The Infrastructure Funding and Financing (Western Bay of Plenty Transport System Plan Levy) Order 2022
Tauranga is the first city to use a new Government tool to raise funding for much-needed infrastructure. The Infrastructure Funding and Financing (Western Bay of Plenty Transport System Plan Levy) Order 2022 (TSP Levy Order) is the first Order in Council established under the Infrastructure Funding and Financing Act 2020 (IFF Act).
Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development (HUD) is responsible for administering the Infrastructure Funding and Financing Act 2020, and also has the roles of ‘recommender’ and ‘monitor’ under the Act.
For more information on the Infrastructure Funding and Financing Act, and HUD's roles, please read our webpage about the Infrastructure Funding and Financing Act 2020.
The Transport System Plan Levy Order allows a Special Purpose Vehicle (SPV), called the TSP Finance LP, to charge a levy to most rate paying properties in Tauranga City Council’s rating area for 30 years, from 1 July 2024.
This levy has enabled the SPV to raise approximately $175 million from private financiers to reimburse for the construction costs of up to thirteen transport projects in Tauranga, selected from the wider Western Bay of Plenty Transport System Plan (TSP).
The SPV is owned by Crown Infrastructure Partners (CIP). CIP is a Crown-owned company, listed under Schedule 4A of the Public Finance Act 1989.
The SPV has raised this funding from CIP, Westpac New Zealand Limited, and the Bank of New Zealand.
The TSP levy partially replaces a targeted rate Tauranga City Council is charging to fund its transport projects. The benefits of the levy replacing a targeted rate includes that:
- The use of the levy frees up debt headroom for Tauranga City Council, creating capacity for additional infrastructure investments benefiting Tauranga residents.
- Levy payers’ total rates bills (inclusive of the levy) are not expected to change materially with the inclusion of the levy and the reduction in the targeted rate.
The Transport System Plan aims to support a projected population of 258,000 residents and 34,000 new homes in Tauranga, resulting in more than one million extra transport movements every day by 2050. The plan considers a range of transport modes including roads, rail, public transport, freight, walking and cycling.
The Transport System Plan seeks to:
- Support quality urban growth by improving access to social and economic opportunities like schools, jobs, GP clinics and shops by different transport modes (including walking, cycling, buses, and vehicles.)
- Increase use of public transport, cycling and walking to help reduce transport-related greenhouse gas emissions
- Maintain or improve off-peak travel time predictability for freight via road and rail and
- Contribute to a reduction in road fatalities and injuries
The levy applies to all properties within the district in which Tauranga City Council is entitled, at any time, to charge general rates under the Local Government (Rating) Act 2002 (Tauranga City Council rating area), excluding any protected Māori land. Properties subject to Tauranga City Council's rates remissions policy will also not be charged the levy.
If the boundaries of the Tauranga City Council rating area are updated over time, the levy area will automatically update alongside it.
Fifty per cent of the proposed levy will be charged to residential rating units in the levy area and fifty per cent will be charged to commercial rating units.
The capital value (CV) of a rating unit will be used for assessing the annual levy liability of that rating unit:
- It is estimated that a median CV residential rating unit would be charged a levy of $68 in the first levy year (2024/25), increasing to $80 in 2029/30 and $95 in 2034/35.
- It is estimated that a median CV commercial property would be charged a levy of $521 in the first levy year, increasing to $618 in 2029/30 and $730 in 2034/35.
Protected Māori land can only be included in a levy area with the written consent of the owners of the land. This consent must be provided in advance of the recommendation report being provided to the Minister of Housing.
Protected Māori land is defined in section 11 of the IFF Act(external link) and generally includes Māori freehold land and Māori customary land. However, it also applies to a number of other categories of land, including general title land owned by Māori if it was previously Māori freehold land, but had its status changed by Part 1 of the Maori Affairs Amendment Act 1967 or an order of the Māori Land Court made on or after 1 July 1993.
It was not feasible for Tauranga City Council to seek to obtain the consent of owners of protected Māori land and as such, no parcels of protected Māori land have been included in the levy area.
The levy will be charged for 30 years from 1 July 2024 to 30 June 2054.
