Infrastructure spend in New Zealand must work harder: user-pays in focus

2026-03-25 - 16:03

When the developers of 1500 new homes northwest of Hamilton needed a way to pay for water and roading infrastructure, they got approval this month for a levy on future residents under the Infrastructure Funding and Financing Act. When Napier Port needed a new wharf, the Hawke’s Bay Regional Council sold a 45 percent stake in the port company to fund that and other major infrastructure projects. On our roads, ministers are shifting from charging petrol excise at the pump, to asking all motorists to pay their share through consistent road user charges. These are just some of the innovative new tools being used to fund and finance critical infrastructure, says Bell Gully partner Sarah Anderson-Butler – and there are many more to come. These solutions are sketched out in the new National Infrastructure Plan, published by the NZ Infrastructure Commission Te Waihanga in February. “It’s about ensuring that we’re getting better value for the dollars that we are spending,” says Anderson-Butler. “It’s about looking at how we fund infrastructure and matching that to its purpose – so allowing for things like network infrastructure, like roads and water, to be funded by users, freeing up taxes to be directed towards social infrastructure like hospitals.” WATCH: Spending smarter on the infrastructure we need most Asset sales, privatisation, charging the public to use their infrastructure – these concepts were once anathema to many New Zealanders. But now, user-pays is no longer a dirty word. “I don’t think it should be,” says Anderson-Butler. The National Infrastructure Plan starts with the acceptance that we have a big backlog of infrastructure wants and needs, and a small country like New Zealand can’t pay for everything. “We need to get a lot smarter around where our dollar is going.” So we have to prioritise: the plan says our aging population means hospitals should be the No 1 priority, followed by catch-up on renewals in the water sector, then implementing time-of-use charging and fleet-wide road user charges. WATCH: Looking after what we’ve got New Zealand is already spending more per capita on infrastructure than anyone else in the OECD – so clearly, prioritising the country’s spending isn’t enough on its own. Central government, councils and the private sector needs to get more bang for their infrastructure buck. The best way to do that is by managing existing assets. The infrastructure plan says up to 60 cents in every dollar of future infrastructure spending should be directed toward maintenance and renewals of existing infrastructure. “It’s the concept of looking after what we’ve got, to ensure that we’re not spending more than we need to,” Anderson-Butler says. So it’s not all about shiny new toys? “Maintaining our existing infrastructure to ensure it has as long a life as possible is a lot cheaper than requiring new and replacement infrastructure.” WATCH: Road charges, tolls, levies and other new funding tools Anderson-Butler says New Zealand is moving rapidly towards greater use of road user charges, tolling, volumetric water charging, development levies and bespoke Infrastructure Funding and Financing Act solutions like the new one to build 1500 houses at Te Awa Lakes near Hamilton. “The road user charges reform is aimed at making sure that the costs of developing and maintaining our roads are being spread more fairly across the pool of people who are actually using them – so moving away from paying petrol tax at the pump to charging based on distance and weight.” Solutions like road tolling and volumetric water charging are pretty self-explanatory, but others like the IFF Act need more explanation. Anderson-Butler has acted on all three of New Zealand’s IFF projects. She advised National Infrastructure Funding and Financing Ltd on Te Awa Lakes, announced by Housing Minister Chris Bishop on March 24. “The IFF structure offers a way for developers to unlock upfront funding for critical developments for their regions, recovering the cost of development over time through a levy on those who benefit from the relevant projects,” she says. This funding and financing tool has been used by councils like Tauranga and Wellington, and as recently announced, by a developer to fund a new housing development in Hamilton. Proposed changes to the act will allow it to be used by the likes of the NZ Transport Agency or KiwiRail to build transport projects, or by the new council-controlled water organisations to fund pipes and treatment plants. “The model has been successfully used across transport and wastewater projects and, now, to meet demand for new housing,” she adds. “The current changes proposed to the IFF Act should allow even wider scope for its future use, as well as potentially reducing transaction costs and speeding up funding lead-times.” WATCH: What clearer infrastructure rules mean for business Beyond that, central and local government are exploring new methods to unlock capital. “Asset recycling is a really interesting tool that is garnering a lot of attention at the moment,” Anderson-Butler says. “So this allows the Crown to unlock value by recycling some of its assets and freeing up that capital to be deployed towards funding new infrastructure requirements. “There are some good local examples. Hawke’s Bay Regional Council sold a share of its stake in Napier Port, which allowed for the construction of a new wharf.” Anderson-Butler argues businesses and investors should be “invigorated” by the infrastructure plan. “It’s looking at developing clearer systems for our infrastructure spend and investment and how that is funded. And bringing greater clarity to the system is going to benefit everyone.” Bell Gully’s Big Picture report explains the new tools and opportunities in infrastructure funding and financing.