Two more tools for the urban development tool box

16 January 2020

Two Bills to expedite urban development were ushered into Parliament before Christmas – one to help overcome constraints on local authority funding of growth infrastructure, and the other to give Kāinga Ora new powers to promote large scale public projects.

We summarise the changes.

Infrastructure Funding and Financing Bill

This Bill is eagerly awaited by high growth population councils, several of which assisted in its design, and builds on the innovative funding and financing proposals involved with the Milldale project, delivered by Auckland Council and Crown Infrastructure Partners.

It seeks to address the gap between local authorities’ responsibility for growth infrastructure and their tools to discharge that responsibility, in view of their acknowledged balance sheet constraints. Where conditions are suitable (in particular, where an infrastructure asset can generate cashflows), borrowing can be undertaken on the strength of those cashflows.

The Bill creates a multi-year levy to be paid by the beneficiaries of infrastructure assets to a dedicated project company, or Special Purpose Vehicle (SPV), so that the costs are appropriately allocated to the people who will most benefit from the investment.

Oversight of levy proposals is provided by the Minister of Urban Development, whose approval is required after independent assessment by the “Recommender” – a role provided for in the Bill.

The Bill also provides for a separate “Monitor” to ensure that the arrangements proceed smoothly. This will include investigating complaints from levy payers, annually confirming the amount of levies to be charged, requiring such information from SPVs as is necessary to ensure they are complying with their obligations and – where an SPV is in persistent breach – ultimately recommending that Ministers step in.

The Bill provides that a levy order must specify:

  • the levy area and the levy period to be covered
  • the construction and financing costs that will be recovered through the levy
  • the SPV or SPVs and their roles
  • the properties that are to be levied (generally the levy will mimic the rating system and will be collected from the ratepayer by the local council), and
  • the maximum levy that may be collected.

SPVs may be granted specific powers equivalent to those held by local authorities under the Local Government Act – e.g., the ability to build on private land and to break up roads and public areas for the construction of water services.

All levy revenues are subject to annual reporting by the Monitor, and to audit. On completion, the infrastructure asset, is vested with the territorial authority.

Urban Development Bill

This Bill will establish a new specified development process (SDP) to be administered by Kāinga Ora for complex projects requiring the coordination of central and local government agencies together with private sector interests.
Powers available to Kāinga Ora will include an ability to:

  • override, add to or suspend provisions in the Resource Management Act (RMA)
  • act as a consent authority in lieu of the normal RMA decision-makers
  • levy targeted rates and development contributions
  • build and/or alter infrastructure (including all roads in a project area except those under the control of the NZ Transport Agency), and
  • reconfigure reserves.

Kāinga Ora may be able to delegate some of these powers but only with agreement from the Ministers of Finance and Urban Development. Ministerial approval, delivered through an Order in Council, will also be needed to initiate an SDP.

Kāinga Ora will then be required to prepare a draft development plan which will be publicly notified with submissions heard by an independent hearing panel.

More information?

These Bills provide useful new opportunities and, if used well, could be game-changing, not just in addressing our accumulated infrastructure and housing deficits, but also in climate change adaptation and mitigation.

Chapman Tripp will be happy to provide a presentation should you want an in-depth analysis of how to make best use of them.

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