The Government has refused to underwrite millions of dollars required by the Tauranga City Council to deliver on more than a dozen transport projects, which could result in slow progress for the city's plans
Promises by Tauranga City Council to complete a raft of transport projects could take longer than expected to complete with the city’s commissioners’ pleas for future funding to be underwritten by the Crown dismissed.
All up the 13 projects, including upgrades on Cameron Road, cycle lanes in Ōtūmoetai and Mount Maunganui and improvements to public transport, are estimated to cost around $870 million with capital coming from Waka Kotahi’s National Land Transport Fund (NLTF) a big piece of the funding puzzle.
About $70m through the current transport fund has so far been approved across the various projects but the council’s commissioners wanted an assurance that funding down the line would be a sure thing.
This is because it's also trying to fund the projects via a ratepayer levy under the recently passed Infrastructure Funding and Financing Act.
If approved by Cabinet, the council has a statutory obligation to complete the work - a risky responsibility if it's not sure it can secure future funding.
“With the increasing constraints on the NLTF, and recent project cost escalations, TCC now feels the risk is too significant for it to carry and has asked the Government to step in with the Crown underwrite of the NLTF funding share for the projects, which is estimated as $230m,” a briefing to Transport Minister Michael Wood said.
“TCC does not object to meeting the investment requirements for the NLTF, including going through the business case process. TCC's concern is that it will meet these requirements and then the NLTF will not have adequate funding available to provide its share. Therefore, TCC is comfortable with a Crown underwrite or endorsement being subject to the projects meeting all standard NLTF investment requirements.”
The levy would secure $200m for the projects charged to ratepayers over 30 years.
It would apply to every home and commercial property within the city boundary.
The proposal to set this up is now with the Minister of Housing and Urban Development Megan Woods, and if approved will be the first time new legislation to allow funding in this way is tested.
Transport officials noted if the levy could not be accessed, the projects would take longer to complete.
Whether the risk has been mitigated enough to allow the levy to begin - and the obligations that come with that - now lies with Woods and Cabinet.
Despite the council's predicament, the Government will not underwrite the unaccounted for funds.
In a letter to the council signed by the Minister of Transport, Minster of Housing and Minister of Finance and Infrastructure, they instead promise “best endeavours” if the money becomes hard to come by.
A briefing prepared by officials before making this decision showed underwriting all or just some of the future funds was too risky for the Crown mostly due to the likelihood of cost increases over the course of the build.
Other options considered included getting ratepayers to contribute more through the levy and allowing the council to borrow more.
Neither was recommended.
Commissioner Stephen Selwood said the rest of the money would come from a range of sources.
“We are working on a range of possible funding mechanisms for transport projects, including Waka Kotahi grant funding, other government grant funding (including existing shovel ready funding and proposed Infrastructure Acceleration Funding), development contributions and rates funding.”
He said these funding options would also be used should the levy not be approved by Cabinet.
A separate, project-specific Ievy for developments at Tauriko is also being considered.
Owners there could be expected to stump up about $2500 each year to help pay for the infrastructure.
