auckland infrastructure report

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NATIONAL INFRASTRUCTURE UNIT

Infrastructure2012National State of Infrastructure ReportA year on rom the National Inrastructure Plan

National Inrastructure Advisory Board& National Inrastructure UnitNovember 2012


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Crown Copyright

ISBN: 978-0-478-39659-1 (Online)

http://www.inrastructure.govt.nz/plan/2011implementation/2012report

PURL: http://purl.oclc.org/nzt/i-1493

This work is licensed under the Creative Commons Attribution 3.0 New Zealand

licence. In essence, you are ree to copy, distribute and adapt the work, as long as you

attribute the work to the Crown and abide by the other licence terms.

To view a copy o this licence, visit http://creativecommons.org/licenses/by/3.0/nz/Please note that no departmental or governmental emblem, logo or Coat o Arms may be used in any way

which inringes any provision o the Flags, Emblems, and Names Protection Act 1981. Attribution to the

Crown should be in written orm and not by reproduction o any such emblem, logo or Coat o Arms.

Located within The Treasury, the National Inrastructure

Unit (the NIU) has the overall responsibility or the National

Inrastructure Plan (the Plan), working with the various

agencies responsible or the dierent inrastructure sectors

and ensuring a coordinated work programme is in place to

deliver the Plans vision.

The NIU has a particular ocus on the national perspective,

looking across the dierent inrastructure sectors at the

networks and interdependencies between them. The NIUrecognises the critical role local government and businesses

play in the Plan and has extensive networks throughout

the inrastructure community. The majority o the work

the NIU does is with the responsible agencies at the policy

stage, ocusing on the Plans principles. The NIU leads a

small number o items on the work programme, usually in

conjunction with others, and typically where the issues cross

inrastructure sectors and involve multiple agencies.

The NIU also supports the National Inrastructure Advisory

Board and being located within The Treasury, provides advice

to the Minister o Finance on spending and policy proposals.

Further inormation on the NIU, the Plan and the work

programme is available at: www.inrastructure.govt.nz

In putting this report together, the NIU acknowledges the

contributions and support provided by our colleagues

rom The Treasury, National Inrastructure Advisory Board,

Ministry o Transport, Ministry o Business Innovation and

Employment, New Zealand Transport Agency, Department

o Internal Aairs, Ministry o Primary Industries, Ministry or

the Environment, Land Inormation New Zealand, Canterbury

Earthquake Recovery Authority, Local Government

New Zealand, INGENIUM, Society o Local Government

Managers, BusinessNZ, NZ Council or Inrastructure

Development, Transpower, Water New Zealand, Vector,

WEL Networks, Z Energy, Telecom, Irrigation New Zealand

and many other businesses.


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Contents

National State of Infrastructure Report and the

Business Growth Agenda ............................................................................. 2

Overview from the National Infrastructure Unit ................................... 3

Report on three-year action plan and sector snap shots..................... 7

The way forward ............................................................................................8

Overview from the National Infrastructure Advisory Board............. 10

National Infrastructure Advisory Board think pieces ..........................13

Inrastructure developments around water utures in theCanterbury Region ..................................................................................................13

Proposed transport investment and planning or Auckland ....................14

Economics and the role more targeted and comprehensive

road pricing can play in managing demand ................................................... 16

Focus on Christchurch .......................................................................................... 18

Risk management, resilience and insurance .................................................20

Sector Reports ...............................................................................................21

Transport ..................................................................................................................22

Telecommunications .............................................................................................25

Energy ...................................................................................................................... 28

Water .........................................................................................................................31

Social ........................................................................................................................ 34

Auckland ................................................................................................................. 38

Christchurch ...........................................................................................................40


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National State o Inrastructure Report and

the Business Growth Agenda

Growth in New Zealand-based businesses creates jobs, spurs competition and

increases our exports. Business condence and growth will create sustainable

high-paying jobs and boost our standard o living. Building a more competitive

and productive economy or New Zealand is one o our key priorities the

Prime Minister has laid out or this Government to achieve, via the BusinessGrowth Agenda.

This Government believes that there are six key inputs that

businesses need to succeed and grow. By ocusing on these

inputs, the Government will ensure businesses can lead

economic growth.

Inrastructure underpins growth by providing the supporting

networks demanded by a growing economy and it catalyses

growth by creating new economic opportunities.

The quality o inrastructure shapes business investment

decisions; it is an important actor in determining the

location o economic activity and the kinds o activities or

sectors that can develop.

As a country with a small, dispersed population, ar rom

world markets, growth depends on raising the quality o this

inrastructure so our businesses can connect at low cost

with each other and with the rest o the world.

Given this key role that inrastructure plays in the economy,

the Government is taking a more strategic approach to

inrastructure planning and investment. The 2011 NationalInrastructure Plan (the Plan) seeks to provide common

direction or how we plan, und, build and use all economic

and social inrastructure.

The Plan sets out a 20 year vision, which is directional but

not directive, and a programme o work, led by the National

Inrastructure Unit (the NIU) and involving a range o

agencies, to progress this vision:

By 2030 New Zealands inrastructure is

resilient and coordinated and contributesto economic growth and increasedquality o lie.

The work programme includes the publication o an annual

National State o Inrastructure Report, o which this is the

rst. This report includes material rom the National

Inrastructure Advisory Board an independent board

created to advise the Minister o Finance and the NIU.

It ollows the rst ministerial progress report rom the

Building Inrastructure workstream o the Business Growth

Agenda, released on 1 November 2012.


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Overview rom the National Inrastructure Unit

Over a year ater the release o the Plan, the challenges

remain and there is still signicant work to do. A new

series o challenges is emerging, in part owing to the

continued tight scal environment, but also driven rom new

knowledge and understanding developed over the past year.

New Zealand is a small player in the global economy,

heavily dependent on the exports o primary products.

The growth outlook or our major trading partners has

deteriorated in recent months and risks associated with

the Euro debt crisis have continued. The uncertainglobal outlook is reected in the New Zealand economy

registering only 2% growth in the year to 30 June 2012

and a moderate 2 3% orecast or the medium term.

This increases the importance inrastructure plays as a

platorm or economic growth especially considering 1%

o this orecast growth is rom the rebuild o Christchurch.

With new capital spending in Budget 2012 just under

$560 million over ve years, compared to the $900 million

previously orecast, inrastructure investment must be

ocussed on quality, not quantity.

This environment has aected all aspects o the

inrastructure community: on the private sector competingin a global economy or scarce capital; on local government

needing to replace and maintain ageing inrastructure

amidst pressure to minimise rates increases; and on central

government looking to return to budget surplus and acing a

signicant bill or the rebuild o Christchurch.

New Zealand has made signicant progress over the

past year, including an increased knowledge base around

resilience, continued central government investment in key

inrastructure projects and ongoing improvement o how

the government plans and manages capital. Alongside,

there have been new unding instruments through the

Local Government Funding Agency and a signicant

amount o private investment, especially in the energy,

telecommunications and water sectors.

Despite this progress, a commonquestion rom the business communityover the past year has been whether wehave sucient understanding o utureneeds and the right nancial/regulatory

settings to incentivise the requiredinvestment.

This reects the long lead-in time o many large

inrastructure assets, the large scale o investment

required and the evolving regulatory environment. This

uncertainty is one o the actors that contributed to

inrastructure being cited as the most problematic actor

or doing business in New Zealand in the World Economic

Forums 2012/13 Global Competitiveness Report.

A year on rom 2011, we understand that to turn around this

perception and deliver on the Plans vision in the long term

requires the inrastructure community to work together tostrengthen our inormation base across three key areas:

1. Key drivers that will determine our uture inrastructure

needs what are they telling us?

