Minister of Transport Phil Twyford has sent a clear message to would-be investors in New Zealand’s transport infrastructure – “the Government is open for business.”
He is sending Associate Transport Minister Shane Jones on a fact-finding mission to Australia tomorrow to investigate the best ways investors can work with the Government on public-private partnerships (PPP).
“The message from our Government is we’re open for business,” Twyford said after addressing a business and local Government summit on the “changing direction in transport for New Zealand.”
Twyford says it is likely projects, such as Auckland’s light rail and rapid transit, will be funded in collaboration with the private sector through PPPs.
He says it’s too early to put a figure on how much the Government is expecting private capital providers to stump up with but says it’s likely to be on “multiple billion-dollar projects.”
Twyford says there has been a “great deal of interest” from parties looking at getting involved in a PPP with the Government.
“We’re very happy to work with private capital to make these big investments.”
The Government has previously indicated it would be looking at PPPs as a way to meet some of its investment expectations but, at the moment, the process for investors is too complex.
This is the reason Jones is heading off to Australia tomorrow.
“We need to configure ourselves better within the state so there is less static when either foreign or domestic investors approach the state to play a role in our infrastructure turbocharging,” Jones says.
More debt to be taken on
But PPPs would require more debt from the Government.
Twyford says there are options when it comes to new revenue streams to help pay for this – for example, through land value capture and infrastructure bonds.
But the projects would be long-term and, according to Twyford, it would be “nuts to try and pay for it out of next year’s road user charges or a petrol tax.”
“We should be spreading that debt over multiple generations who are going to benefit from the infrastructure.”
But taking on more debt would be problematic.
As it stands, some of New Zealand’s council’s – including Auckland’s – are close to their debt limits and the Government has committed to reducing net core Crown debt levels to 20% of GDP by 2021/22.
But Twyford says there is a way the Government could take on more debt to fund the PPPs without abandoning its debt target and pushing councils over its limit.
“We intend to build on some of the work that was done by the previous Government in establishing Crown infrastructure partners as a special purpose vehicle.
“It’s a balance sheet that’s not council or Governments – it’s a public purpose hybrid if you like.”
He says through this, a lot of capital could be borrowed to pay for the infrastructure needs the country is facing.
54 Comments
True - they cant ban the rest of the world from using oil and gas - just signaled that this type of investment, industry and jobs are not welcome in NZ - and so we would rather burn dirty coal ( not quite banned yet) or import our oil and gas from other countries, paying a premium and taxes to them not us and securing their jobs and jobs for the next 40 years at least not ours as clearly they dont feel high paying high skilled jobs for the people of Taranaki is fair Comrade
Never mind the message it sends to other industries about investing in NZ - wait a few months and we will decimate your investment without consultation!
And good luck finding a partner willing to invest in new rail infrastructure at their expense and given the horrendous costs of establishment .
It involves buying prime fully developed land from the CBD to the airport , knocking down probably thousands of properties , building a rail bridge over the Manukau at possibly more than one point .
Then there is the huge cost of electrification
And all this while the road and rail building Companies in the country are short-staffed .
Another case of wishful thinking on the part of our leaders who just dont have a clue
Can you imagine what a train ticket would cost ?
It would make much more sense to just use electric busses
This boy came from half way down Dominion Road. I rode the buses forty years ago and ride the bus now on my way in from the airport. Looking at it nowadays I can't see that a light rail operation will work physically. Total chaos and holdups for both cars and the railcar thing. Dominion road is already nearly there.
Best would be heavy rail. Connection from the Airport to the main line at Puhunui, A short straight and flat run.
"electric buses" actually funnily enough this does actually make more economic and CC sense, but the Green's have a bee in their bonnet and wont listen to any dissenting voices, I've tried. Now for long haul city to city I do not agree rail makes more sense if the volume is there.
National made the NZTA investigate the bus option. But you need 8 buses to carry the same number of people as one light rail train, so 8 times the number of drivers and 8 times the number of vehicles in the city. Considering light rail is scheduled to run every 10 minutes, you basically need a bus a minute to carry the same number of people, which means you can forget about things like traffic light priority. And if they did go with buses and built a dedicated bus corridor (which is the only way to make it usable at peak times), then the cost isn't that much cheaper anyway.
