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Regional growth fund trickle today becomes avalanche in election year

Friday 23rd February 2018

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The government has made an initial $61.7 million down-payment on its promise to spend $1 billion a year for the next three years on regional economic growth initiatives, with Cabinet papers signalling it will take three years for major projects to gain momentum.

Prime Minister Jacinda Ardern and Regional Economic Development Minister Shane Jones launched the Provincial Growth Fund at a ceremony in Gisborne today, identifying for special attention six "surge" regions where efforts to accelerate regional growth are required and announcing a swag of funding for local road, rail, tourism infrastructure projects, along with feasibility studies for larger projects to follow.

While projects can be funded in any region, the surge regions were identified as Northland, Bay of Plenty, East Coast, Hawke's Bay, Manawatu-Whanganui, and the West Coast of the South Island.

Emblematic of the government's intention to unblock languishing regional projects is the decision to apply $5 million from the fund to unblock the stalled initiative to reinstate the railway line between Napier and Wairoa, where a consortium of KiwiRail, Port of Napier, and the Hawkes Bay Regional Council had failed to move ahead after discovering higher capital costs for repairing the line than first anticipated.

The announcement was one of several amounting to $9.2 million in commitments to the Gisborne and Hawke's Bay regions, which includes $2.7 million for redevelopments at the Gisborne port, but does not at this stage mention any prospect of reopening the rail link between Gisborne and Wairoa, which was washed out in a storm in 2011.

Some $750,000 is being granted for three feasibility studies on KiwiRail projects in Kawerau, Southland and New Plymouth, with the Kawerau study examining options for an inland hub to connect exports from Murapara and Kawerau to rail, while in Southland "KiwiRail will work with local forestry interests and ports to determine the best export flows for forestry and containers", said Jones in a statement. The New Plymouth study will focus on forestry export opportunities.

However, consideration of extending a rail connection to Whangarei's Northport, potentially as part of relocating Auckland's port to take it out of the city's central business district, will occur in the context of a wider Upper North Island Supply Chain study. KiwiRail has been asked to “put forward infrastructure proposals”.

Other initiatives include a tourism hub for the Northland town of Kawakawa, a $9 million upgrade to a dangerous intersection on the tourist route, State Highway 10, in the Bay of Islands, and grants of $1 million to improve cycle trails on the West Coast, a future-proofing study for the tourist stop-off of Punakaiki, and a waste-to-energy scheme for the Buller District.

“As of today, the Provincial Growth Fund (PGF) is open for business and has the potential to make a real difference to the people of provincial New Zealand,” said Jones. "We are being bold and we are being ambitious because this government is committed to ending the years of neglect. Nearly half of us live outside our main cities. If this country is to do well, then our provinces must thrive."

Cabinet papers released at the same time as the flurry of announcements acknowledge that some of today's projects were already in prospect as part of the previous government's $44 million regional growth package.

However, those papers also indicate a timeline that will favour smaller scale "pre-investment and remedial infrastructure" investments from the fund in 2018, funding decisions on a number of larger projects later this year, and delivery of major projects occurring between 2019 and 2021, meaning work will be starting to peak when the government is next scheduled to return to the polls, later in 2020.

Officials and delegated ministers will be able to approve projects of up to $20 million in value, with larger projects requiring full Cabinet approval. All projects will be judged against criteria covering the government's aim to improve economic productivity, including better use of Maori assets; adding value beyond what would have happened anyway; consistent with regional and community priorities; and be capable of being well managed and executed.

Projects that contribute jobs in areas of high regional unemployment and to resilience in the face of climate change threats will be eligible, with the PGF to fund the plan for the government to plant half a billion trees over the next decade to complement another half billion to be planted by the private sector.

Cabinet papers acknowledge “observable improvements in regional indicators may take 2-3 years after investments have been made - outside the lifetime of the fund”. Success measures in the meantime will relate to adherence to investment and progress criteria.

Transport projects will still need to go through NZTA and the fund will not generally be available for projects relating to drinking water reticulation, sewerage or stormwater. However, local water storage projects that assist employment, sustainability or resilience can seek funding, even though the government has ruled out further support for large-scale irrigation schemes.

Also excluded from the fund are applications for schools, hospitals or large-scale housing projects, at least until wider decisions are made on how such initiatives will be funded. 


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