More innovative solutions need to be implemented to deliver the infrastructure Auckland desperately needs as traditional funding options are impracticable, according to Auckland Council’s Chief Economist, David Norman.
In the second Auckland Economic Quarterly (PDF) available today, Mr Norman reports on funding Auckland’s rapid growth and explores a number of new ways to fund infrastructure.
Growth leads to benefits and challenges
“Auckland is growing rapidly. In the year to June 2017, the city is expected to grow by around 45,000 which is the third consecutive year of this level of growth.
“That is equivalent to adding the city of Tauranga to Auckland in three years.
“While a growing city provides many great benefits with more jobs, more things to see and do and a greater sense of belonging to a community it also creates challenges with the demands of this burgeoning population exerting huge pressure on existing infrastructure which is very expensive to build or replace.
$19 billion needed for greenfields infrastructure
“Even using modest growth projections over the next 30 years, the council estimates that bulk infrastructure, such as water, transport, wastewater, needed for new greenfields development will cost the council around $19 billion, and 90 per cent of this has not yet been funded.
“In addition the costs of capacity and service upgrades for existing infrastructure to support additional development within urban, or brownfield areas, will run into billions of dollars.
Funding options
“There are several ways to boost revenues or increase cash on hand but the number of implementable options is not as large as many believe and several options carry significant trade-offs.
“More traditional funding approaches such as growing council debt or increasing the burden on ratepayers are not realistic options.
According to Mr Norman, the limitations of the more traditional approaches to funding growth means Auckland needs to be more innovative in how it delivers infrastructure.
This could include central government or the private sector funding new development, including bulk infrastructure, through a special purpose vehicle, implementing more sophisticated ways to capture the value uplift in property resulting from infrastructure investment or delaying or eliminating the need for new infrastructure by managing demand and optimising the use of existing infrastructure.
“A number of innovative tools would likely need to be used in concert to achieve the best outcome, to maintain council’s credit rating, and to minimise additional costs to ratepayers.
The full report
Read the full Auckland Economic Quarterly (PDF).