The problem is indeed quite dynamic and one I have not seen well modelled / explained which is my biggest interest/ issue. Not sure how we handle the costs not the CC aspects well, can we do any differently?
What do we do with all the staff and hardware outside of peak hours? does it really make sense to run a light train with 3 staff for a few people on gold cards or just one bus? which solution gives the minimum CC impact? kinf of eft wondering.
There is simply not the demand for these levels of service.
Look at Airporter Bus demand currently.
Look at well established Brisbane Airport Rail link volumes - and it links to 14 local rail lines
Yes - plan for the future but these volumes projections are laughable. Brisbane Rail to Airport carries about 6 % of airport traffic and of course went belly up along with Sydney Airport rail link.
Private investors may well be interested - but I doubt they'll carry any risk given the record of Airport rail connections and projections.
You assume the only stop is the airport. You're forgetting about Mangere, Mangere Bridge, Onehunga, Hillsborough, Mt Roskill, Mt Eden and the city itself (e.g. Wynyard Quarter). This route would make sense even if the airport wasn't at the end of it, its basically two for the price of one.
Ring Ring - Hello China here, how can we help? And lets talk about the future Government of your nice little island. It is so close to all the minerals in Australia and Antarctica. Lets just cut to the chase shall we?
neglect to take care of business, out of personal greed, and aggrandisement, and create opportunities for your enemies, sorry other entrepreneurs.
Even with the introduction of double-decker buses, most bus routes into the city centre would reach capacity in the early 2020s.
"The stress on the system at that time will be such that only the introduction of a mode that can move more people in fewer vehicles and that can use the sole under-used City Centre corridor – Queen Street – will provide more than very marginal relief."
You can forget me ever using the bus from Greenhithe to the airport .......
1) Its too expensive , even when I get someone in the family to take me there and drive back its still cheaper
2) It will take too long , at least a 1 km walk to the bus stop and then around 3 or 4 buses to get there
Until we have a PROPER public transport system thats got
100% coverage
Cheaper or as price -effiicient than alternatives
At least a time efficient
Until then its doomed to failure
Be careful what you wish for! I wonder how much the user would need to pay to get a decent ROI on all the billions of dollars of land under Auckland’s roads. And don’t forget the council pay for 50% of local road costs too, isn’t that a subsidy?
There is a reason not even Act promotes the privatisation of the road network, it’s because no one could afford the true cost.
Dear Minister
1) How does the Government propose to have a land value capture tax & a capital gains tax or land tax ex the tax working group?
2) Infrastructure bonds - fine, but the government still has to repay the bonds which will be at a higher rate of interest than the government could borrow at.
3) Special purpose vehicle - this is beginning to sound like the Cayman Islands. The SPV either has to be government / council guaranteed (so it should be on the books anyway) or face much higher interest rates / expected return from investors - where is the advantage
4) Whilst a toll road might provide an adequate return from toll road users (there are also plenty that failed) the Auckland light rail is always going to be capital and opex subsidized. Its not Hong Kong where the private operator (ex government operator) can make a profit
5) Where is the substantial risk reduction that a PPP would provide??? Unless very carefully crafted to share the risks between both parties, either the government will overpay the PPP or the PPP will fail.
6) Quite simply a land tax or capital gains tax (with no family home exemption) would best capture the uplift in land value around stations & other land price changes
7) Given the much higher required returns for a PPP & higher risks, it would simply be better for the government to borrow the money.
8) That said the benefit/cost ratio of the light rail will be low / poor. It would be much better to get all the transport pricing right first (congestion tolls, commuter parking levies, air pollution excise tax, reduced ratepayer funding & increase excise tax, freed up land use zoning) before proceeding with the light rail so that the benefit / cost (even if still low) will be maximized.
The only reason Auckland Council can't afford more infrastructure is that it has its assets tied up in poorly targeted investments. As I have said in the past - let's start with the $3-4 billion tied up in golf courses.
The $2.1 billion in this article only involves the cbd ones
https://www.interest.co.nz/news/78635/auckland-public-unaware-significa…
"A great deal of interest " from private Capital ?
So can he name them ?
