auckland infrastructure report
TRANSCRIPT
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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
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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.
NATIONAL INFRASTRUCTURE BOARD THINK-PIECE
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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?
NATIONAL INFRASTRUCTURE BOARD THINK-PIECE
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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