Minister of Transport Phil Twyford has sent a clear message to would-be investors in New Zealand’s transport infrastructure – “the Government is open for business.”
He is sending Associate Transport Minister Shane Jones on a fact-finding mission to Australia tomorrow to investigate the best ways investors can work with the Government on public-private partnerships (PPP).
“The message from our Government is we’re open for business,” Twyford said after addressing a business and local Government summit on the “changing direction in transport for New Zealand.”
Twyford says it is likely projects, such as Auckland’s light rail and rapid transit, will be funded in collaboration with the private sector through PPPs.
He says it’s too early to put a figure on how much the Government is expecting private capital providers to stump up with but says it’s likely to be on “multiple billion-dollar projects.”
Twyford says there has been a “great deal of interest” from parties looking at getting involved in a PPP with the Government.
“We’re very happy to work with private capital to make these big investments.”
The Government has previously indicated it would be looking at PPPs as a way to meet some of its investment expectations but, at the moment, the process for investors is too complex.
This is the reason Jones is heading off to Australia tomorrow.
“We need to configure ourselves better within the state so there is less static when either foreign or domestic investors approach the state to play a role in our infrastructure turbocharging,” Jones says.
More debt to be taken on
But PPPs would require more debt from the Government.
Twyford says there are options when it comes to new revenue streams to help pay for this – for example, through land value capture and infrastructure bonds.
But the projects would be long-term and, according to Twyford, it would be “nuts to try and pay for it out of next year’s road user charges or a petrol tax.”
“We should be spreading that debt over multiple generations who are going to benefit from the infrastructure.”
But taking on more debt would be problematic.
As it stands, some of New Zealand’s council’s – including Auckland’s – are close to their debt limits and the Government has committed to reducing net core Crown debt levels to 20% of GDP by 2021/22.
But Twyford says there is a way the Government could take on more debt to fund the PPPs without abandoning its debt target and pushing councils over its limit.
“We intend to build on some of the work that was done by the previous Government in establishing Crown infrastructure partners as a special purpose vehicle.
“It’s a balance sheet that’s not council or Governments – it’s a public purpose hybrid if you like.”
He says through this, a lot of capital could be borrowed to pay for the infrastructure needs the country is facing.