Local Government Magazine
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Infrastructure funding – we need to change

Despite our national housing crisis and despite growth coming at us like a freight train, one fundamental issue is failing to ignite public debate. By Paula Southgate, Mayor, Hamilton City.

Any Elected Member can start a community conversation about playgrounds or parking. But try engaging people on undergound pipes or any essential (but often unseen) infrastructure. Eyes will glaze over and attention will move quickly to those things people can see, touch and understand.

Our critical infrastructure is often ‘hidden’ in full sight, despite it being a foundation of every community. We need water services, roads, and power to build the new homes we so desperately need. Infrastructure enables new businesses and industry to establish and grow, creating jobs and driving well-being.

Yet we have a massive infrastructure issue looming – and looming fast. There is a frightening gap between the investment that’s budgeted in Council Long-Term Plans  … and the money available to fund that investment. The gap is getting bigger, yet the silence from the wider community is deafening. That’s despite increasing expectations from the community and government for safe drinking water, clean rivers, and congestion-free travel.

This month the Infrastructure Commission released a draft strategy that implored our sector, alongside government and industry, to plan and build infrastructure in a different way. The commission noted building what we need to keep up with demand, and face future challenges, will cost about $31 billion per year; almost double what the country spends now.

Given the looming crisis, I’m despondent so few people are talking about it. Local government has some responsibility for that. We are good at taking apart the smaller issues that people can more easily understand.

But, we’re not so good at driving important, albeit difficult conversations about massive, long-term concerns that don’t naturally sit within a three-year election cycle.

And while we might communicate the costs of infrastructure to help explain large rates rises, we don’t do so well in communicating the economic, environmental, and social benefits that our communities demand and that infrastructure drives.

The issue has been highlighted during recent (and ongoing) debate about water reform. Many councils, including Hamilton City, raised strong concerns about governance, local voice and asset ownership proposed in the government’s initial model. We must keep raising those issues.

But, with some notable exceptions, I saw little discussion and even less public commentary about the fact that some parts of our water infrastructure are simply not fit for purpose. Out of sight, out of mind, despite estimates of a $185 billion water bill heading the nation’s way.

It is not just water infrastructure that’s desperately underfunded. The challenges for local government are huge and Hamilton City Council is no exception. In recent years there’s been a massive increase in both the scale and value of our capital works programme as we seek to keep up with growth plus meet our legal and growing environmental obligations.

We have signalled $1.07 billion of ‘unfunded’ infrastructure in the first 10 years of our 30-year Infrastructure Strategy. That’s $145 million in water, $204m in wastewater, $49m in stormwater, $542m in transport, $94m in parks and $40m for community infrastructure assets. At year 11, those costs blow out of all proportion, but few members of the public are aware of that.

Those are eye-watering figures and are simply unaffordable for a city that is already carrying significant infrastructure-driven debt. Our ratepayers will not want to pay more.

We all know councils are under pressure to deliver (much) more but keep rates down. We’re reminded almost daily. Local politicians have been accused of ignoring issues which will come to a head in 30 years’ time, in favour of dealing with issues which are important – right now – to their community.

In some instances that might be correct, and I’ve heard it said that we must take the politics out of technical decisions. But one thing is stark. As the HCC Infrastructure Strategy makes clear, “…we need to change. Making incremental and minor changes to how we plan, deliver and fund infrastructure will not be enough.”

Lately, I’ve been having discussions about this issue with groups like Infrastructure NZ. It’s also been useful to see the Infrastructure Commission’s draft strategy, released on October 13. That strategy was developed after the commission canvassed the views of 24,000 people.

The top three issues they identified are enlightening. Not always having access to safe drinking water was the number one infrastructure issue for New Zealanders. Creating too much waste, and our ageing schools and hospitals, were the second and third most important issues. In addition, four out of five New Zealanders wanted to see an increased investment in water networks to solve current issues.

Yet, despite this, I didn’t see a lot of concern about water infrastructure reflected in the recent water reform debate. Indeed, there was some apparent shock at the realisation that the costs of water service – with or without reform – must rise.  That’s what years of underfunding and the huge wave of compliance change and growth does.

We all know the infrastructure challenge is a complex one to solve, especially given other reforms being considered by the Government and the additional pressures from frameworks like the NPSUD.

But, ultimately, any solution will require spending public money and finding effective funding partnerships with the private sector. We will not make substantive progress on this issue, and the substantial challenges ahead, if we do not talk openly with our communities about their expectations and the very real funding gap we are facing.

We might be concerned within our sector and within the infrastructure sector, but we are leaving the public behind.

Of course, we also need conversations with others who can drive change, including the government. We need more diversified funding tools to enable infrastructure projects. The Independent Funding and Financing Act is a good start, but it needs to be more flexible to enable smaller projects as well as big ones. Other government initiatives like the Housing Infrastructure Fund and the Infrastructure Acceleration Fund are essential.

For me, and for others like Infrastructure NZ and the Infrastruction Commission, it is crystal clear.

We need to fundamentally rethink how we fund infrastructure so we can lead with it –  not lag behind playing catch-up. The current model is unsustainable and will not allow us to deliver what our communities need.

These are critical but probablly unpopular conversations. But as leaders within our communities, these are conversations we should be having now.




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