2. Our current stock and its perormance are we getting

the best bang or our buck?

3. Our current response are our unding paths and

regulatory settings going to deliver what will be

required?

There will be dierent perspectives, but having the debate

and discussion in a coordinated way that looks acrosssectors will help us as a country to better understand the

issues, the range o possible responses and when we need

to make decisions. We will develop this over 2012/13

through a series o workshops that build on work already

done by the inrastructure community.

Strengthening theinformation base

While there are still many outstanding questions, we have

invested considerable eort over the past year into betterunderstanding the levels and type o investment in each

inrastructure sector and how these relate to each other

to create our national network. With other inrastructure

agencies, we are developing perormance indicators

to strengthen this inormation base, particularly in the

energy, telecommunications and transport sectors. In

local government, the newly-developed Transparency,

Accountability and Financial Management reporting

requirements will assist to create a more rened pool o

inormation.

The Canterbury earthquakes have led to a wealth o new

knowledge about building and inrastructure perormance,

the interdependencies across lielines utilities and

the requirement to restore levels o service. This new


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knowledge is being applied across the country, with many

regions reassessing the likely impacts o natural hazards.

In some cases, most notably Wellington, this work raises

serious questions around appetites or risk and the

responsibilities o dierent parties.

Increase the robustness ofinvestment analysis

Government must manage its own assets well and

make robust investment decisions. The 2010 Investment

Statement demonstrates how government agencies have

continued a ocus on better managing and planning how

capital is used, although there is still a way to go. We have

developed the rst perormance metrics or the cost o

capital across some key social sectors and have completed

a baseline measurement on asset management practices,

which identies areas to strengthen and eeds into a our

uture investment programme.

The Better Business Case (BBC) methodology introduced

two years ago requires a more consistent, disciplined,

transparent whole-o-lie approach to decision-making or

government capital investment. The BBC methodology

has been picked up by a number o private sector

companies, is being investigated by a number o tertiary

education institutions and is starting to be used in the localgovernment sector.

With Christchurch needing large-scale investment, this

discipline is critical so a key achievement is the rollout o a

disaster recovery version o BBC. Likewise, the Auckland

region is seeking signicant investment to deliver on

the Auckland Plan, so robust investment analysis will be

essential. Aucklands proposed transport projects are very

expensive and central government needs condence that

these will address the longer-term issues acing our largest

city, in particular trafc congestion post-2021.

We are working with the transport agencies to developthe debate around road pricing and demand management.

Pricing is widely used in the energy sector, and to a limited

extent in the water sector; the potential benets o a

comprehensive transport demand management strategy are

maximising the use o existing inrastructure, deerring new

capital investment or raising revenue.

Inrastructure only exists to provide a service and the scale

o damage in Christchurch orced many service providers

to be innovative and ocus on how to deliver services in

a dierent way. As an example, needing to restore the

court services quickly, the Ministry o Justice quickly

implemented centralised scheduling o acilities acrossmultiple jurisdictions, and rapidly created new capacity

or trials using portacoms on a site with a two year lease.

This innovative thinking around how best to deliver services

and use inrastructure has valuable lessons that can be

applied across the country. Likewise, the approximately

$1 billion education recovery and rebuild programme over

the next 10 years provides opportunities or innovation in

how education is delivered and schools are designed, built

and used.

Improving the businessenvironment and crowding ininvestment

The Governments inrastructure investment programme

has continued, including work on the transmission grid,

Ultra-Fast Broadband and Rural Broadband Initiative,

Roads o National Signicance, Auckland and Wellington

commuter rail upgrades and the rst allocations rom theIrrigation Acceleration Fund. Further details o specic

investments and highlights are included in the sector

reports.

Signicant investment or policy work underway includes:

responses to the Royal Commission and other post-

earthquake reviews; oil security a long term solution or

gas supply into Auckland and urther north (the Ministry

o Business, Innovation and Employment); the Canterbury

rebuild (Canterbury Earthquake Recovery Agency); urther

exploration o possible Crown investment in irrigation

(Ministry o Primary Industries), Better Local Government

reorms (Department o Internal Aairs); and the nextphase o the Resource Management Act 1991 reorms

(Ministry or the Environment).

Delivering two Public Private Partnerships Hobsonville

Schools and Wiri Prison has been a major achievement. The

Hobsonville Primary School is on schedule and due to open

in January 2013 with the secondary school a year later. More

importantly, the programme has seen a change in thinking

across the public sector and increased clarity on the outcomes

and perormance expected rom new investment.

It is not clear that the current regulatorysettings acilitate the level o investmentneeded to meet long-term inrastructureneeds.

In part, this is because the regulatory regimes or the

electricity and telecommunications sectors are still bedding

in, while decisions are still to come on phase 2 o the

Resource Management Act 1991 reorms or the water

sector. The questions around the regulatory settingsare reected in the Preliminary Assessments under the

Best Practice Regulation Model, released by The Treasury

in August. We will monitor this and consider how the

individual pieces o legislation operate as a whole, including

interdependencies.


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In conclusion, we have made progress over the last year,

including starting to improve our inormation base, and

there are signicant levels o investment underway or

planned across the whole inrastructure community. We

now have a clearer understanding o what is required to

deliver on the Plans long-term vision and believe that

we have an exciting and challenging ew years ahead

as we plan an integrated platorm o inrastructure or

New Zealands economic growth.

Finally, thank you or your ongoing commitment to the Plan

and the vision we are trying to achieve. We appreciate your

willingness to engage on the issues and your desire to work

together with us.

Evolution of National Infrastructure Plans

2010 EDITION 2011 EDITION 2014 EDITION

An inrastructure

stocktake.

Immediate priorities or

investment.

Outlines vision with a

20-year perspective.

Describes challenges and

context or inrastructure

development.

Establishes guiding

principles or inrastructure

investment and asset

management.

Stronger perormance

measures and data to

give visibility over the

stock, state and progress

o New Zealands

inrastructure.

More sophisticated

analysis o demand,

population, efciency and

growth.

ACTION PLAN

Partnerships

Government

agencies

Research

Reporting

Vicky Robertson

Deputy Chie Executive, the Treasury

David Taylor

Manager, National Inrastructure Unit


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Guiding principles rom the Plan

Investment Analysis

Investment is well analysed and takes sufcient account o

potential changes in demand.

Resilience

National inrastructure networks are able to deal with

signicant disruption and changing circumstances.

Funding Mechanisms

Maintain a consistent and long term commitment to inra-

structure unding and utilise a broad range o unding tools.

Accountability and Perormance

It is clear who is making decisions, and on what basis, and

what outcomes are being sought.

Regulation

Regulation enables investment in inrastructure that isconsistent with other principles, and reduces lead times and

uncertainty.

Coordination

Inrastructure decisions are well coordinated across dierent

providers and are integrated with decisions about land use.

Key challenges identied in the Plan

1 Inrastructure investment is well analysed at theproject level but there is insufcient considerationo how assets unction as a network or address

potential changes in demand.

2 New Zealands inrastructure is vulnerable tooutages, including through natural hazards, and we

have insufcient knowledge o network resilience at

a national level.

3 The volatile nature o inrastructure unding createsa lack o certainty and continuity or inrastructure

providers. There is insufcient use o the tools

available to generate revenue and manage demand.

4 The perormance o inrastructure assets isnot transparent. It is not always clear who is

accountable or decisions.

5 The regulatory environment does not support long

term inrastructure development and contributes tounnecessary costs and uncertainty.

6 Poor coordination between dierent inrastructureproviders leads to suboptimal outcomes. Decisionsover land use and inrastructure investment could

be better integrated.

