Submission by
Hamilton City Council
NZ Transport Agency’s Funding Assistance Rate (FAR)
Review Options Discussion Paper
28 March 2014
Key Submission Points
1.
Provisional Funding Assistance Rates Framework (refer Appendix 1, Section 3)

2.
3.
4.
HCC supports the Provisional Funding Assistance Rates Framework as outlined in the
Options Discussion Document and believes the Framework will support the optimal
land transport outcomes being achieved within the available financial resources.
Overall NLTF Co-Investment Rate (refer Appendix 1, Section 4)

HCC supports an overall NLTF co-investment rate of 53%, as this provides consistency
with the historical overall NLTF assistance for eligible land transport activities and
facilitates approved organisations to direct attention to areas of need, in accordance
with the funding eligibility criteria.

By supporting a 53% NLTF rate, HCC recognises that targeted enhanced rates will not
be as readily available, but supports their use where possible and appropriate.
Councils’ Funding Assistance Rates (refer Appendix 1, Section 5)

HCC supports the metrics comprising Option 2 as the most appropriate proxy for an
approved organisation’s ability to pay compared with the rest of New Zealand.

HCC supports the banding of 75% of approved organisations at a level of the overall
NLTF co-investment rate minus 1%.

HCC supports an absolute minimum funding assistance rate, for any approved
organisation, of the overall NLTF co-investment rate minus 1%.
Emergency Works (refer Appendix 1, Section 6)

HCC supports that an ‘out of the ordinary’ event be determined on the basis of a
statement of principle.

HCC supports the setting of elevated emergency works funding assistance rates which
are tied to the organisations normal funding assistance.
HCC Ref: D-1366102 / Sub #: 401
Page 1 of 10
5.
Waitangi National Trust (refer Appendix 1, Section 7)

6.
Department of Conservation (DOC) (refer Appendix 1, Section 8)

7.
8.
HCC supports consistency in the application of the overall NLTF co-investment rate
and, for this reason, favours using the overall NLTF co-investment rate for Tau Henare
Drive and the Hobson Memorial Loop Road.
HCC supports the option of DOC receiving funding assistance at the overall NLTF coinvestment rate for the existing ‘special purpose roads’ and for any other roads that
meet the same eligibility criteria.
Targeted Enhanced Funding Assistance Rates (refer Appendix 1, Section 9)

By supporting a 53% NLTF rate, HCC recognises that targeted enhanced rates will not
be readily available, but supports their use where possible and appropriate.

If targeted rates are made available, criteria for accessing targeted enhanced funds
should in the short term focus on the ability of approved organisations to implement
the One Network Road Classification.
Transitioning in Changes to Funding Assistance Rates (refer Appendix 1, Section 10)

HCC opposes across the board transitioning due to the complexities of the subsequent
financial management.