The maximum amount of levy revenue that may be collected over the entire levy period is $524,846,339.54 (plus GST, if any).
This amount may be reduced from time to time if the SPV’s forecast of its excess levy revenue exceeds $1 million (see below). Any reduction in the maximum levy revenue will be published here.
Intended annual levy
The amount of levy revenue that the SPV intends to charge in each year of the levy period is detailed in the table below:
Levy year ending 30 June
Intended annual levy revenue (plus GST, if any)
Levy year ending 30 June
Intended annual levy revenue (plus GST, if any)
If the maximum levy revenue is reduced, corresponding amendments to the intended annual levy for the remainder of the levy period must also be made and the above table will be updated.
The annual levy is the amount of levy the SPV intends to collect in a given levy year. Before the start of each year in the levy period, the SPV must set the annual levy for the upcoming levy year by:
- Taking the intended annual levy for that year and
- Adding the annual reconciliation amount for the prior levy year.
The annual reconciliation amount for a levy year will be calculated with the following steps:
- Start with the annual levy for the year being reconciled.
- Subtract the amount of levy assessed to date in the year being reconciled.
- Subtract any increases in levy assessments for prior levy years determined after the previous annual reconciliation was undertaken.
- Add any decreases in levy assessments for prior levy years determined after the previous annual reconciliation was undertaken.
The annual reconciliation for a levy year will occur between Tauranga City Council sending out the final levy invoices for the year in February, and the SPV setting the annual levy for the next year by May 10.
As such, there may be changes to the amount of levy assessed for a levy year after the reconciliation for that year has been completed (for example, because of an objection raised by a as to the amount of levy for which they have been assessed that is not resolved at the time the reconciliation is completed).
Steps 3 and 4 above ensure these changes to the amount of levy assessed after the reconciliation will be taken into account in a later reconciliation.
Example - annual levy setting process
The annual levy is $8,486,865.33
- This is the intended annual levy for the 2024/25 levy year. There is no prior levy year to undertake the reconciliation for.
2025/26 annual levy
The intended annual levy for the year is $9,556,344.18. This must be added to the reconciliation amount for the 2024/25 levy year to calculate the 2025/26 annual levy.
- The annual levy for the previous year (2024/25) was $8,486,865.33
- At the time of the reconciliation, $8,500,000 of levy had been for the 2024/25 levy year.
- Reconciliation amount = $8,486,865.33 - $8,500,000 = -$13,134.67
The annual levy for 2025/26 is therefore $9,543,209.51
- $9,556,344.18 + (-$13,134.67) = $9,543,209.51
2026/27 annual levy
The intended annual levy for the year is $9,865,732.19. This must be added to the reconciliation amount for the 2025/26 levy year to calculate the 2026/27 annual levy.
- The annual levy for the previous year (2025/26) was $9,543,209.51.
- At the time of the reconciliation, $9,540,000 of levy had been assessed for the 2025/26 levy year. In addition, since the reconciliation for the 2024/25 levy year, the total levy assessment for the 2024/25 levy year had increased by $1,000.
- Reconciliation amount = $9,543,209.51 - $9,540,000 - $1,000 = $2,209.51
The annual levy for 2026/27 is therefore $9,867,941.70
$9,865,732.19 + $2,209.51 = $9,867,941.70
Assessing levy liability
Once the annual levy for a year has been set, it will be allocated to the leviable ratepayers based on the below:
Residential levy rate = annual levy x 50%
aggregate capital value of residential rating units
Commercial levy rate = annual levy x 50%aggregate capital value of commercial rating units Levy amount per residential rating unit =
Commercial levy rate X capital value of rating unit
Levy amount per commercial rating unit =
Commercial levy rate X capital value of rating unit
For the purposes of the above formula:
- Rating unit includes any part of a rating unit with the applicable categorisation (residential and/or commercial)
- The aggregate capital values of residential and commercial rating units respectively are estimates of the aggregate capital values as at 30 June immediately preceding the respective levy year.
- The aggregate capital values of residential and commercial rating units respectively exclude any rating units to the extent levy remission applies.