Trafc lights assessments o each sector as they appeared in the 2011 Plan

InvestmentAnalysis Resilience

FundingMechanisms

Accountability &Perormance Regulation Coordination

Transport

Telco

Energy

Water

Social

occurs eectively occurs but could be urther developed does not occur or is ineective

Projecting demand or uture inrastructure

Two o the key actors that inuence the level o investment we can and

should make in inrastructure are population and economic growth rates.

Population projections 2011 to 2031

While the overall New Zealand population is projected to increase

by 16% between 2011 and 2031, this growth is uneven, posing a

signicant challenge or uture inrastructure provision.

2011 2031 % change

Combined regions o

Auckland, Waikato

and Bay o Plenty

2,184,200 2,736,300 25%

Combined regions o

Gisborne, Southland

and West Coast

174,200 165,100 -5%

Source: Statistics New Zealand

GDP projections

Source: the Treasury

The Plan is a strategic, uture-ocused document that places inrastructure in thecontext o economic and population growth. It seeks to provide common direction orhow we plan, und, build and use all economic and social inrastructure. It covers thetransport, telecommunications, energy, water and social inrastructure sectors.

The context and keypoints o the 2011 Nationalnrastructure Plan

rastructure reers to the xed, long-lived structures thatcilitate the production o goods and services and underpin

many aspects o quality o lie. Inrastructure is made up physical networks, principally transport, water, energy,

ommunications and social assets.

nrastructure context

Inrastructure orms the backbone o all New Zealand communities,

and every New Zealander needs a greater level o condence about

inrastructure provision, costs and service levels.

Inrastructure is an important component o the Governments

strategy or achieving economic growth it provides the

supporting networks demanded by a growing economy and it

catalyses growth by creating new economic opportunities.

Local government is a signicant owner o transport, water

and social inrastructure. The private sector plays a critical

role as investors in economic inrastructure and providing skills

and expertise in planning and design, construction and asset

management.

High-quality inrastructure attracts industry and business

to New Zealand. A major ocus o the Plan is on providing

businesses with greater certainty and condence about current

and uture inrastructure provision.

Inrastructure assets are typically long-lie, costly and can take

many years to plan, commission, build and bring into service.

Projecting the uture demand or inrastructure is critical to

ensuring that the right level o investment is made in the right

inrastructure at the right time.

Historically, investment in New Zealands inrastructure has been

lumpy with signicant periods o under-investment.

Inadequate supply o inrastructure was cited as the most

problematic actor or doing business in New Zealand in the 2012-

13 World Economic Forum Global Competitiveness Report with the

overall quality o our inrastructure rated 47 out o 140 countries.

he NIU works with other government and private sectorgencies to deliver the outcomes o the Plan, with the overall

mplementation approach a mixture o engagement and dialogue,

eveloping partnerships, projects, research and reporting.

By 2030 New Zealands inrastructure is resilient and coordinated and contributes to economic growth

and increased quality o lie.

Better use o existing inrastructure

... Getting more rom the current stock o

inrastructure is about looking at how assetsare used, identiying opportunities or improvedmanagement, nding better ways o managingdemand and ensuring users expectations are

understood.

Better allocation o new investment

New Zealand needs to be smarter about

investing in new inrastructure. The Governmentwill prioritise investment where there areadequate returns and these are underpinned byrobust analysis through a well understood and

transparent process.

vIsION

OuTCOmes

There are two outcomes the Government is looking to deliver through the Inrastructure Plan:

ENGAGEMENT

Three-year action plan

Policy and advice toagencies and Ministers


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Action Progress report

1. Central government will commit to developing

and publishing a 10 year Capital Intentions

Plan or inrastructure development to match

the planning timerame required o local

government.

Due or publication in 2013, the ocus has been on the preparatory

work including reviewing and modiying the data collection process,

considering alignment with other related publications, and discussions

with local government and the private sector. The aim is to widen the

scope o the publication beyond just central government to provide a more

comprehensive view o inrastructure intentions.

2. Increase understanding o and encourage

debate on the use o demand management and

pricing in inrastructure sectors.

NIU has made a good start on understanding the issues in the New

Zealand context and the available evidence base, but specic deliverables

or decisions are urther away, reecting the complexity o the topic and

the range o stakeholders involved.

3. Improve access to inormation on current

inrastructure perormance to create certainty

about when, where and how inrastructure

development is occurring, includingconsideration o whole-o-lie costs.

4. Develop perormance indicators or each sector

on the stock, state and perormance o central

and local government inrastructure assets as

well as or those managed by the private sector.

Research and work undertaken to look at available inormation sources

and what indicators o perormance are available, along with how other

countries/regions have tried to measure perormance. Building rom

this, a ramework is being developed to measure our network o nationalinrastructure and evaluate progress against the outcomes o the Plan.

Preliminary testing is in progress or the Transport and Energy sectors and

related work is underway in the Social sector or the largest agencies.

5. Work with regions to develop more strategic

inrastructure planning at a macro-regional

level. Consider where adoption o spatial

planning would produce optimum outcomes,

particularly in metropolitan areas.

Work on the various Auckland and Christchurch Plans have demonstrated

a number o the benets o a more strategic and macro-regional planning

to inrastructure but have also been a big learning curve and identied

the importance o co-ordination between and across central government

and local government. The Ministry or the Environment is leading work

to consider how spatial planning can better be built into the planning

process. Signicantly, a number o macro-regional plans are developing,

especially in the Upper North Island, driven primarily by local authorities

and the private sector.

6. Improve scenario modelling to more accurately

project likely inrastructure investment

requirements rom the short to very long term.

Preliminary work completed, initial mega-trends and scenarios

developed, based on work done by NZTA. Open workshops across the

country are planned or later 2012/13 to discuss and seek input rom the

inrastructure community.

7. Use lessons rom Christchurch to signicantly

enhance the resilience o our inrastructure

network. This may include developingimproved seismic design standards, reviewing

organisation culture to improve perormance

in emergencies and identiying ways to quickly

return services to ull operational capacity.

A number o reports and reviews are starting to come through rom

Christchurch showing exactly how dierent inrastructure components

and materials perormed. Analysis and discussion across agencies andinrastructure providers is underway as to the implications and delivering

cost eective resilience. Evidence is emerging o a return to service ocus

being explored as part o these considerations. Providers and agencies

are progressing work looking at the resilience o the major inrastructure

sectors, including energy and the security o oil supply, given impetus by

not only the Canterbury earthquakes but the Maui pipeline outage.

8. Explore alternative sources o unding and

implement unding tools that can be used to

manage the current portolio more eectively.

Related to the Demand Management action above (number 2), work has

yet to start on this action but it has the same complexity and issues to be

worked through. Auckland Councils 2012 discussion document exploring

alternative unding options demonstrates the range and strength o

opinions held.

well advanced just starting not yet started

Sector Key developments since July 2011

Transport The Government Policy Statement on Land Transport Funding 2012/13 2021/22 set out a 10-year

ramework or roading and public transport investment.

Ongoing investment and progression o signicant transport projects, including the Roads o National

Signicance, the 10-year KiwiRail Turnaround plan and urban commuter networks.

Streamlined consenting process (Waterview and Transmission Gully) increasing coordination and

reducing uncertainty and regulatory compliance costs.

Increasing ocus and coordination across transport modes with the upper North Island reight network

and development o strategic reight networks.

Publication o National Airspace Policy, and continued work on associated National Airspace and Air

Navigation Plan. International air transport network enhanced by new air services arrangements with

China and Japan, with urther negotiations planned in South America.

Telecommunications Ongoing investment in the roll out o the Ultra-Fast Broadband (UFB) and Rural Broadband Initiative (RBI),

the structural separation o Telecom and establishment o open access deeds or RBI and UFB.

