The Infrastructure Commission chief tells mayors existing public buildings, roads and water networks need better information and better investment – rather than just succumbing to the allure of glamorous new projects
When a 3.5m sinkhole opens in the middle of a central Auckland street, because the council has dragged its feet on replacing a 1915 stormwater pipe, then that begs some questions.
“Sweating your assets isn't a bad thing," says Te Waihanga Infrastructure Commission chief executive Ross Copland. "But stretching the asset life needs to be a deliberate strategy with increased maintenance investment and higher risk of outages or breakdowns."
Copland will talk to the Local Government NZ conference in Christchurch this week about the importance of strategically managing assets to get the longest life from them. He calls it "Asset Management 101": for every $40 spent on new infrastructure, the commission says we need to be investing $60 in maintenance and renewals of existing assets.
READ MORE: * Lianne Dalziel: A warning to ministers and mayors * Managing old infrastructure for a new future
The Auditor-General has collated data from councils' long-term plans that shows councils aren't replacing assets as fast as they are wearing out. They're going backwards, the Infrastructure Commission says.
The renewal of local roads, footpaths and drinking water networks lags behind depreciation expenses. Sewage and stormwater networks, in particular, are being renewed at only half the rate of depreciation.
From lead-contaminated water in Dunedin, to broken bridges in Canterbury, to burst and gushing sewerage pipes in Wellington, the Auckland sinkhole is just the latest example of what happens when councils and government agencies are slow to renew ageing infrastructure.
The damaged stormwater is a 450mm diameter ceramic pipe built in 1915, Auckland Council says. The design process for its replacement had been fast-tracked after it first showed signs of damage during Cyclone Gabrielle.
Renewal capex v depreciation expenses for local infrastructure
The council had been working with Auckland Transport over the past few weeks to put a traffic management plan in order to replace it next month – but that was too little, too late.
It's not just council assets that aren't being maintained, though.
The spending on Waka Kotahi's state highway network is only a quarter of the depreciation expenses. Social infrastructure likes courts, police and fire stations need renewal.
Bumpy spending on roads
Ask many of New Zealand's mayors about Neil Holdom's campaign to properly fund the maintenance of the country's roads, and they'll laugh. The New Plymouth mayor has been going on about it to anyone who will listen.
Last week, he won approval from Parliament's Clerk for a petition seeking a citizen's initiated referendum. It asks: “Should the NZ Government fund road maintenance at levels sufficient to reverse the current decline in the average age and condition of our national state highway network?”
The problems, he tells Newsroom, are both local and national. "I drove to the East Coast earlier this month and the roads from Palmerston North to Napier were diabolical. Taranaki’s roads are patched and bumpy and almost as bad."
He sees it in Wellington and Auckland, too. "We all know the major cities are struggling from the impacts of rapid growth and ageing infrastructure combined with escalating contractor costs."
At the Local Government NZ conference, his niggling has ensured infrastructure maintenance and renewals are high on the agenda. The infrastructure deficit is estimated at $210 billion and growing – and it's across the board.
"Most councils are starting to lift their depreciation funding but still have to close the gap on the backlog," he explains. "The issue is while they try to catch up, demand is growing and costs are gong through the roof and we have a cost-of-living crisis.
"Average rate increase across councils must be more than 10 percent this year but expect bigger increases from some councils next year as they reset their 10-year plans.
He predicts ratepayers will face average increases of 3 to 4 percent above inflation, over the next 10 years. "The model is broken, we have hit peak rates and neither of the main parties has committed to addressing the issue in their next term."
Hospital pass
The health sector is a big and worrying unknown. In an interview, Copland tells Newsroom the data doesn't even exist to clearly identify the scale of the health problem.
The commission is working with the new health super-agency, Te Whatu Ora, to quantify the health infrastructure deficits and determine the investment needed over the next 20 to 30 years. It is due to report back this year.
Te Whatu Ora has already promised to redirect capital from expensive tertiary hospital projects to primary health clinics. "The health sector is an area where we've got comparatively less information about the state of our existing tertiary hospital sector and so on," Copland says. "That makes it really hard for decision makers, particularly central government, to know where should they put that next dollar of new investment.
"We understand the allure of the big project, and the ribbon cutting and all those factors.... But that should be secondary to a laser-sharp focus on understanding and maximising the utility we get from our existing infrastructure networks." – Ross Copland, Infrastructure Commission
"This predisposition towards investing in shiny new big infrastructure projects, they are absolutely necessary periodically. But what we would say is that having this big focus on asset management allows those investment decisions to be made in a really rigorous and robust way, and prioritised.
"And in our discussions with local government, we're really encouraging them to build this good information, and use it in their own investment decision-making."
The commission is also due to deliver its State of Play report on how good our public institutions are at asset management. This is an important area to get right, Copland says, as 99 percent of the infrastructure we’ll need tomorrow is already in existence.
In sheer dollar terms, he says New Zealand's greatest expense over the next 30 years will be the cost of repairing or replacing infrastructure that’s old or wearing out.
Many of these assets are owned and looked after by public institutions – central government agencies and entities, and local councils. They must look after the assets today and plan for the needs of generations to come.
"We understand the allure of the big project, and the ribbon cutting and all those factors," Copland says. "New Zealand's a growing country, we have very strong net migration that necessitates new-build infrastructure, and we've got aspirations for higher quality of life through things like ultra-fast fibre and lower commute times.
"But that should be secondary to a laser-sharp focus on understanding and maximising the utility we get from our existing infrastructure networks, and looking after them so they realise their full useful lives."
There isn’t enough information available in one place to tell much about asset management capability or performance – that's something the commission wants to know, in order to deliver the best value from public assets, and improve practice where things aren't working well.
"Recent events such as flooding, cyclone and pandemic show both our infrastructure and asset management are weaker than the public might have imagined." – Maxine Forde, infrastructure consultant
MaxAsset Management principal Maxine Forde is one of New Zealand’s most recognised independent asset management consultants. She is on the team commissioned by Te Waihanga to develop its State of Play report on how good our public institutions are at asset management.
"Recent events such as flooding, cyclone and pandemic show both our infrastructure and asset management are weaker than the public might have imagined," she tells Newsroom.
"During the pandemic, for example, the regional variability and general lack of ICU beds (noting also lack of staffing) was highlighted. What has happened since then? Not much. In fact, staffing has probably got worse."
The team of independent consultants is interested that there is such limited transparency and scrutiny on the state of New Zealand's assets, asset management practices and future infrastructure plans, she says, at organisational, sector and NZ Inc level.
"There was a deliberate strategy to reduce maintenance on roads but this reduction in the level of service for roads was not consulted on or communicated. Now everyone is worried about potholes.
"It would also help in my view if media were highlighting issues such as KiwiRail as asset management concerns, and asking why is it not better?"
And she adds: "Health has not kept up with growth and demand at tertiary level, probably for decades."
Crown entities and central government agencies are subject to less regulatory scrutiny than local government or regulated monopolies such as the electricity distribution network, which must disclose information to the Commerce Commission.
Forde argues there's been limited data from government and the main political parties about how the infrastructure deficit will be addressed from a funding, planning and delivery perspective.
"This is hundreds of billions of dollars, even according to Treasury. Te Waihanga are starting to get into that space, but how do we actually start addressing the infrastructure deficit?"
