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NZ regional fuel tax comes as global tide turns on user-pays infrastructure funding

Friday 27th October 2017

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A regional petrol tax to help fund Auckland city's transport infrastructure comes amid a global change in the air for user-pays funding for major projects, provided the benefits stack up for those footing the bill. 

US President Donald Trump is reportedly toying with the idea of hiking fuel taxes as a means to fund his promised US$1 trillion of infrastructure investment, which was a key policy plank in his successful bid for the White House last year. That would end a 24-year freeze on US petrol taxes and marks "a massive shift" for user-pays funding models, says KPMG's Americas and India head of global infrastructure Stephen Beatty. 

"It will send a signal to all politicians it is possible to raise charges as long as you're prepared to provide something to the people that you are charging," Beatty told Infrastructure New Zealand's building nations symposium in Wellington today. "Our credibility as public servants is not high because we aren't delivering the value we need to and we are apologising when we raise any charges for it, and so I would urge everybody in the room to turn to the new government and say don't apologise but make sure you deliver benefits at the same time."

Both major political parties made big-spending infrastructure promises in the lead-up to the September election to meet New Zealand's expanding population, which has seen a shortfall of housing drive up property prices and increase traffic congestion, while at the same time local authorities are hamstrung in their ability to pay for upgrades to municipal infrastructure. 

Beatty told the conference that the big questions for policymakers to answer is funding projects, which is whether the taxpayer or users foot the bill over an extended period of time, rather than financing, which is simply where the immediate cash comes from. "It's not about financing, it's about funding. Does the base business case actually work?" he said. 

That means the project has to have a sound business case that strongly links the benefits to the people paying for it, he said. 

One way to change that is to look at projects as assets, rather than liabilities, in that they create value and aren't just "things to be funded and obligations we've got to fulfill," he said. 

KPMG New Zealand's Jesse Phillips told the conference that local authorities, in particular, had limited options in funding municipal infrastructure and new tools are needed to put the deep pools of capital available to pay for that work. 

"We need to be smarter about how we fund our infrastructure and this is particularly true now we have had a change of government," he said. 

The lack of local government funding options was touched on during a panel session at the conference, where there was general agreement councils needed to have access to a wider tool-kit. 

During that session, Bell Gully partner Hugh Kettle told the conference he was optimistic the new government will continue to use public-private partnerships to deliver "asset heavy deals" with the Labour party having already "come out in support of transport PPPs in the future.

HRL Morrison & Co executive director Steven Proctor paid tribute to the New Zealand Transport Agency in selling its projects to the world, which means "they get a better outcome" and was "great procurement."


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