Started digital switchover and re-stacking o the 700MHz spectrum to ree up the spectrum or

opportunities rom 4G.

Energy Strategic documents released: NewZealand Energy Strategy 20112021and the NewZealand Energy Eciency

and Conservation Strategy 20112016, setting the energy sectors direction and role o energy in the economy.

Upgrading the electricity transmission grid and addressing potential gas transmission capacity issues via

the Gas Transmission Investment Programme.

Water Large-scale policy work programme (Fresh Start or Fresh Water) and resource management reorms.

2012 long term plans clearly and separately identied the three urban water services and the production

o nancial orecasts in a consistent ormat allowing a better picture o local government planned

expenditure and unding sources.

Development o non-nancial perormance indicators or local authorities to improve inormation

collected on urban water inrastructure in the 2015 long term plans.

First allocations rom the Irrigation Acceleration Fund.

Social Independent report assessing the asset management maturity o 13 Capital Intensive Agencies and initial

steps to develop a ramework o social asset perormance reporting.

Stocktake o the Capital Asset Management regime to develop renements.

Development and expansion o the BBC methodology and guidance.

Auckland Development o a regional spatial plan the Auckland Plan, identiying long-term goals and vision.

Initial debate around alternative sources o unding.

Development o the rst Unitary Plan making the link between land use and uture inrastructure provision.

Christchurch Return to basic level o service.

Establishment o the Stronger Christchurch Inrastructure Rebuild Team (SCIRT) alliance and

programme ofce.

Establishment o the Christchurch City Development Unit and release o the Christchurch Central

Recovery Plan.

Report on three-year action plan (2011 to 2014) Sector snapshots developments and progress


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The way orwardThe Plan sets out a long-term vision and seeks to provide common

direction or how we plan, und, build and use economic and

social inrastructure. To advance the Plan we must shit the ocus

beyond central government and better integrate the private sector,

local government and iwi/Mori entities. The 2014 Plan must be

based on better inormation and reect stronger coordination and

collaboration across the whole inrastructure community.

The Plan sets out a three-year action plan (reported on

above), recognising that the challenges will take many years toresolve. Since the Plan was released, we have heard rom the

inrastructure community about the longer-term uncertainty

and the need to ensure that the regulatory and nancial

settings are right to acilitate and incentivise the investment

required or the long-term challenges. As an example, regular

questions arise around whether as a country we:

are investing in the right level and mix o transport

inrastructure, noting the importance transport plays in

our primary sector and getting exports to market

are clear on the inrastructure requirements to meet ourlong term energy needs, including gas and liquid uels,

how this will be sourced, stored and distributed

are resolving a recognised lack o investment in our

transmission grid but in doing so are exposing similar

problems in local lines and distribution companies, and

can aord the large-scale renewal o water assets that

are now 50 60 years old, especially in areas o declining

population.

Building on this eedback, the NIU has a work programme over

the next our years ocused on the long-term picture o our

national network o inrastructure to increase the certainty andcondence o the inrastructure community.

Government has a number o diverse roles across the

spectrum o inrastructure types. In some areas, government

acts as a regulator o contestable markets, while in others it

acts as inrastructure under and/or owner.

All things being equal, the government will avour the distributed

decision-making power o private markets or the provision

and ownership o inrastructure. Private providers subject to

the disciplines o the product and capital markets are generally

accepted as achieving greater efciency and better outcomes.Government plays a supportive role in providing the legal

ramework or markets to operate efciently so that providers

can respond to changing preerences and allocate scarce

resources over time.


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Any government needs to take care when considering direct

investment, recognising that:

the commercial disciplines and efciencies that come

rom investors risking their own money to meet consumer

demands are difcult to replicate in the public sector

government investment can crowd out private investment

and set precedents that reduce private sector willingnessto invest. This sort o investment can divert scarce

government resources rom core inrastructure/public

good services (eg, roads, schools, hospitals, etc), and

government ailure can occur where the costs o the x

outweigh the costs o the problem being addressed or

where policy interventions aect incentives in unoreseen

ways resulting in unintended consequences.

In certain circumstances, a government can play a direct role

through intervening in a market, unding services or owning

inrastructure. Government has such a role where:

there is an unambiguous market ailure (eg, where the

private sector is unwilling to provide services). In some

circumstances, the nature o the inrastructural goods

and services are such that a private market cannot

ourish (these circumstances are generally where the

inrastructure has the characteristics o public goods), or

distributional and equity objectives are demonstrably

better achieved through in-kind provision than through

income support or other targeted measures.

Given the downsides and risks o government provision,

such interventions will be rare and any government should

transparently set out why and when it is departing rom

avouring market provision. This approach is consistent with

the overall purpose o the Plan to improve investment certainty

or business.

Future Inrastructuredemands drivers

o demand

What are the uture drivers o demand?

How consistent is this view across the

sectors?

Where are the most signicant orecast

decits and the relative priorities o these?

Scenario modelling

Macro-regional planning

Resilience ramework and

issues

Current state and

perormance o

inrastructure

What quantity/volume o inrastructure do

we have?

Where is it located?

What is the quality?

Does it deliver the appropriate level o

resiliency?

What capacity do we have, how well is it

utilised?

What is it costing? The price?

Perormance Indicators

ramework

Resilience ramework and

issues

Regulatory setting

Funding arrangements

How is it unded?

Who should be making the investment?

Are the regulatory settings optimised to

acilitate the required level o investment?

Capital Intentions Plan

Demand management

Alternative sources o

unding

Regulatory settings

analysis

ResPONse

s

TATe

PRessuRe

FOCus Key quesTIONsWORK PROgRAmme

(ACTION PLAN)

Framework o the work programme or the next our years


12/44

Overview rom

the NationalInrastructure

Advisory Board


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Overview rom the National InrastructureAdvisory Board

One year on rom the release o the Plan, there is little

disagreement about the strategic direction it outlines

and the outcomes that it is trying to achieve. As

we stated in the Boards oreword to the Plan, we

believe it highlights where progress has been made in

developing New Zealands inrastructure and pinpoints

areas where we must do better i economic growth is

to be accelerated. What has changed, however, is the

environment in which the Plan is operating.

In our role as conduit between inrastructure

stakeholders and the Government, advising both

the Minister o Finance and the NIU, the NationalInrastructure Advisory Board is putting orward our

thoughts on this changing environment and the key

challenges. The inrastructure sector must work together

to address these i we are to achieve our vision: By

2030 New Zealands inrastructure is resilient and

coordinated and contributes to economic growth and

increased quality o lie.

Fiscal environment

The scal environment is tight and the government

books are not orecast to return to surplus until 2014/15

at best. This tight scal environment creates a stronger

imperative to ensure that decision-makers undertake

robust investment analysis o all inrastructure unding

proposals. We need open and transparent discussion

o the unding available to manage expectations and

promote collaboration across central government, local

government and the private sector. The Auckland Plan,

with its signicant projected population growth, demand

or inrastructure and programme o large ununded

projects, is an example o where this collaboration can

be improved.

With over $108 billion o social inrastructure assets

collectively owned by New Zealanders, it is natural or

the Government to lead these discussions, recognising

that eectively managing this demand can ensure that

inrastructure investment is ocused on where it can

deliver the most benets.

Funding

Identiying and implementing alternative sources o

unding is also a critical part o the mix. Instead o

government being the rst place looked to or unding,

we need to better encourage private investment,

particularly by increasing certainty and thus reducing the

risk or the private sector.

Feedback rom key players in the energy and

telecommunications sector provides an example o risk

and uncertainty: the private sector does not believe

that the regulatory environment supports long-term

inrastructure investment. The same uncertainty

is playing out in the water sector, increasing the

importance o the decisions on urther Resource

Management Act 1991 reorm due this coming year.


