CIP injects $600m into infrastructure funding

Developers in Auckland will be the first to benefit from the Government’s new infrastructure funding vehicle – Crown Infrastructure Partners (CIP)

Formerly known as Crown Fibre Holdings, CIP is a Crown company that will co-invest in infrastructure with councils and private investors to alleviate the pressure on councils in high-growth areas, whose ability to access further finance is limited by existing debt levels.

Up to $600m could be invested by the government over a two-year period – in addition to contributions from councils and private investors – to speed up large-scale housing developments through the construction of roading and water networks to open up land supply.

Local Government Minister Anne Tolley says councils will have the option to buy back the infrastructure in the future, but that they don’t have to.

“This innovative new funding method will be made available to cash-strapped councils struggling to fund new long-term infrastructure,” said Mrs Tolley. “This is all about introducing outside capital, so current ratepayers don’t get burdened with all the costs of growth.”

Special Purpose Vehicles (SPVs) will be established to invest in roading and water infrastructure assets in place of councils. In return, the SPV will receive a stream of revenues from developers or the households that use the infrastructure – possibly in the form of a one-off payment for developers, or through a targeted rate or volumetric charging for householders.

Auckland to get first bite of the cherry

Two Auckland-based projects are the first to be selected for the assessment process. If approved, it is estimated more than 23,000 homes could be enabled through CIP funding.

Developers are seeking a total of $588m – which would be drawn from a combination of CIP and council funds – for the Auckland North and Auckland South projects.

The Auckland North project focuses on Wainui, where the existing infrastructure can only support the construction of 2,000 new houses. It is estimated that an infrastructure investment of $201m could sufficiently increase infrastructure capacity to service up to another 5,500 houses.

In the south, Paerata, Pukekohe, Drury West and Drury South offer the greatest opportunity to fast track the supply of housing. It is estimated that an infrastructure investment of $387m could increase the supply of new houses by 17,800 across the four areas.

Of those, Drury South is the closest to being ready for development, with planning permission already obtained. It is expected the design and consenting stages could be completed by the end of this year. Should major civil works commence in October 2017, it is expected the project will be ready for the first occupants in 2019.

The project requires new wastewater and freshwater connections, including a 4.5km trunk sewer between the project and Hingaia pump station, along with a new connection to the Waikato water pipeline.

This infrastructure will be designed to integrate with other developments in the area and could service in excess of 10,000 households. Civil works required to deliver the land ready for development will total $300m, of which an estimated $68m in road and waste infrastructure will be assessed for CIP funding.

Additional housing enabled
Project	Current yield	Enabled by CIP	Total yield
North
Wainui	2,000	5,500	7,500
South
Paerata	1,000	4,500	5,500
Pukekohe	700	7,300	8,000
Drury West	1,300	5,000	6,300
Drury South	0	1,000	1,000
Total all areas	5,000	23,300	28,300