Govt open to using $1bn Housing Infrastructure Fund differently to get around council debt concerns, not keen on sharing GST

The Government is looking at how its $1 billion Housing Infrastructure Fund could be accessed by councils without the funding sitting as debt on council balance sheets, Building and Construction Minister Nick Smith has confirmed.

And Finance Minister Steven Joyce said the Government was looking at other models that might help local government’s with higher levels of debt, although there were some difficulties in re-classing lending from the fund away from debt. Models with third-party financing could be in the mix, he said.

Meanwhile, Local Government New Zealand’s call for a share of the GST take to be syphoned off for tourism infrastructure spending was met with a cool response from Joyce and Local Government Minister Anne Tolley.

The local government body pointed out councils are struggling to meet housing and tourism infrastructure costs due to a number of fast-growing councils hitting affordability covenants for being able to take on extra debt. See Alex Tarrant’s earlier article here.

Speaking to media in Parliament on Tuesday afternoon, Smith said officials were exploring options with councils on how government and councils could best make the $1bn fund work. As reported earlier, councils have balked at being made to take any funding from the vehicle on their balance sheets as debt.

Different councils faced different circumstances, Smith said. “Some of them are very keen on a simple loan/interest-free instrument, others are looking at Special Purpose Vehicles to fund that infrastructure.”

The Government was quite open to having those discussions. “We simply want to use that $1bn to get more infrastructure on the ground to support more houses,” he said. Officials were confident they would have a number of projects ready to go connected to the fund in coming months.

GST share not going to fly

Local Government NZ on Tuesday morning also floated the idea of local councils being allocated GST receipts that had come from tourists to New Zealand, which hit $1.6bn last year.

However Finance Minister Steven Joyce was quick to play down the idea, saying government was “unlikely to be allocating GST to local government.”

“It’s not something that New Zealand has done and we don’t think there’s any need to,” Joyce said. The Government already funded programmes alongside local government directly, he added.

Asked whether there were options to fund local government differently from the rates model, Joyce replied New Zealand had a “good principal” where there was a clear distinction between rating that occurred on behalf of local government, and taxing that occurred on behalf of central government.

“It gives very strong accountabilities to different groups of voters that then get to determine whether they like what their levels of government are doing,” he said. “But within that, I think there’s some opportunities around infrastructure financing, which we’re talking about with a number of different local government organisations.”

Local Government Minister Tolley said she agreed that the GST model was not one the government would take a look at. “I’ve made it clear to Local Government New Zealand that it’s not on this government’s agenda at this point in time.”

Government was talking with local government particularly in regard to long-term infrastructure and acknowledged there were issues, she said. “But they’ve got to be sure that they are delivering their infrastructure currently as efficiently as possible.”

Funding tourism infrastructure was a conversation the Government would be prepared to continue, although, “we want to be sure that they are looking for…every efficiency we can make on behalf of the ratepayer before they come to the taxpayers asking for additional funding,” Tolley said.