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Resilience

Another year on rom the Christchurch earthquakes, and

a urther 11,000 atershocks, we now have a growing body

o knowledge about the resilience o our inrastructure

and the relationship between insurance and risk. This

knowledge has the potential to undamentally change

what we invest in and how much it will cost, owing into

the rate o return that we can expect.

Resource mobility

We are also seeing an emerging risk around resource

mobility. There are projected shortages o skilled labour

in Christchurch and workers being recruited rom

overseas. There is a lack o work or some construction

companies in the north. We need to better understandthis risk and what can be done to overcome any barriers

to the movement o resources.

Discussion

The Board has prepared the ollowing series o short

think pieces on a number o inrastructure topics to

stimulate the debate and encourage collaboration

amongst decision-makers, unders, providers and users.

We look orward to working closely with the Government

as the implementation o the Plan continues and we

see the strategic and policy work making a positive

dierence or the inrastructure sector on the ground.

Dr Rod CarrChair, on behal o the

National Inrastructure Advisory Board

National Inrastructure Advisory Board

Consisting o members rom the private sector

and outside central government, the National

Inrastructure Advisory Board was established toadvise the NIU and the Minister o Finance.

The Board provides both the Minister and the NIU

with advice and perspectives on inrastructure project

appraisal, capital asset management issues and the

development o the National Inrastructure Plan.

The current members o the Board are: Dr Rod Carr

(Chair), Lindsay Crossen, Margaret Devlin, Kathryn

Edmonds, Edward Guy, Dr Terrence Heiler, John Raeand Alex Sundakov. Dr Arthur Grimes has just let the

Board, completing a three year term in June. Further

inormation on the Board and proles o the members

is available at: www.inrastructure.govt.nz


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Inrastructure developments around Waterutures in the Canterbury Region

Since the Canterbury Water Management Strategy

(CWMS) was adopted by the Canterbury Mayoral

Forum in 2009 there has been a signicant

community input to develop water plans to meet the

environmental, social, cultural and economic objectives

o the Strategy. The CWMS is the rst attempt at

community-led water-based long-term regional

planning. The economic objectives o the CWMS

are ocused on increasing the area o land irrigated in

Canterbury (rom 500,000 ha to 1,000,000 ha) by

investment in water inrastructure largely storage

and distribution systems, improving the perormance

o the existing irrigated lands and making more rompast inrastructure investments. This ollows extensive

growth in irrigated lands in Canterbury in recent times,

most o it privately unded.

The recent growth has largely exhausted the smaller and

easily completed schemes, meaning uture development

will need to be at a more difcult, ambitious and

expensive scale. Any new schemes will need to

sustainably advance the achievements o all o the

objectives o the CWMS in parallel.

The CWMS process has identied major storage

and distribution possibilities, and has undertakenstrategic assessments as to how well they match the

overall objectives o the CWMS. In some cases, pre-

easibility and easibility studies have been completed

by developers. In total, close to 400,000 ha o new

irrigated land has been identied but challenging

implementation issues remain.

Alongside the new developments has been the

introduction o new technology across existing irrigation

schemes getting more rom the sunk investments o

previous generations. Farmer investments o more than

$500 million have led to the conversion o on-arm ood

irrigation systems to modern centre pivot irrigation.

Water savings o up to 20% have resulted and additional

lands are now being irrigated adjacent to the original

scheme areas. Similarly, armer initiated investments

in converting inefcient open channel distribution

systems to pressurised pipe supply are in progress

at a cost o $300 million across 70,000 ha. The

resultant water savings will allow additional lands to be

irrigated. Pressurised pipe supply will also substantially

reduce energy use and have reduced conversion costs

considerably. These developments have been led by the

private sector, and need to be supported by the CWMS.

Whilst the Canterbury experiment has made a good

start, there are still many challenges to overcome to

implement the Strategy. In particular, there is currently

active debate amongst stakeholders about the likely

impact o the recently notied Land and Water Regional

Plan, on meeting the irrigated area targets in the CWMS

The CWMS however is an example o making progress

through the eective co-ordination o stakeholders to

deliver a clearly dened strategy that recognises the

economic value o water to NZ Inc. Finding acceptable

win-win solutions is still an issue to be dealt with.

Considering that much has been written around the need

or improvement across a number o areas in the urbanwater sector, and the CWMS is an example o what can

be achieved, what is the impediment or adopting the

same approach to the urban water sector?

Given the importance o water to NZ Inc, and experience

with the CWMS to date, perhaps it is time to progress

the debate on establishing an independent entity

responsible or land and water matters - providing

transparency and accountability to all stakeholders in the

water sector. This unction would cover pricing, service

delivery and efciency. It would liaise directly with

the environmental and quality regulators to provide a

sustainable water sector or NZ.

NATIONAL INFRASTRUCTURE BOARD THINK-PIECE

Change in hectares consented or irrigation, ECAN, 1999 2010

Report ound at: http://www.me.govt.nz/publications/water/water-allocation-2009-10/index.html

Source: Aqualinc Research Ltd, 2010 report prepared or ME

0

200,000

400000

600,000

800,000

201020061999

Consented area (hectares)


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Proposed transport investment and planningor Auckland

The development o the rst Auckland Plan just

24 months ollowing the establishment o the new

amalgamated Auckland Council is a remarkable

achievement and should celebrated. The Auckland

Plan sets out an ambitious shit to a more compact city

supported by signicant new investment in transport,

especially public transport. But there are undamental

strategic problems relating to unding, and optimal

alignment o transport investment and land use

intensication that must be addressed i the objectives

o the Auckland Plan are to be realised.

Aucklands transport system is undergoing the most

signicant capital investment in decades. Across

road and rail, investment in the transport network

is the highest it has been since construction o the

original motorway system in the 1960s and 1970s.

This investment is expected to produce a signicant

productivity dividend with a orecast reduction incongestion o around 14% by 2021, despite population

growth o 22%.

Beyond 2021, the combined eects o population and

economic growth mean that trafc congestion will

increase once again.

To address this challenge the Auckland Plan proposes

over $20 billion o new transport capital spending,

including the City Rail Link, the Auckland Manukau

Eastern Transport Initiative and the East West Link, an

extension to the Northern Bus Way and an additionalWaitemata Harbour crossing.

Auckland Councils modelling shows that even with

the proposed projects and supporting travel demand

measures, such as increased parking costs, congestion

is orecast to increase signicantly rom 2021, aecting

the majority o trips on the Auckland network. A nearthreeold increase in public transport and walking and

cycling trips will not be enough to oset the additional

Given the cost and the orecast increase in

congestion, despite this substantial investment there

are undamental questions over value or money

and whether the right mix and timing o projects

has been chosen to address orecast travel patterns.

A priority or the Auckland Council, potentialunders and inrastructure users is to reconsider the

proposed projects and undertake the strategic review

to determine whether individually, and as a package,

they are the right projects to address the long-term

transport challenges acing Auckland.

This view is consistent with the ofcial Government

response to the Auckland Council, released in

July, which noted ... the Government also remains

to be convinced that the programme as a whole

represents the right mix o projects and will provide

value or money. To improve the prospects or

alignment on transport policy, the Government

encourages the Council to review the proposed

projects to ensure the transport strategy is optimised

to address orecast congestion under the likely land

use pattern.



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demand or private vehicle travel as the population

grows. Average travel speeds are orecast to drop by

18% in the peak period and 24% in the inter- peak period

by 2041. Private vehicle travel, including business travel,

will become more difcult as congestion becomes more

prevalent throughout the working day. From 2021, travel

time to key economic centres, including the city centre,

airport and ports, is orecast to increase signicantly,

while potential productivity gains rom a larger workorce

are likely to be limited by the overall perormance o the

transport network.