A commercial building has a capital value of $2 million.
The annual levy for the levy year ending 30 June 2025 is $8,486,865.33 (exclusive of any GST). Fifty percent ($4,243,432.66) of that amount is allocated to commercial rating units and 50% to residential rating units.
For the purposes of this example, the aggregate capital value of commercial rating units is assumed to be $9,428,000,000. This means that the commercial levy rate is 0.0004500883183.
The ratepayer for the building must pay a levy of $900.18 plus GST (0.0004500883183 × $2 million) for the 2024/25 levy year.
Collecting the levy
The levy liability for a property will be included in the rates invoice issued by Tauranga City Council for that property and levies will be paid to Tauranga City Council alongside rates. Tauranga City Council will pass on the levy revenue it collects to the SPV.
Each annual levy resolution contains the information necessary for Tauranga City Council to correctly assess the amount each rating unit should be charged during the levy year, and the total amount of levy revenue that the SPV intends to collect in the levy year.
The annual levy resolutions for this levy will be published here no later than the May before the start of the levy year to which the resolution relates.
The 13 eligible infrastructure projects
The Transport System Plan levy can be applied towards eligible costs of 13 projects selected from the Transport Systems Plan by Tauranga City Council.
The levy will enable the SPV to provide approximately $175 million of funding towards the construction costs of some or all of the following 13 selected Transport System Plan projects.
Transport Systems Plan Project Project Description Hewletts Road sub access area Transport infrastructure works in the Hewletts Road project area to improve access to the Port of Tauranga and Mount Maunganui. Connecting the People Fifteenth Avenue to Welcome Bay Transport Infrastructure works on the route between City Centre fringe and Fifteenth Avenue, Turret Road and Welcome Bay to improve access to and from Te Papa Peninsula and City Centre. Tauriko West enabling works package Transport infrastructure works to support new urban development and housing in Tauriko West, while also supporting the inter-regional freight movement function of SH29. Cameron Road multi-modal upgrade stage 1 Transport works (including public transport, cycling and walking) on Cameron Road between Harington Street and Tauranga Hospital. Cameron Road multi-modal upgrade Stage 2 Transport infrastructure works (including public transport, cycling and walking) on Cameron Road between 15th Avenue Tauranga Hospital area and through Barkes Corner to integrate with Pyes Pa Road. Cameron Road corridor connections Transport infrastructure works to improve access to Cameron Road to support the use of bus, walking and cycling facilities delivered in the stage 1 and 2 upgrade works. Primary cycle route facilities (Accessible Streets Area A) Improvements to walking, cycling and public transport facilities in Mount Maunganui, Papamoa and the CBD. Primary cycle route facilities (Accessible Streets Area B) Improvements to walking, cycling and public transport facilities in Ōtūmoetai, Bellevue, and Brookfield. Tauranga Crossing bus facility improvements Transport infrastructure, including a public transport hub, to support multi-modal access to and from the Tauriko commercial area in and around Tauranga Crossing. City Centre transport hub Transport infrastructure, including a public transport hub and support for active transport modes, to support multi-modal access to and from the city centre. Barkes Corner to Tauranga Crossing multi-modal (local road component) Transport infrastructure works to improve public transport connections between some local roads and SH36 on the corridor between Cameron Road and the Tauriko commercial centre in and around Tauranga crossing. SH2 revocation (Cameron Road to Bethlehem) Transport infrastructure works to support improvements to local roading networks to integrate with the revocation of the existing SH2. Maunganui road future proofing Infrastructure upgrades to roading, cycling and pedestrian facilities to improve safety and speed management. Enables improved connections and parking amenities to Blake Park & Mt Maunganui College
Levy revenue may be applied towards the following types of eligible costs:
- the costs of the construction of eligible infrastructure, including establishment costs
- financing costs such as interest and fees, debt repayment and equity repayment and returns
- the costs of the administration of a levy
- the general operating costs of the responsible SPV and
- any further costs incurred by the responsible SPV in complying with the Act and the Levy Order.
