Fran O'Sullivan: Building a framework for future funding

Housing Minister Phil Twyford and Auckland Mayor Phil Goff turn the sod in new land at Milldale north of Auckland. Photo / File

COMMENT: Phil Twyford and Shane Jones wowed the annual NZ infrastructure jamboree promising they would persuade punters — particularly what Jones labels the "NZ Incs" — to put hands in pockets and help fund New Zealand's housing needs.

That was three months ago.

Then it went quiet, apart from the odd rumble in Auckland about the Crown (read Treasury) being too rigid when it comes to assessing infrastructure investment.

Particularly, where some creativity was being urged by investment advisors steeped in the capital markets.

It was starting to look as if the plan to use special purpose funding vehicles had fallen foul of bureaucratic purism and was dying a slow death in Wellington. Not so.

Yesterday, Twyford, who holds both the housing and urban development portfolios, announced the Accident Compensation Corporation (ACC) had agreed to provide debt funding to a government special purpose vehicle created in partnership with Auckland Council, Crown Infrastructure Partners, and Fulton Hogan Land Development to support infrastructure development for a project to build 9000 new homes near Wainui, 40km north of Auckland.

Some $48.9 million of the $91m of roading and wastewater infrastructure for Fulton Hogan's Milldale subdivision will be funded with secured long-term (35 years), fixed-rate debt from ACC.

Auckland Council is stumping up $33.5m to the project SPV. The Government is tipping in $4m, and Fulton Hogan the remaining $4.6m.

The SPV funding will be repaid over time partly by Fulton Hogan and partly by section owners as an infrastructure payment that will be collected with rates payments.

Getting ACC to the table — along with the NZ Super Fund, iwi and KiwiSaver funds — has long been an objective shared by both Cabinet Ministers.

With Finance Minister Grant Robertson on a promise not to bust his Crown core debt funding targets, other measures had to be pursued to fund the infrastructure Auckland desperately needs for major new projects.

Particularly as Auckland Council is also hard up against its debt limits.

Twyford is at pains to stress the project is simply a pilot for a new funding mechanism that allows private investment in new infrastructure with the debt sitting on a balance sheet that is neither the council's or the Government's.

But in the next breath he gives the game away by saying the funding model can be used in other high growth areas, affected by the housing crisis, to help more houses to be built more quickly.

Crown Infrastructure Partners (CIP), which began life as Crown Fibre Holdings, was originally set up by the prior National Government to manage the roll out of ultra-fast broadband.

Near the end of its watch, National had started refashioning its purpose to fund other new infrastructure developments.

Twyford indicates that this will be further enlarged with a raft of special purpose vehicles sitting within Crown Infrastructure Partners to raise funds for further investments.

In Jones' inimitable way he used his Infrastructure Minister's pulpit to make it clear what he wants these "NZ Incs" to do — invest more here in New Zealand's future.

The Cabinet Ministers will tread carefully. It's not yet the time for a major victory roll.

This is just the first of a number of developments that will move ahead in this fashion.

Robertson has still to release the Treasury advice on whether special purpose vehicles do in fact breach the Government's debt exposures.

It would appear, however, that pragmatism over purism has won the day.