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Innovative infrastructure funding agreement confirmed

An innovative infrastructure funding model approved by the Government this week will deliver a wide range of benefits for Tauranga City Council and city ratepayers over the coming decades.

The Council will be the first local authority in the country to utilise the Infrastructure Funding and Financing Act (IFF), with approval being given to raise $175 million to part-fund up to 13 projects included in the Western Bay of Plenty Transport System Plan (TSP).

Commission Chair Anne Tolley says the Act recognises that many fast-growth councils are debt-constrained, limiting their ability to fund the infrastructure needed to meet the needs of their growing populations.

“Many of our community conversations have focused on the need to find new ways of financing infrastructure investment and IFF funding is one of the avenues we have successfully explored,” she says. “While the focus for this arrangement will be transport projects, it will also help us deliver on our wider urban and housing development goals, support housing intensification within the city’s existing footprint and create a more sustainable city by shifting more travel to public transport and active transport modes like walking and cycling.

“IFF funding means the finance raised stays off the Council’s balance sheet, providing the flexibility we need to fund other infrastructure and community amenity projects within our existing debt limits,” Anne explains. “It will also mean that the need to use rates income to retire debt will be reduced and the cost of the borrowings will be spread over the life of the TSP projects, so that the people benefitting from them will be contributing more to the financing costs.”

The IFF process will see the funds raised by a Crown-owned entity, with repayments funded by a levy on all eligible properties across the city as the IFF funding is drawn-down, reflecting the fact that all residents and businesses will benefit from the transport network improvements provided. The levy is expected to be offset by reductions in the transport targeted rate.

Significant projects which could be part-funded include: Hewletts Road/Totara Street/Hull Road improvements; an upgrade of the Fifteenth Avenue/Turret Road connection to Welcome Bay; and stage 2 of the multi-modal upgrade of Cameron Road, between Seventeenth Avenue, Barkes Corner and beyond.

The IFF TSP funding proposal was consulted on through a Long-term Plan amendment earlier this year. The LTP amendment also included the possibility of using an IFF levy to contribute to the infrastructure needed to allow the development of up to 2000 homes in Tauriko West. Anne Tolley says the Tauriko West IFF proposal is not likely to progress, because the funding required is expected to come from direct developer contributions, the recently announced Infrastructure Acceleration Fund grant of $80 million, Waka Kotahi roading subsidies and some rates funding.

“Council staff have worked closely with Crown Infrastructure Partners (CIP) for many months now to get the IFF TSP proposal to the point where it can be signed-off by Government and the Council,” Anne adds. “Because this was the first of its kind, there have been a number of structural issues to overcome and we greatly appreciate the contributions Crown entities have made to getting this across the line.”

Financing has been confirmed through a competitive process to ensure that the best possible interest rates apply to the borrowing involved. As a result, the median residential levy that will apply when all of the available funds have been drawn-down will start at between $65 and $77 a year – slightly lower than the $75-$85 a year indicative levy set out in the LTP Amendment. The median commercial levy will start at between $520 and $610 a year, again lower than the range set out in the LTP Amendment. The levy is expected to be progressively applied from the 2024/25 financial year.

Posted: Dec 2, 2022,
Categories: General,

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