Opinion: No silver bullet for regional funding

WSP Opus Managing Director Ian Blair discusses the need for alternative funding models for local government.

Local governments are at a critical point when it comes to planning and paying for infrastructure that meets the needs of today’s communities – and tomorrow’s. They face unprecedented challenges that require strong and timely decision-making.  Because our regions are the powerhouse of the nation, it’s too important for the future of New Zealand to not get right.

For those in the major centres, it can be all too easy to group the regions together as a single entity, but each area has its own distinct identity and challenges.  We know this because we operate across 40 offices around the country, and our people live in the communities they serve.  This provides incredible insight into how unique each region is, and it’s reflected in our business.

While there are common challenges around funding essential infrastructure upgrades, the drivers and potential solutions differ greatly. 

Take Queenstown, which could well be considered the tourism capital of New Zealand, with more than 3.6 million visitors a year. Spending on infrastructure is critical to the economic success of the district and to meet the needs and expectation of the community and visitors. If Queenstown drops the ball on tourism, the impact on the rest of the country will be massive, however the cost of providing services for visitors in the 2018-2028 long-term plan has been estimated at $374 million. While Queenstown has the fastest growing population in New Zealand – approximately 6% pa in the last 4 years – it has a ratepayer population of around 23,000 and 34 international visitors to each resident. By comparison, Rotorua – another key tourism destination has a ratepayer population of more than 70,000. To alleviate the significant pressure on ratepayers alternative funding models are needed.

Meanwhile Tauranga, while buoyant, is grappling with the impact of rapid growth and the demands this places on essential infrastructure. Tauranga has grown rapidly and is now the fifth largest urban area in New Zealand. Not only is the aging infrastructure struggling to keep up but the population increase has led to traffic congestion. From a funding perspective it’s a balancing act to meet the needs of the community while delivering crucial infrastructure and services. With a population sitting at around 130,000, Tauranga doesn't have a sufficient critical mass to explore and promote the use of leading world-class alternative modes of transport such as light rail.

Dunedin faces a very different set of challenges. Climate change means more intense rainfall, more often and this, combined with rising sea levels, is pushing up groundwater levels and impacting on low-lying parts of the city. There are over 3,000 homes, more than 110 businesses and 35km of roads in these areas, which are less than 50cm above sea level. Compounding this is significant pressure on the costs of delivering core services including managing ageing infrastructure and the obligation to build new infrastructure to a higher standard. Like many other councils, Dunedin has deferred maintenance due to a lack of willingness (or limited ability) of communities to pay for the work, and in the face of previously unheard-of challenges new approaches to funding are needed.

Earlier this year we carried out a comprehensive study of the 10-year plans of New Zealand’s councils and found a number of common themes including:

• Drinking water quality is a massive issue
• Infrastructure is at risk from sea level rise, potentially as much as $14 billion of it
• Other issues commonly faced include ageing infrastructure, earthquake prone buildings and bridge maintenance.

Most “normal” organisations would have no problem prioritising this, however in local government these investments quickly become political hot potatoes and projects need wholesale buy-in from ratepayers. Unfortunately, we are at a point where deferring investment in no longer an option.

So, what’s the best course of action?