capturing the total value of tomorrow’s infrastructure · • opportunity mapping: identifying...
TRANSCRIPT
April 2017
www.pwc.co.nz
Capturing the total value of tomorrow’s infrastructure Financing New Zealand’s future projects through value capture
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New Zealand’s infrastructure future New Zealand finds itself at an interesting point in time. We’re very much a modern economy, but sparsely populated; however, that’s quickly changing across many parts of the country. As New Zealand grows, our towns and cities will need to be liveable, well connected and resilient for the future. We’ll also need quality infrastructure to achieve our ambitions of economic and social wellbeing and prosperity. New Zealand’s future economic competitiveness goes hand-in-hand with how efficiently our towns and cities function.
This has captured the attention and imagination of central and local government. This publication takes a closer look at the tools, methods and strategies that will help support this bright future and that are in line with the National Infrastructure Plan, central government policies around strategic infrastructure networks and local land-use plans.
From an infrastructure providers’ perspective the good news is that help is at hand. PwC has strong value analysis and capture expertise, built up from many Australian projects.
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Why we need to talk about value capture All around the world, infrastructure funding is a challenge. Beyond budget funding processes and debt funding, how can governments deliver new, improved or replacement public infrastructure that boosts the liveability and competitiveness of our cities and ensures economic and social wellbeing?
Value capture is a methodology that is now being used to solve this challenge. It shifts the focus from ‘user pays’ to ‘beneficiary pays’ – identifying and quantifying the revenue streams that can contribute to project funding. The value that is captured is linked to the additional advantages received by those who benefit from new, improved or replaced infrastructure.
This position was recently endorsed by the Productivity Commission who determined in their March 2017 Urban Planning Report that value capture is an equitable way to capture infrastructure contributions.
Value capture can be used across: • Property Development: New residential
communities, land divestment and acquisition, site specific development, precinct development.
• Urban planning: Urban renewal, citywide planning, greenfield, infill.
• Transport: Major new transport infrastructure, network change, site specific changes, new/enhanced infrastructure, system changes and scheduling uplift.
• Tourism & sports infrastructure: New/enhanced tourism infrastructure, new sports arenas, new/enhanced sports precincts, cultural precincts.
• Social infrastructure: New community infrastructure, enhanced community infrastructure, new/enhanced health precincts.
• Employment zone development: New commercial zones, new retail/mixed-use zones, new institutional zones, new/enhanced employment facilities.
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How does value capture work? Value capture begins with a concrete plan that addresses four critical questions:
1. What benefits will be created?
2. Who will benefit?
3. Where will the benefits occur?
4. What value can be captured?
Key focus areasValue Creation Analysis• Context Assessment: Identifying and
documenting characteristics of the investigation area including land use type and zoning; existing amenities and services; transport linkages; land ownership; demographics.
• Stakeholder Identification: Stakeholders can be direct (eg landowners, investors, developers) or indirect (eg residents, employers, businesses, government).
• Opportunity Mapping: Identifying and understanding the value that a project will create for different stakeholders. This forms part of an integrated land-use strategy that identifies how an infrastructure project could add value to its surroundings.
• Value Creation Mapping: Identifying the positive (value creation) and negative (value loss) effects for stakeholders.
Value Capture Analysis• Quantification of Potential Value: This step
quantifies the change in value based on a distance basis from the core, or location within a defined precinct.
• Mechanisms Analysis: Identifies how value will be captured from the different stakeholders to create the greatest returns.
• Optimisation Focus: Evaluating different infrastructure options to select the one that creates the greatest lift in value.
• Net Revenue Analysis: Once a preferred option has been selected, we carry out detailed revenue analysis, including backcasting and forecasting revenue and cash flow of value-capture projects, and assess the uplift in property values.
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Benefits of a value capture approach Value capture provides a robust, data driven, integrated solution for governments, city and infrastructure planners, and developers, enabling them to:
• Assess strategic options for land use planning
• Optimise capital allocation; particularly between competing projects
• Quantify potential sources of revenue that may bring projects forward
• Recoup part of the costs of infrastructure equitably among beneficiaries
An example of Value Capture in practiceValue Capture analysis utilises:
• Multiple opportunities
• Up to 75 Benefits
• Up to 50 Beneficiaries
• Up to 24 Mechanisms
• Spatial location analysis built up from the meshblock level.
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New train stop
Proven to be accurate down to the meshblock level, and has been repeated in many different locations in New Zealand and Australia.
1. BenefitIncreased amenity for residential properties
Reduced travel times
2. BeneficiaryProperty owners
Public transport users
3. LocationProximity of amenity to property
Proximity of amenity to user
4. MechanismChange in property value
Value of change in travel time
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The PwC approach Our end-to-end infrastructure and commercial planning offering is helping businesses and governments make the big decisions shaping New Zealand’s infrastructure future. We evaluate options, optimise trade-offs, and produce bankable quality revenue forecasts. This leads to better decision making ability and realisation of benefits for multiple beneficiaries and stakeholders. Our bespoke methodology leverages our industry expertise, access to best practice experts across the entire project lifecycle, and our deep understanding of the process to drive strategic, evidence based decision making.
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Contacts
Dr Bill Kaye-BlakeDirector+64 4 462 [email protected]
Craig RicePartner+64 (9) 355 [email protected]
David WalkerDirector+64 (9) 355 [email protected]
Richard ForganPartner+64 (4) 462 [email protected]
Melanie LuenAssociate Director+64 9 355 [email protected]
John Marinopoulos (Australian contact)Partner+61 (3) 8603 [email protected]
© 2017 PricewaterhouseCoopers New Zealand. All rights reserved. ‘PwC’ and ‘PricewaterhouseCoopers’ refer to the New Zealand member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
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