The size o the proposed programme is a signicant

challenge, with the Auckland Plan estimating $10 to

$15 billion in additional unding will be needed over

the next 30 years to deliver the proposed transport

programme.

Even i 50% o these costs were met by central

government, Auckland Council has not identied how

it would und its share. I it is also to co-und other

planned road and rail improvements, the Auckland

Council share increases to at least $15 billion. To

provide a context or the size o this challenge, i this

was to be unded by debt, the annual payments o

principal and interest over 30 years would exceed

$700 million equivalent to a 50% increase in

Auckland Council rates or up to 45 cents per litre

regional petrol tax.

While the Council is considering a range o unding

alternatives including increases in development

contributions, car park charges or airport departure

taxes these options would make a comparatively

small contribution to meeting its share o unding, even

when taken together.

I the Auckland Plans ambition level is reasonable,

and the unders, New Zealand drivers and Auckland

ratepayers and businesses, believe that the projected

benets o investment outweigh the cost, then it

is clear that current road unding tools (central

government Fuel Excise Duty and Road User Charges,and rates and other charges employed by Auckland

City) will require substantial augmentation.

This strategic review needs to seek improved alignment

between land use intensication and the proposed

transport investment. For example, committed

transport investment will improve accessibility in the

west and along rail corridors, but workers and residents

with limited access to rail, and those in the north,

will see less transport investment to meet planned

intensication, apart rom city bound designated bus

way corridors. Congestion can also be expected to

worsen signicantly throughout much o the city as

more residents are compacted into urban areas without

supporting transport linkages. In addition, heavy bus

movements are projected into Wynyard Quarter and

along Fanshawe Street while these areas are earmarked

or trafc calming and greater pedestrian activity, and

no major transport inrastructure investment is planned

or one o the largest generators o transport trips into

the city centre the University o Auckland, apart roma railway station in Albert Street.

As well as the alignment o land use intensication and

proposed transport investment, the strategic review

needs to also ocus on the critical elements o phasing

and timing. Currently, the proposed projects designed

to serve more distant suburbs expected to grow over the

next 10 years, such as the Botany to Manukau bus way,

are not scheduled or completion until the mid to late

2020s. In the city centre, immediate growth pressures

are already apparent along the city waterront, but the

Auckland Plans near-term transport investment, the City

Rail Link, is planned or mid-city and beyond into areas

exhibiting little oreseeable development attraction in

comparison to the waterront.

In conclusion, transport is a key enabler o economic

growth and the right transport inrastructure is critical

to ensuring that people and goods can continue

to move efciently in New Zealands largest and

astest growing city today, in 2021 and in 2041.

Despite the many commendable achievements o the

Auckland Plan, ensuring that transport investment is

optimally integrated and appropriately priced to support

population and economic growth needs when required,still requires urther work and remains an urgent priority

or the Auckland Council and inrastructure unders.


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Economics and the role more targeted andcomprehensive road pricing can play in

managing demand

There is near consensus among economists that managing

demand and optimising our transport networks through

some orm o more targeted road pricing should be part

o the transport programme or Auckland, especially

considering the orecast increase in congestion over the

medium/long term. However, road users are deeply

suspicious o road pricing, especially in the orm o tolls

and cordon ees, such as used in Singapore and London.

In act, managing demand on our roads using road pricing

seems to be an issue with the widest gap between

economists and the motoring public. This is despite the

large scale o road pricing tools that we already have Fuel Excise Duty (FED) and Road User Charges (RUC)

although these do not accurately reect all the ull costs

imposed on road users. For example, motorists pay the

same regardless o whether they travel at peak times

or o-peak. Implementing a more comprehensive and

detailed road pricing regime would have a number o key

benets.

On the other hand, public reaction to the general concept

o targeted road pricing is usually negative, oten coming

rom a airness perspective. Cordon pricing in London

has been seen as being very eective at pricing poorer

people rom the suburbs o the roads, while enabling

richer central city dwellers to move around more reely.

The high cost o bringing a car into the city may deprive

lower-income people o important options, particularly

when public transport does not provide the exibility

that a car can provide. A urther concern is oten a lack

o trust that government will use the revenue raised or

the purposes advised.

Considering this discord, it is oten difcult to know where

to start and how to progress the debate in a positive

manner. Fundamentally, the challenge is to understand how

the current network is being used and determine whether

this use is as eective and efcient as it can be. Knowingthis demand, and ensuring the network is being used as

optimally as possible, provides clarity and robustness

around what uture investment will be required and when.

A key to shiting the debate orwardmay be in better and clearer

communication o the need or uture

investment and the potential benets

o more targeted road pricing.

Potential benets include:

More efcient use o the existing inrastructure.

Road demand is very uneven: trafc may be at a

standstill during peak times but ow reely at other

times; school holidays change peak times; and

holiday weekends generate additional demands.

At peak times each motorists trip comes at a

greater cost to society because o the congestion

they unwittingly create or others. This means that

without a way o charging or congestion, o-peakmotorists are eectively subsidising peak-time

motorists. Pricing incentives can help spread the

trafc load more evenly between peak and o-

peak periods with the overall eect o making the

existing road inrastructure deliver a better service.

Reducing or deerring the need or new spending.

By reducing congestion at peak times, pricing can

reduce the need or extra investment. Congestion

charge revenue can be used to und new transport

inrastructure, reducing the need or revenue rom

other sources.

Increased economic growth and welare by reducing

time stuck in jams and trip time uncertainty.



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Providing motorists with choices. For example,

a popular innovation in the United States is to

provide tolled lanes on motorways alongside ree

lanes (see sidebar). Most people accept peak-time

congestion as a reasonable and inevitable aspect o

living in big cities. However, there are times whenbeing stuck in unpredictably crawling trafc can be

very costly: or example, i you have to get to child

care beore the late pick-up ee is charged, or you

have to catch a ight or need to get to an important

appointment. Having the option o paying a toll at

those times, but knowing that you will make it on

time, signicantly increases the value o the service

provided by the road.

Just communicating these benets is unlikely to be

convincing so economists are going to need to work

closely with policy-makers to implement more targeted

road pricing in a way that overcomes both the practicaldifculties and concerns held by road users, including:

Equity considerations and wider impacts some

users o the transport network will have limited

exibility to change travel behaviour in response to

a pricing signal. For some people the origin, timing

and destination o trips will be relatively xed and

travellers will consequently have little option but to

pay the charge.

Overall network impact there could be a negative

impact on the overall transport network, particularly

i trafc is diverted to other roads. This can beovercome by ensuring the pricing is comprehensive

across the whole network; however, this is a much

more difcult regime to implement.

Credibility and trust many people see demand

management as either an ideological position or an

excuse not to invest in the necessary inrastructure.

Governments oten accompany arguments in avour

o demand management with acknowledgement that

there must be alternative public transport, but such

promises are oten seen as not credible.

Road pricing schemes with a primary ocus on tacklingcongestion are in place in London, Singapore and

Stockholm. These cities have dense urban orms and highly

developed public transport systems, with public transport

accounting or the vast majority o all trips made.

By contrast, Norwegian cities have more dispersed

urban orms and public transport mode shares that are

more comparable with United States and Australasian

cities. Norway has pursued toll rings pricing schemes

with the key objective o raising a specied amount o

revenue to und a dened package o transport projects.

While these schemes also have a positive impact on

congestion, this is very much a secondary objective.

US cities (see Washington Beltway example) have

generally provided additional lane capacity in the new

inrastructure and then priced it to provide a better level

o service than the adjacent congested current lanes.

