OPINION: Why infrastructure is important to your business

Commercial property and development only works if good infrastructure supports it.  Infrastructure is needed to bring people to and from home, work, shop and provide the utilities essential to business – water, electricity, internet.  There is an economic cost, in the order of billions of dollars, if that infrastructure is clogged or inefficient.

Despite its importance, funding and building infrastructure before it is needed is not well done in New Zealand.  The Government both local and central has either seriously underinvested in infrastructure or placed it firmly in front of the development community to pay for it.   This creates yet another hurdle in delivering housing quickly and efficiently.

If we want our cities to grow, both now and in the future, we need to work out how we pay for crucial infrastructure. 

What the experts say

Tackling this issue head on, Property Council recently hosted a series of Infrastructure events in Auckland, Christchurch, and Wellington, to discuss –  how do we do it?

Property Council Australia

Glenn Byres from Property Council Australia talked about what had and had not worked well in Australia.  He said that Tax Increment Financing, based on actual value increases in property directed back into infrastructure, worked much better than value capture models that simply added new taxes on top of existing property taxes. 

Mr Byres explained the benefits of asset recycling programmes in New South Wales and Victoria where long-term leases on existing infrastructure were sold and the proceeds reinvested in new infrastructure, such as rail.  He discussed how the process had retained public ownership and freed up capital for more public investment.  Asset recycling also gained 30 per cent greater public support than asset sales.

Infrastructure investment firm HRL Morrison

Steven Proctor from infrastructure investment firm Morrison & Co argued a move towards public-private partnerships (PPPs) should not be about funding, nor a shortage of funding, given the interest from banks and other investors in infrastructure. 

Mr Proctor instead focussed on the added value the private sector could bring.  Using data, he demonstrated how PPPs tended to deliver more projects on time and on budget compared to other tendering methods.  Most importantly he argued that because the private sector is much better at managing risks, PPP projects often were higher quality and had lower operational costs than publicly managed projects. 

Development Christchurch

In Christchurch, Paul Silk, from Development Christchurch, highlighted that the rebuild of central Christchurch was the mother of all PPPs.  Fragmented and diffuse funding sources and a requirement to go through inflexible government procurement processes had slowed the rebuild down, and resulted in some lost opportunities. 

He pointed out how lessons could be learnt for future large projects, but the long-term objective is delivering for Christchurch.  The aim of the Blueprint (which turns five next month) was to drive economic activity into the city by delivering three key projects; the Health Precinct, the East Frame and the Convention Centre Precinct.  These projects are currently underway. 

All the speakers provided positive examples of how the Government and the private sector could work together to provide the infrastructure New Zealand’s cities need.  Thought provoking and informative the events are part of our work in providing the platforms and guidance on how we tackle issues that are impacting on the development community.


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