridge and water network, and the $150m Ruakura inland port transport corridor.

Southgate said debt had to be repaid, but the city could not ask developers to pay for everything. “How much do developers bear before it becomes a burden that means they slow down or stop developing? And the critical thing for me is, who pays pays for the community infrastructure – the pools, the parks, the libraries – because building houses is just one part of the equation.”

And Whangarei mayor Sheryl Mai said the problem was bigger than anyone could afford, especially in a city like hers with lower incomes. Whangarei had capacity for more borrowing, but others like Auckland were at the limit.

“The infrastructure is ageing, we’ve got the issues of climate change, so the problem is huge – and I don’t think we as a nation have addressed it effectively.

“There was a time when debt was a dirty word,” she said. “When I first became the Mayor seven years ago, we were told debt was out of control. So reducing debt was a really big focus of mine at the time.

Now, the Council was able to borrow up to 300 percent debt-to-revenue ratio, which she said was an “extraordinary” change. “We will look at intergeneration debt, because we’re looking at assets that generations before us put in the ground, and we’re having to replace them.

“New Zealand is in a fortunate position where we can borrow more, but we do have to think long term. With climate change, there is a risk to the infrastructure assets we are building. Stormwater assets, of course, won’t function in 50 years with sea level rises.”

Prime Minister Jacinda Ardern acknowledged yesterday that New Zealand was suffering a massive infrastructure deficit – a shortfall of up to $75 billion, ranking the country a lowly 46th in the world for the state of its public facilities. That shortfall was equivalent to the cost of 17 Auckland rail projects, she said.

“Now, we have a once in a lifetime opportunity to build back better.”

She agreed with local councils that the regulatory framework didn’t support their infrastructure projects, and she  highlighted the government’s plan to replace the outdated Resource Management Act this electoral term. She also pointed to a serious skills deficit.

Newsroom Pro managing editor Jonathan Milne covers business, politics and the economy.

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