Gaining traction on urban road

pricing will require a ocus on what

will work best in the New Zealand

context. This is likely to include acomprehensive package o measures,

including both pricing and non-

pricing tools, innovations using

new technologies and non-assetsolutions. These innovations are

all part o managing demand andoptimising the existing network.

Road pricing generates vigorous debates this discussion

is worth having. It should be a long-term goal to move

urther towards a more comprehensive and targeted road

pricing system, understanding that a key challenge is to

close the gap in understanding and motives between

economists, road users and decision-makers.

As always, the key question to ask at each step along the

way will be whether the additional costs o the schemewill be outweighed by the benets to the users o the

transport system, particularly those who are paying.

Washington Beltway

The decision to incorporate dynamically tolled

lanes into the Washington Beltway resulted rom

an entrepreneurial proposal where private investors

came up with an idea o how an additional lanecould be incorporated into an existing right o way,

and were willing to pay or that investment out o

the expected toll revenue.

The toll lanes are dynamically priced to ensure

predictable travel times on the tolled lanes. Such

dynamic tolls may rise during peak hours or during

holiday events, but be very low during o-peak

times. A motorist has the choice o travelling on

the congested ree lanes or paying the going rate to

achieve a guaranteed travel time.

As a result, motorists using the Beltway (so ar, onlythe part o the Beltway that passes through the state

o Virginia, which has a well-articulated PPP policy)

will have an improved service even i they use the

existing ree inrastructure, while the revenues rom

road pricing deliver additional inrastructure.


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Focus on Christchurch

The Plan was released soon ater the catastrophic

22 February 2011 earthquake. With population and

economic growth as two key drivers o inrastructure

demand, the Plan recognised challenges in predicting

the uture size and make-up o Christchurch. The Plan

also noted the opportunities ahead with the redesign and

rebuild and the potential or innovative approaches to

deliver inrastructure and quality o lie.

Coordination

There are two dimensions to the recovery the short

term and the longer term. We must not lose sight o

the longer term in dealing with the immediate pressures

to x inrastructure and accommodate businesses and

residents displaced rom the central city and red zones.

It is essential the plan or the longer term provides

resilience, best use o investment and creates

opportunities in providing inrastructure to supportpopulation and economic growth in Canterbury.

The recently published Christchurch Central Recovery

Plan (CCRP) is widely acknowledged and is now

driving the central city development. Work is rapidly

proceeding on a Christchurch Transport Strategy

which, with reocus o the Greater Christchurch Urban

Growth Strategy, will provide direction or long term

inrastructure. The CCRP provides clustering or justice,

health and civic amenities to be developed. A blueprint

or education has been promoted that embeds uture

delivery with school recovery and rebuild priorities.

Coordination across all o these plans and strategies is

critical, especially the integration o inrastructure with

land use.

With such a signicant inrastructure programme, the

typical business as usual approach will not be sufcient

this creates a great opportunity or a bold new leadership

approach and an integrated cooperative approach. The

Stronger Christchurch Inrastructure Rebuild Team

(SCIRT), which is accountable or operational prioritisation

and programme implementation or the inrastructure

rebuild, is an innovative initiative that provides a proactiveresource or planning and construction.

Challenges andopportunities ahead

The Christchurch situation provides

an opportunity to address uture

needs based on service rather than

built assets, relating the service touture demand, spatial development

and resilience. For this new view to be

successul, it will require adventurous

planning, ocused collaborative

governance and courage to explorediferent opportunities.

Time and public demands create a signicant challengein striking the right balance between recovery

(operational prioritisation) and strategic inrastructure



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need (the long-term economic value and service). The

base level o inormation needed or long-term planning

is only just emerging and it will take time to evaluate the

opportunities and options. Geotechnical and land prole

inormation is now available to guide land development,

building oundations and storm water standards.

Consultation and collaboration also critical to ensure

the right long term outcomes need highly skilled and

proactive project management over time.

There is a real opportunity among the challenge o

unding resilience, betterment and long-term strategic

provision. Central and local government with insurance

assistance will und most o the inrastructure rebuild

and local government will be accountable or service

levels. There is an opportunity or the provision o the

assets to come rom alternative models o ownership

and unding, which require less government capital.

As an example o these challenges and opportunities,

consider the ollowing inrastructure sectors:

Telecommunications and energy

Resettlement will provide the opportunity to establish

resilience, services and capacity levels or particular

locations (eg, business and industrial areas). There is also

the opportunity to deliver a well-integrated broadband

rollout and strategically consider liquid uel storage and

distribution, gas reticulation and district energy schemes.

Transport

The distribution o population in Christchurch will change

and the rebuild provides opportunity to provide an

invigorated strategic direction or passenger transport,

commercial routing (eg, port, airport, rural and industrial

connections), light vehicle travel, cycling and walking, but

these must be aligned with the new visions and strategies.

Wastewater and storm-water

systems

Both suered extensive damage owing to land movement,made worse by the very at topography o Christchurch

and its gravity-ed system. Reinstatement and uture

strategic provision are priority challenges acing the rebuild

teams because capacity tolerances are marginal and

topographical challenges are difcult to engineer through.

A single wastewater treatment plant located on liqueable

land is a resilience risk. Urban developed land should not

be ood prone and a longer-term and broader perspective

to ood protection and management needs to be taken.

Environmental Inrastructure

Air and water discharge quality have historically been

signicant environmental issues or Christchurch. The

rebuild provides a unique opportunity to incorporate

initiatives that will deliver a quantum step change in

improving this area.

Fundamentally, it is essential to move beyond the

current ocus on operational prioritisation and

interdependencies. Inrastructure owners need to

organise and collaborate to ensure that the primary

objective is to reinstate inrastructure in a strategic way.

They need to collectively consider actors such as spatialplanning, enhancement opportunity, service resilience

and uture-proong in order to achieve long-term

economic, environmental and social outcomes.


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Risk management, resilience and insuranceThe Plan describes resilient inrastructure as being

able to deal with signicant disruption and changing

circumstances. This recognises that resilience is notonly about inrastructure that is able to withstand

signicant disruption but is also able to recover well.

Buildings and lielines that save lives are a priority, while

the earthquakes also revealed the resilience o widely

distributed but highly collaborative networks.

There are risks and high costs in over-investing in

inrastructure as the principal way o building resilience

beyond the level required to protect and preserve lie. This

over-investment includes over-engineering and over-

building. Reactions to the recently announced changes to

the building standards and how they are implemented,

along with the varying approaches taken by local authorities,demonstrate this risk and the importance o careul

consideration and robust analysis o the costs and benets.

Resilience involves considering the location and

concentration o inrastructure. Resilience is placed at

risk when signicant national inrastructure is overly-

concentrated in specialised acilities in one location,

or heavily concentrated in one region like the upper

North Island. Resilience requires consideration o the

ability to ail over to alternative sources o supply

o lieline services such as water supply, electricity,

communications and transportation as a more cost-

eective way o protecting lie and acilitating recovery.

Assuming that there is appropriate lie-preserving building

codes and compliance, adequate investment in the

inrastructure lielines, a spread o critical inrastructure

across the country and sufcient investment in social

capability to respond to and mitigate the costs and

losses rom disruption, there is still the question o

nancial resilience. How much should we orgo current

consumption to mitigate the nancial consequences o

uture disruption? At one extreme it could be argued that

this is a private matter where individuals determine the

tradeos they are prepared to make, based on their owntolerances or risk and ability to absorb losses. To insure

what assets at what cost against what risks?