HCC suggests independent arrangements for approved organisations for whom the
changes result in a funding assistance reduction of greater than 10%. Any agreed
transition should then be completed prior to 2018/19.
Specific Comments
Appendix 1 outlines HCC’s specific comments on the Discussion Paper.
Further information
For any questions around the submission points, please contact Chris Allen (General Manager
City Infrastructure) on 07 838 6748, email [email protected]
Yours faithfully
Barry Harris
CHIEF EXECUTIVE
Please note that although this submission has been circulated to HCC’s Elected Members for consideration
and feedback, it has not been adopted through the formal committee process. HCC’s submission is to be
considered and adopted retrospectively at the 30 April 2014 Strategy and Policy Committee meeting. We
will advise you after this meeting if Council makes any changes to its submission.
HCC Ref: D-1366102 / Sub #: 401
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Appendix 1
Hamilton City Council’s Specific Comments on the NZ Transport Agency’s
Funding Assistance Rate (FAR) Review Options Discussion Paper
The comments in this Appendix are structured under the following key headings.
1.0
Introduction
2.0
High Level Observations
3.0
Provisional Funding Assistance Rates Framework
4.0
Overall NLTF Co-Investment Rate
5.0
Councils’ Funding Assistance Rates
6.0
Emergency Works
7.0
Waitangi National Trust
8.0
Department of Conservation (DOC)
9.0
Targeted Enhanced Funding Assistance Rates
10.0
Transitioning in Changes to Funding Assistance Rates
1.0
Introduction
1.1
The following statements represent the views of Hamilton City Council (HCC) on the
Transport Agency’s proposed funding assistance rates framework. The key headings
follow those used in the Options Discussion Document and the questions provided on
pages 17-18 for guidance have been loosely addressed.
2.0
High Level Observations
2.1
The legislative requirement for Financial Assistance Rates is set out in Section 20c of
the Land Transport Management Act, which states:
“The agency must set the rate of funding assistance from the national land transport
fund for activities or combinations of activities in accordance with any criteria set by
the minister”.
2.2
It is noted that there is insufficient detail in the Options Discussion Document to
enable a financial assessment of the impact for each scenario. Uncertainty regarding
eligibility, One Network Road Classification, GPS funding allocation and prioritisation,
changing levels of service and similar requires that assumptions be made which
influence this feedback but may not be reliable in the long term.
HCC Ref: D-1366102 / Sub #: 401
Page 3 of 10
2.3
Any changes in funding assistance rates for HCC will have a significant impact on the
upcoming 2015-25 Long Term Plan, in the form of both financial impacts and the need
to alter planned programmes.
3.0
Provisional Funding Assistance Rates Framework
3.1
HCC supports the Provisional Funding Assistance Rates Framework as outlined in the
Options Discussion Document and believes the Framework will support the optimal
land transport outcomes being achieved within the available financial resources.
3.2
The NZ Transport Agency has developed a Provisional Funding Assistance Rates
Framework that comprises a set overall co-investment rate (flat rate) which will be
applied to all qualifying activities.
3.3
HCC accepts that some approved organisations will receive a funding assistance rate
that is above the overall co-investment rate to take into account factors that
materially affect their ability to deliver land transport outcomes.
3.4
HCC supports the principle that eligibility for funding assistance under the provisional
framework will be based on undertaking or maintaining a land transport activity to fit
for purpose standards, but notes that the criteria for setting these standards has yet to
be confirmed or agreed.
3.5
HCC accepts that special purpose roads, which have in the past received higher
funding assistance rates, will under the provisional framework receive only the
approved organisations set funding assistance rate.
3.6
HCC notes that cycleway, footpath and kerb and channel maintenance and renewal
activities that are currently eligible for funding assistance at the approved
organisations base funding assistance rate will continue to be eligible for funding
under the provisional framework at the approved organisations normal funding
assistance rate.
3.7
HCC accepts that road safety promotion activities will, under the provisional
framework, receive only the approved organisations set funding assistance rate, which
will be less than the current rate.
3.8
HCC accepts that an approved organisations actual, fair and proportional
administration costs for each activity will be included as part of the direct cost for the
activity and be funded at the approved organisations set funding assistance rate.
3.9
HCC accepts the principle that the approved organisation will, under the provisional
framework, receive only the set funding assistance rate, which is less than the current
rate of 100%, towards the cost to the road transport network of eligible level crossing
warning device maintenance as imposed by KiwiRail.
HCC Ref: D-1366102 / Sub #: 401
Page 4 of 10
4.0
Overall NLTF Co-Investment Rate
4.1
HCC supports an overall NLTF co-investment rate of 53%, as this provides consistency
with the historical overall NLTF assistance for eligible land transport activities and
facilitates approved organisations to direct attention to areas of need, in accordance
with the funding eligibility criteria.
4.2
By supporting a 53% NLTF rate, HCC recognises that targeted enhanced rates will not
be as readily available, but supports their use where possible and appropriate.
4.3
The Options Discussion Document proposes that the appropriate range for the overall
NLTF co-investment rate is from 50% to 53%.
