BILL ENGLISH HAS RADICAL NEW IDEAS ON HOW TO PAY THE $11 BILLION A YEAR INFRASTRUCTURE BILLL
By Richard Harman (author)
The Government yesterday unveiled a plan to spend $11 billion a year on infrastructure for the next ten years.
It has been designed to cope with ageing facilities like schools and storm water systems as well as anticipated demands for a growing but older population, the shift to Auckland and climate change.
The big ticket items that are already on the Government’s books include the Auckland Central rail loop, the Waikato Expressway and a massive rebuild of ageing schoolrooms.
With that list of concrete proposals comes a proposal to use complex data about the use of infrastructure to manage demand much more precisely, probably by developing sophisticated user pays stems.
Finance Minister Bill English told POLITIK yesterday that other funding mechanisms might include more public private partnerships to build and run infrastructure.
The report says demand for infrastructure will change.
The population is ageing – from an average age of 37 today to 43 years in 2043.
Some regions will grow as the population increases by 1.2 million by 2045, but a few are expected to shrink.
Some ageing infrastructure networks will need renewing.
The plan also acknowledges that climate change is now a major challenge for our infrastructure.
Among the key points:
* A dramatic and comprehensive use of sophisticated data to measure demand for transport and other infrastructure.
* The development of new ways of charging road users based on that data to enable more efficient use of the existing infrastructure.
* Including economic implications in freshwater management plans.
* The creation of a regionally owned entity to manage the rebuild and running of water, waste water and storm water systems by the Hamilton City, Waipa District and Waikato District Councils.
* A review of Defence housing and the defence estate, including army camps.
* A similar review of Corrections facilities.
* The continuation of work by the National Cyber Policy Office working with the GCSB to ensure that the country’s most significant information infrastructure is protected.
At the same time, and linked to the Infrastructure Report, Treasury published its Capital Investment Pipeline, which details the Government’s capital spending out to 2019.
That shows that the biggest ticket items for central Government are for new or replacement schools and the transport sector.
Up to $4 billion is expected to be spent on schools by 2019 though that figure is inflated by the need to rebuild schools in Christchurch.
The biggest single item in the Treasury pipeline is the $1 to $3 billion anticipated for the Auckland Central rail loop intended to begin construction in 2018.
But there are also substantial sums for the Waikato Expressway and new motorways in Wellington (Transmission Gully) and Christchurch (Northern and Southern).
There is provision for a second Mt Victoria tunnel for Wellington to begin work in 2018.
And for each year out to 2019, there is an anticipated investment of up to $200 million in Kiwirail.
Not all of this expenditure will fall on taxpayers.
Though the Plan warns that the ability of local authorities to pay might be limited.
It says they are responding to community calls to manage debt and reduce rate rises and central Government is focussed on returning to surplus and reducing net debt.
So where is the money going to come from?
For a start Mr English is proposing that the Councils better manage their finances and their projects.
As an example he said the Government was working with the Auckland Council about where they put their black lines through lists of projects.
“That will lead to a discussion about what they can do with their balance sheet because they might have more or less debt than they thought because they’ve never really looked at it that hard,” he said.
But if Councils can’t raise rates or have no room on their balance sheet to borrow, what then?
What about public - private Partnerships?
“Possibly, but the first step is to focus on performance.
“What we want to be able to be able to do instead of having the traditional argument about who should own what is to focus on getting comprehensive information on the state of the infrastructure and showing them (the local bodies) benchmarks so they can see how they line up against each other and then getting the tools to make better decisions.”
It sounds vague but Mr English is plainly hoping that gathering more complex and extensive data about infrastructure will have the same impact on decision making that better data already has with the social investment approach to welfare.
However the better data will not only enable Government and the local authorities to get a better handle on what they’ve got and how it works but coupled with other sophisticated technologies it may well allow a more demand driven user pays system to be put in place.
Mr English said we already have a crude user pays system for roads with petrol tax and road user charges but both really only measure how far a vehicle has travelled.
So he is planning to start a trial with the so-called 44 tonne-plus “high productivity motor vehicle” trucks, or HPMVs.
These are already restricted ion what routes they can take because of their wright.
As a consequence they are fitted with sophisticated GPS and other technologies allow their operators to tightly manage their trips.
“These guys are all geared up now,” said Mr English.
“They are ahead of the Government.
“They have all these real time monitoring systems on their vehicles.”
So those systems will be used to levy charges on the vehicles according to where they go and at what time.
That might mean, he said, that a Fonterra tanker, would be able to be exempt the charges as it travelled up and down driveways to the sheds on dairy farms.
Ultimately what this plan does is to set out a way whereby data and co-ordination can better manage the infrastructure that we have.
But there are also new challenges, particularly climate change.
The Plan says: “The combination of rising sea levels and increasing heavy rainfall have significant implications for long-life infrastructure with increased inundation and erosion projected.
“With sea levels expected to rise by 30 centimetres by 2050, local authorities are noting that the rising water table is hastening the degradation of pipes.
“Changed rainfall patterns will bring challenges, not only for water storage, but also for flood protection of productive land and urban settlements as well as key transport networks that in our hilly terrain, can be impacted by slips and erosion.
“Flooding is our most frequent natural disaster with an average annual cost of approximately $51 million.”
“These issues raise questions around how we develop and manage our infrastructure – it needs to be resilient “to changes over time, and use resources efficiently.”
What was unveiled today was a long way from the old pork- barrel -Ministry –of- Works approach to infrastructure planning.
But like the work going on the Resource Management Act it also throws the spotlight back on local government and the need for a much greater degree of sophistication in that area. Convincing often obstinate Councillors to change may be as difficult as finding the money for some of the plans.