Disclosing inormation about the relative risks can

send a useul signal to both suppliers and buyers. Just

as ratings indicating the probability o deault can give

investors guidance, simple disclosure o the likelihood

and consequences o a disruption in supply can inorm

decision-makers about the relative value o the cost and

risk in the short and medium term. Not all decision-

makers would need to process the inormation to

inuence outcomes or all buildings rated as re traps

or a communications provider rated as more likely tosuer supply interruptions will have incentives to make

these tradeos and determine how much to invest.

One question we are acing now is the extent to

which the government is and should be the insurer

o last resort? There is a risk that an overly-anxiousgovernment may crowd out sources o capital that are

more abundant and oer more efcient pricing. On the

other hand, a lack o inormation, short term portolio

constraints, operational complexities and other reasons

may cause mispricing o risk, under-insurance and

excessive economic rents relative to underlying risks.

Global insurers and local providers experienced

signicant losses rom seismic activity in Canterbury,

more than was anticipated prior to the events. As a

result o the Canterbury events, insurance cover has

become more expensive and available on tighter terms

than previously. This will aect New Zealand as a whole;not just Canterbury. New Zealand will have to careully

consider a range o strategies to promote resilience

and to reduce the severity o expected costs and losses

associated with natural disasters.

The Government should ensure that capital can ow

reely into Canterbury and New Zealand more widely.

On the other hand, a lack o inormation, short term

portolio constraints, operational complexities and other

reasons may cause mispricing o risk, under-insurance

and excessive economic rents relative to underlying risks.

It is important that inormation about New Zealand risk

and strategies taken to improve resilience and mitigate

risk are available to local and global providers o capital.

We should think very careullyabout the role planning, collaboration,

connectedness, networks and dispersion

can play in place o insurance in

reducing the nancial impact o the

next inevitable natural disaster.

Some questions to continue the discussion could include:

Should we invest in more than one submarine cable

network or our bre connection to the world?

Should we ensure that we maintain and develop at least

one deep water container port in each main island?

Should we deliberately disperse central government

capability in at least two major urban areas?

Are we satised that the efciency gains rom largebase hospitals adequately compensate or the

reduced resilience o tertiary health service delivery?



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An agreed way orward on unding requirements or key projects will require agreementon their merits and the analysis used to prioritise these, as well as consideration oalternatives to the current Pay As You Go unding ramework.

The year

The Government Policy Statement (GPS) on Land Transport

Funding 2012/13 2021/22 was published in July 2011 to

guide the New Zealand Transport Agency (NZTA) and local

authorities with planning their transport expenditure. Some

amendment to the GPS may be required to deal with the

roading reinstatement expenditure in Christchurch, which is

ar larger than originally estimated.

Multiple long-term plans are underway or have been

developed, especially in Auckland and Christchurch, identiying

key questions or provision o uture transport inrastructure

and raising a number o challenges relating to prioritisation,

sequencing and unding.

Government has continued its extensive investment in

transport programmes, especially with the urban rail networks

in Auckland and Wellington and the Roads o National

Signicance. 2011/12 was also the second year o the 10-year

Turnaround Plan or KiwiRail with new locomotives and at

deck wagons entering service.

The uncertainty and compliance costs associated with the

regulatory environment have been reduced or the largest

projects, with Waterview and Transmission Gully both using

the new board o enquiry process.

The earthquake-related damage to the roading inrastructure in

Christchurch is severe and a ocus has been on rebuilding. The

NZTAs alliance contracting model was adapted to establish the

SCIRT alliance to coordinate repairs o underground services

as well as roading. This provides an opportunity to plan the

longer-term intermodal transport network through the Greater

Christchurch Transport Statement.

In aviation, the National Airspace Policy released in April 2012,

and its related National Air Navigation Plan (in progress),

will guide aviation inrastructure investment, particularly

in updating technology, and allow operational saety

improvements, helping make both domestic and international

aviation more time and uel-efcient, and more reliable.

The Ministry o Transport has led a detailed nancial,

operational and commercial viability analysis into the long-

mooted potential inter-island erry terminal at Cliord Bay.

Increased coordination is evident, both within and across

central and local government, especially in the Auckland and

Christchurch contexts and the continued development o the

upper North Island reight network. This builds on work to

identiy the key strategic reight routes and better classiy the

roading network (State Highway Classication System and

the piloting o a local road classication system) to better

understand the core unctions o each road and align planning

and investment where most needed. The response to the Renaship grounding also highlighted the strength o coordination

between central and local government in the transport

emergency management ramework.

Transport


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1

2

3

Looking ahead

Recent closures o the Manawatu and Waioeka Gorges have

highlighted the demanding environments that some o ourkey transport links traverse and the impact on productivity o

workarounds. In the case o the Manawatu, alternative routes

have been available, i not ideal, to deal with the closure o a

key link. The closure o the Waioeka Gorge meant a diversion

o several hours or trafc to Gisborne.

The Productivity Commission report on international reight

ound that productivity in New Zealands reight sector is good,

but has room or improvement. While costs have allen over

the past 20 years, productivity growth has slowed. Although

commentators oten query the large number o New Zealand

ports with container capability, the indicators looked at by

the Commission suggest that, while container productivity at

New Zealand ports is below world best practice, it compares

avourably with Australian ports. International shipping prices

to and rom New Zealand are notably higher than those to and

rom Australia, whereas New Zealand port costs are lower.

The Commission recommended more use should be made o

acilitated discussion models o cooperation in coordinating

investment planning to minimise the risks o over-and-

under-investment in additional capacity and capability at

New Zealand ports. The Government is soon to release its

response to the Commissions recommendations.

Regional Transport Committees have a key role in ensuring that

regional programmes take account o intermodal connections,

plans or opportunities or changes in use o sea and air ports

and the transport implications o proposed changes in land use.

Such integration is being pursued, particularly in the Auckland/

Hamilton/Tauranga triangle and in the Canterbury rebuild.

A key actor in the Plan has been to balance the supply side

interventions o providing new or improved transport links with

optimising the use o the existing network, especially urban

commuter and strategic reight routes.

NZTA has developed investment analysis techniques to

quantiy direct and indirect benets and used these to

Highlights rom the past year

GPS 201222 published July 2011

Purchase o 57 new electric trains or Auckland

$1.1 billion in the redevelopment and electrication

o Aucklands metro rail network

Matangi trains entering service in Wellington

Victoria Park Tunnel opened March 2012

Waterview Connection consenting process

New Kopu bridge opened December 2011

National Airspace Policy released April 2012

Cliord Bay nancial, operational and commercial

viability analysis underway

Rena oil spill cleanup and recovery led by Maritime

NZ and Bay o Plenty Regional Council

SCIRT alliance model previously developed by

NZTA working on coordinated repairs o roading

and underground services in Christchurch

Government Transport Expenditure as a percentage o Gross Domestic Product

Total Government Transport Expenditure Central Government Transport Expenditure

Note: Includes, NLTF, Super Gold Card, KiwiRail Turnaround Plan expenditure, Metro Rail expenditure and other non-NLTF expenditure.

Excludes costs associated with the purchase o KiwiRail.

Source: New Zealand Treasury, Ministry o Transport, New Zealand Transport Agency, Statistics New Zealand

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

%

201520102005200019951990198519801975

PROJECTION


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assess transport investments. It is now developing urther

improvements and extensions, including to determine the

optimal timing o transport investments. An agreed way

orward on unding requirements or key projects will require

agreement on their merits and the analysis used to prioritise

these, as well as consideration o alternatives to the current

Pay As You Go unding ramework. An acceptable long-term

solution requires eective engagement with transport users

and interest groups.

The numbers

Central and local government expenditure on land transport

(road, rail and public transport) has increased markedly since

the early 2000s ater restricted spending since the 1980s. The

stated justication or

auckland infrastructure report

Documents