Caps on the application of levy revenue to certain eligible costs
There are caps on the total level of IFF funding that each eligible infrastructure project may receive:
- the total construction costs of the TSP 009 (Tauriko West Enabling Work Package) project that are to be met by the levy must not exceed the lesser of 15% of the total final costs of construction of that project and $50 million plus GST (if any).
- the total construction costs of the TSP 002 (Hewletts Road sub access area) project that are to be met by the levy must not exceed the lesser of 65% of the total final costs of construction of the project and $110 million plus GST (if any).
- the total construction costs of the TSP 018 (Cameron Road multi-modal upgrade stage 2) project that are to be met by the levy must not exceed the lesser of 65% of the total final costs of construction of the project and $110 million plus GST (if any).
- the total construction costs of each of the other Transport System Plan eligible infrastructure projects that are to be met by the levy must not exceed the lesser of 65% of the total final costs of construction of the project and $50 million plus GST (if any).
In addition, eligible costs to complete business cases are capped at $25 million plus GST (if any).
Excess levy is levy revenue that, at the end of the levy period, has not been applied to eligible costs. The SPV will estimate the first forecast excess levy prior to the first levy year and subsequently, the SPV is required to periodically forecast its excess levy. These forecasts will occur on and then at 30 June 2028 and at least every subsequent 30 June thereafter.
To calculate its forecast excess levy, the SPV will add its cash balances to its forecast of the expected levy revenue over the remaining levy period and its forecast of the expected drawdowns of debt and equity funding over the remaining levy period, and subtract its forecast of the expected eligible costs over the remaining levy period.
If at any time the forecast excess levy is greater than $1 million (excluding GST), the SPV will be required to reduce the maximum levy revenue to ensure the forecast excess levy no longer exceeds $1 million. In addition, the SPV will be required to make corresponding amendments to the intended annual levy revenue for the remainder of the levy period.
The reduced intended annual levy revenue would be used for setting the annual levy for levy years beginning after the reduction occurs.
Transport System Plan Finance LP is the Special Purpose Vehicle for the purposes of the TSP Levy Order. This SPV is wholly owned by Crown Infrastructure Partners through an intermediate holding company.
Crown Infrastructure Partners is unable to sell its equity in the SPV unless consented to in writing by HUD as the IFF Act monitor. If it does so, HUD will be able to direct the SPV to not pay distributions to the new equity holders. However, certain rights of financiers (for example, the right to appoint a receiver, a receiver and manager, an administrator, or a liquidator to the SPV, or to acquire the partnership interests in the SPV and shares in its general partner) will be provided for without requiring HUD’s consent.
Limits on return of capital
Schedule 4 of the Levy Order sets out the limits on the return on capital the owners of the SPV may receive. CIP has notified HUD that the final capital amount is $2,110,506 plus GST (if any). This means the following limits on return on capital will apply:
Limits on return on capital
1 January 2023 to 30 June 2023
1 July 2023 to 30 June 2024
Levy year ending 30 June 2025
Levy year ending 30 June 2026
Levy year ending 30 June 2027
Levy year ending 30 June 2028
Levy year ending 30 June 2029
Levy year ending 30 June 2030
Levy year ending 30 June 2031
Levy year ending 30 June 2032
Levy year ending 30 June 2033
Levy year ending 30 June 2034
Levy year ending 30 June 2035
Levy year ending 30 June 2036
Levy year ending 30 June 2037
Levy year ending 30 June 2038
Levy year ending 30 June 2039
Levy year ending 30 June 2040
Levy year ending 30 June 2041
Levy year ending 30 June 2042
Levy year ending 30 June 2043
Levy year ending 30 June 2044
Levy year ending 30 June 2045
Levy year ending 30 June 2046
Levy year ending 30 June 2047
Levy year ending 30 June 2048
Levy year ending 30 June 2049
Levy year ending 30 June 2050
Levy year ending 30 June 2051
Levy year ending 30 June 2052
Levy year ending 30 June 2053
Levy year ending 30 June 2054
1 July 2054 to the end of 30 June 2055
1 July 2055 to the end of 30 June 2056
1 July 2056 and following
The annual reports for this levy will be published here no later than the May before the start of the levy year to which the report relates.