The new funding and financing model
The Act creates a new model where a ‘Special Purpose Vehicle’ (SPV) is used to fund and construct infrastructure to support housing and urban development. SPVs will repay any finance raised by charging a levy to those who benefit from the infrastructure (for example, homeowners in the area serviced by the new infrastructure).
Levies are collected from defined area
Like property rates charged by local councils, levies will be applied to a defined geographic area. Properties within this area will be charged an annual levy for as long as specified in the levy order.
The responsible council will be responsible for collecting the levy and transferring it to the SPV. The council will continue to collect the levy on behalf of the SPV until the financing is repaid and the levy period concludes.
Levy payers will not be charged twice for the same infrastructure. Development contributions can be used alongside a levy but cannot be used to fund infrastructure already being funded by a levy.
Infrastructure
SPVs can build and finance the following types of infrastructure:
- three waters infrastructure – such as water supply, sewerage, sewage treatment, or stormwater drainage
- transport infrastructure – such as roads, cycleways, rapid transit, rail, walkways, ferries and the associated infrastructure
- community facilities – including reserves
- environmental infrastructure that manages risks from natural hazards, including avoiding or mitigating those hazards, and environmental restoration.
Once constructed, the responsible council or infrastructure provider (such as the city council or in Auckland, Watercare) will take over the infrastructure and be responsible for its ongoing operation and maintenance.
The Act streamlines the tool used to build the Milldale community in Auckland
This new tool has evolved from the SPV used in Milldale, north of Auckland in 2018. The SPV raised around $50 million to fund infrastructure to support housing development. This infrastructure will support the creation of a community of 9000 new homes, nearly ten years earlier than Auckland Council’s long-term plan provided for. Landowners pay an annual ‘infrastructure payment’ to fund this borrowing - $650 for an apartment or $1,000 for a house, over the next 30 years. Auckland Council collects these payments through the rating system, on behalf of the SPV.
The Act aims to make it easier for this model to be used by a broader range of projects, and by providing statutory powers to SPVs to support the delivery of infrastructure.
For more information on Milldale, see the Infrastructure Payments website.
Frequently asked questions
Published: January 22, 2021