Infrastructure Financing | KPMG | NZ

Infrastructure Financing

Infrastructure Financing

Hundreds of infrastructure projects that would make a meaningful difference to people’s lives are stuck in the pipeline in New Zealand

Infrastructure projects that would make a difference to NZ are stuck in the pipeline

Hundreds of infrastructure projects that would make a meaningful difference to people’s lives are stuck in the pipeline in New Zealand. The nation needs fresh ways to pay for infrastructure to get its cities and growing towns humming, with less congestion, more affordable homes, better quality water, and resilient energy systems. 

Traditional ways to pay for projects aren’t working. Local and central governments are struggling to work out how to pay for assets and services that need to be delivered. 

Population growth and urban drift are putting real pressure on infrastructure. Limited access to public services (including public transport), congestion, and runaway house prices are issues that major cities like Auckland have to deal with. In smaller towns, having fewer people leads to almost the opposite problem — an exodus to the cities, less ratepayer money to develop facilities, fewer job opportunities, and dwindling resources.

Property rates and user charges are not enough. Central government doesn’t have enough funding to go around and many councils’ balance sheets are full. But $150 billion of private capital dedicated to infrastructure is sitting on the side-lines looking for a home. The bottleneck is having flexible financing tools to be able to invest in these projects. There are smarter ways to put both public and private capital to work, demonstrated by projects overseas:

  • In the United Kingdom, the £14.8 billion Crossrail project raised 32 percent of the cost by targeting a levy on all the people who benefit from the project — businesses in London.
  • In Australia, owners of new assets such as roads and bridges are able to sell the rights to collect revenue from tolls. Investors, often pension funds, might pay for these rights and the money paid is then used to build more infrastructure. In this way, initial capital can be recycled indefinitely to pay for future projects. The pension money of ordinary citizens goes back into public projects that benefit the whole country.
  • In the United States, ‘hot lanes’ are a successful way to give drivers a choice to opt-in to paid faster lanes. The fee for the fast lanes is dynamic and changes according to how much traffic is on the road. For example, it might cost $20 during weekday peak times, but only 20c at 2am on a Sunday. Revenue from the tolls funds the cost of the road.

Plenty of capital is available in New Zealand to invest in these types of projects, but we need more tools to put it to work. The resources below may provide some inspiration.

Thought Leadership resources:

Click here to view Stephen Beatty speaking at the Building Nations Symposium 2017.

If you’d like to join the conversation, please get in touch with a member of our New Zealand infrastructure team: 

NZ Infrastructure Team

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