Are they onshore ( unlikely ) or offshore ?
Lest face it , even I would be "interested " if the capital was a GILT and returned more than a term deposit of similar timefframe
The truth is ............. I reckon he is telling a porky
PPP.
Anyone got examples where these structures have worked well? not needed a bail out etc.
Seems to me it just funding $ looking for an investment grade "borrower" and risk taken by some derived Govt gtee.
Look at NZTA. All the larger deals seem be alliance/joint venture structures where NZTA takes the consortium risk, and the contractors make off like robbers dogs.
Starts out all smiles, then NZTA freak out when they see what the contractors pass off as job costing and project accounting. Problem then is that the contractors are at the top table.
Hint: excel based reporting is not the path to glory!
Seriously the Govt. is better taking the funding risk on balance sheet, then getting a Scottish Programme Director.
Corporate johnnies seconded from said contracting alliance partners as commercial mgt can not and do not serve two masters!
What can we say, the Aussies will get a laugh.
Another Shambles ...
Talking PPP, but have No idea ... Big Jonesy will be out fishing and will bring in the investors by the balls ( anyone noticed his body language and loose mouth?) -
" He is sending Associate Transport Minister Shane Jones on a fact-finding mission to Australia tomorrow to investigate the best ways investors can work with the Government on public-private partnerships (PPP). " - - so in fact they have bugger all interest in NZ so far and they are on a searching expedition to look in AUS, right ??
they are still begging for private investors to bring in the capital needed and share the risk, this has been going on since Nov 17 - I wonder what would be the reward to any investor for such a contribution / partnership / risk taking business ?... and How Much is this going to cost us ?? ....Spread over 100 years? ... Really?
The Billion $$ Rail Link comes to mind !!
It is obvious that this LOT is still stabbing in the dark and have run out of Ideas and Money ( lol, still looking for a balance sheet to dump the cost On!) .... This Lazy COL had all the time to do some homework in the last 9 years, but these noobs act now as if they have descended upon us from Mars!
But maybe they Did !! .. No wonder nothing could be done in the last 6 months when we have a Health & Educational advisor working as Construction Minister, A Theologist and preacher working as a Health Minister, An international humanitarian, journalist, and a union organiser / moaner working as Housing and Transport Minister! .. and so on ... Almost all were activists. have high hopes for NZ, and equality fighters ... now that they have real jobs for a change , they got stuck !
PT has no clue about costs, and has NO projects for investors to invest in, they have illusions and dreams, and Promises to keep to the voters who believed them !!
It will take years to conclude MOUs and consortiums or JVs and banks and design and costing ... etc... etc ...Even if they start fishing now, we won't see any project of these in the next 10 years - Well after their expiry date ! ...
Imagine the frustration of engineers and designer working on a project for years and suddenly Gov changes and tells them to scrap it !!
It is very curious why they are resisting the idea of borrowing the money instead of this complicated detours for getting costly private investment in public Infrastructure projects .. where is the " Roll up the Sleeves" and "Let's Do This" attitude? or is that just TALK?
This smells like a dead rat !! ... Why is it not Ok to get PPP in Schools, Prisons, and Hospitals while it is OK to build roads and Rail and milk the public for Generations ? Where are the socialist ideology and principles ?
Wonder why they started going down in the Poles ?? ... Honeymoon is over, Divorce papers are being prepared and Will be filed soon.
God forbid we elect these losers into office again ..
Well said ............. On Friday they announce , without consultation the BANNING of an entire industry ( the oil and gas exploration industry )
Then on Monday the same people stand in front of us, hand on heart and ask for capital to be invested in a hare - brained scheme , an uneconomic venture to build an uneconomic rapid rail link to the Auckland airport , which, it is noted .......... we cannot afford .
We have not seen a detailed cost estimate , a detailed timeline , a survey of the likely take-up for the service , a survey of the Capital requirements , the vaguest idea of the capital structure they have in mind , or anything else for that matter .
That's it .......... a hare -brained idea .
And the last time Labour sent someone to Australia on an investigative junket , it was to see if John Key somehow caused the GFC.
And the person sent there watched porn at the hotel, at taxpayer expense.
Lest we forget that fiasco
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