Infrastructure Report: Priorities for big projects

Auckland’s Central Interceptor wastewater tunnel. Photo / Watercare

Everyone in the sector is united in the call for New Zealand to have a clear, long-term infrastructure pipeline to attract investment and get the projects done. That moment may soon arrive.

The Government, in conjunction with the Budget, released its Infrastructure Action Plan and gave the Infrastructure Commission the green light to work with the Treasury and the sector to develop a priority list of projects.

The list will support longer-term thinking and planning, provide more certainty for suppliers, and enable capacity to be established in the right places.

“We have a clearly articulated infrastructure deficit — that’s been beaten to death,” says Sarah Sinclair, chair of law firm MinterEllisonRuddWatts and a board member of the Infrastructure Commission.

“The priority list gives you a menu and roadmap. It focuses the conversation on needs and partnerships — including the appropriate models for the public and private sectors to work together.

“This should open the door for the conversations around resilience and sustainability, inter-generational considerations. and what the government must own and what’s the equity stake for the private sector.

“We need to develop the right priorities and have certainty and credibility around a pipeline — call it a shop window — of water, health, transport and renewables projects.

“This is the long-life stuff that is going to serve us for the next 50 years, and so our investment framework — including the priority list — needs to bring stability and sustainability to investment decisions. And then we need to stick with those decisions and focus on the enablers to allow us to get on and do it.”

Sinclair’s focus is on the enablers. “There has to be a constructive discussion about the role of the private sector and private capital. I’m not just talking about dollars, but also expertise, experience and resources in the infrastructure sector.

“We need that long-term certainty so those resources and talent want to come to New Zealand and contribute.

“The enablers would make sure that the projects are sequenced in the right way. For example, the Central Interceptor wastewater tunnel and City Rail Link in Auckland are fantastic projects.

“They have another two years to run and what do we do with the tunnelling expertise after that. The tunnelling crews have invested in New Zealand, but will they stay on.

“Infrastructure projects do have long lead times and that’s why we need a credible, trusted pipeline going forward.”

Sinclair says there’s a whole range of structures allowing the public and private sector to work together and deliver.

“The Government will say it always gets private contractors to do the work. But private sector should be further up the tree and sitting alongside as a partner, sharing risks and accelerating the delivery of infrastructure.”

Examples of funding and investment structures include collaborative models such as capital partnerships that can be supported with long-term concessions, co-ownership, joint ventures and long leases.

New Zealand has operated a public-private partnership programme (for new schools and for roading projects such as Transmission Gully).

Sinclair says “it is now an appropriate time to consider the next generation of procuring and delivering public infrastructure partnering with the private sector, and bringing the best of all resources and capabilities to the table”.

Canada, as an example, has an interesting range of models that leverage private sector capital and capability. Value capture has been used by municipalities in Vancouver to fund new stations along the Canada and Evergreen metro lines where developers make contributions in exchange for density bonuses to their residential and other developments in the surrounding areas.

Sinclair says huge resources are going into the United States because of ITS 2022 Inflation Reduction Act which focused on reducing carbon emissions and lowering healthcare costs through spending and tax breaks.

“They have tax credit schemes that enable the construction of affordable housing that has been in place for decades. These structures attract capability and investment that fuels their economy and delivers on need.”

Sinclair sees investment in water — there’s at least a $90 billion deficit — and transport as two key areas for the infrastructure priority list.

“There is a clear need, for instance, to address the congestion in Auckland so that people can live their lives and access education and employment in an affordable way.

“But the needs of Auckland will be different to Queenstown or Tauranga, and we have to think about each region in a holistic way to plan infrastructure programmes before coming up with a list.”

Sinclair says: “We should have a strong focus on squeezing the most out of what we have got rather than just focusing on big shiny projects.

“We do need to maintain our asset base. At the Infrastructure Commission we estimate that for every $40 spent on new infrastructure, $60 is required for renewals.”

Sinclair suggests that demand-side management such as congestion charging could be applied to Auckland traffic.

“Dominion, Sandringham and Mt Eden roads, for example, are all clogged. How do you unlock them? We should be trialling demand-side management and see how it works as a tool for managing traffic.

“There are lanes in the United States that you pay for.

“The right-hand lane on the Southern Motorway [in Auckland] could be tolled and you can use it if you want to be on time for a meeting or pick up your kids at school.”

Sinclair says the Auckland transport system needs to be looked as a whole and a range of options considered to unlock congestion.

“We must always keep our focus on a coordinated transport system with a whole range of modes that work — buses, trains, ferries and demand side management. You are not trading one off for the other — it’s a mix that is best for Auckland.

“It shouldn’t be a decision between the second harbour crossing or light rail. It might be both over time and it’s how they connect and are phased to make Auckland a more accessible and liveable city to live and work in.”

Sinclair can’t imagine infrastructure ever going off the agenda given Auckland’s population growth and societal aspirations. It comes down to priority — something that the Infrastructure Commission is wrestling with.

The commission released the New Zealand Infrastructure Strategy 2022- 2052 in May last year. The strategy considered the long-term issues and challenges facing infrastructure including climate change, population growth and changing technology, and sets a vision for the role infrastructure can have in the future.

It incorporated feedback from more than 20,000 New Zealanders through the Aotearoa 2050 survey, resulting in 68 recommendations and setting a pathway to transform New Zealand’s infrastructure over the next 30 years.

The Government welcomed the strategy, saying it provided opportunities to deliver on its economic goals more efficiently and effectively and raise the living standards of all New Zealanders. That response was followed by the Government’s infrastructure action plan.

The commission is charged with:

· Working with Treasury to develop and implement the infrastructure priority list over the next three years.

· Research and provide a report next year on how government infrastructure providers and Māori engage and work with each other in the planning and development of infrastructure.

· Working with the Public Service Commission to ensure the development of leaders is aligned across the public sector including the options of a major projects leadership programme.

Partnerships form a cornerstone of the Government’s plan. It wants to strengthen relationships with Māori, local government and the private sector, opening the door to innovative co-operative strategies, including co-ownership, shared governance arrangements and joint planning efforts.

The commission says “to address New Zealand’s infrastructure challenges, we need to think wider than the plan — no one sector can do it alone. Central and local government, iwi and the private sector will need to work together to build a legacy for future generations that we can be proud of.”

· MinterEllisonRuddWatts is an advertising sponsor of the Herald’s Infrastructure Report.