4.4
HCC considers that an overall co-investment rate of 53% will provide certainty of
investment which will enable better, longer term decisions to be made.
4.5
While it is anticipated that a 53% overall rate will limit the opportunities to access
targeted enhanced rates, the generally higher standard funding levels will instead give
approved organisations the ability to prioritise projects themselves, and to work with
partners to ensure regional and national priorities are met.
5.0
Councils’ Funding Assistance Rates
5.1
HCC supports the metrics comprising Option 2 as the most appropriate proxy for an
approved organisation’s ability to pay compared with the rest of New Zealand.
5.2
HCC supports the banding of 75% of approved organisations at a level of the overall
NLTF co-investment rate minus 1%.
5.3
HCC supports an absolute minimum funding assistance rate, for any approved
organisation, of the overall NLTF co-investment rate minus 1%.
5.4
The Options Discussion Document presents five options based on different metrics or
combinations of metrics, to assess an individual councils ability to pay and, from that,
set a FAR for each council (i.e. determine which organisations should receive funding
assistance rates that are higher than the overall NLTF co-investment rate). The five
options are outlined on the following table:
HCC Ref: D-1366102 / Sub #: 401
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Option 1
An option which compares the relative wealth of the residents of each
council’s area – using the New Zealand index of deprivation.
Option 2
An option which uses a proxy for the relative wealth of a councils’
ratepayers including corporate and non-resident ratepayers (the capital
value of rateable land in an area) and a proxy for the number of
ratepayers a council can obtain the local share of land transport costs
from – using the ratio of:
Net equalised rateable capital value
Number of rating assessments
Option 3
An option which combines Options 1 and 2.
Option 4
An option which compares councils by both an objective proxy for the
size of the land transport activities they undertake (lane kilometres of
local road) and a proxy for the relative wealth of councils’ ratepayers –
using the ratio of:
Lane kilometres of local road .
Net equalised rateable capital value
Option 5
An option which combines Options 1 and 4.
5.5
In HCC’s feedback to the earlier Funding Assistance Rates Review Discussion
Document, we stated that “HCC considers it critical that any FAR should be anchored
in some form of assessment or measure in relation to community size. This is
necessary in order to achieve a proportional match between the benefits from
planned transport investment and the size of the community the investment is
occurring in.”
5.6
Of the five options, only Option 2 recognises community size.
5.7
Option 1 uses the Index of Deprivation (also included in both Options 3 and 5), but the
measure does not take into account business and industry, so is not a good measure of
the true prosperity of a region. Also, it is based on census data so has limited
repeatability.
5.8
Option 1 will require potentially contentious adjustments to the metrics in order to
facilitate organisations with a high proportion of non-rateable conservation estate,
high levels of non-resident ratepayers, or similar.
5.9
Option 4 uses lane kilometres divided by capital value (also included in Option 5). This
does not reflect the level of maintenance required – it treats an unsealed rural lane
carrying 2 vehicles/day as the same as a multilane arterial road. The metrics also do
not accommodate non-unitary regional councils.
5.10
HCC supports the banding of 75% of approved organisations at a level of the overall
NLTF co-investment rate minus 1%, allowing funding assistance rates that are higher
than the overall NLTF co-investment rate for authorities where there are factors which
make it materially harder for them to deliver land transport outcomes.
5.11
Banding of the 25% more vulnerable organisations would appear to be a simple and
fair means of determining funding assistance rates. A bell curve or similar over this
group only would potentially require frequent recalculation.
HCC Ref: D-1366102 / Sub #: 401
Page 6 of 10
6.0
Emergency Works
6.1
HCC supports that an ‘out of the ordinary’ event be determined on the basis of a
statement of principle.
6.2
HCC supports the setting of elevated emergency works funding assistance rates which
are tied to the organisations normal funding assistance.
6.3
The role of emergency works funding assistance is to address the situation where an
approved organisation has incurred significant expenditure in responding to an ‘out of
the ordinary’ short duration natural event, which the approved organisation could not
reasonably have planned or managed for.
6.4
The Options Discussion Document suggests three options for determining whether an
event is ‘out of the ordinary’. They are:

A statement of principle.

Annual return period or similar.

A minimum cost threshold.
6.5
HCC is fortunate to not experience emergency events on a regular basis, but as a result
any such event would be random and we have little historical data to justify planning
for these events.
6.6
The annual return period of an event and the impact of such an event may well be
substantially different for different areas, even adjoining, due to a range of factors
such as size, geography, urban form and so on. Specifying appropriate return periods
or similar to measure what is ‘ordinary’ for individual approved organisations is likely
to be highly subjective and contentious.
6.7
HCC agrees that determination by way of a minimum cost threshold would likely
influence cost estimates and adversely impact on efficiency.
6.8
The Options Discussion Document suggests two options for setting elevated
emergency works funding assistance rates. They are:

Elevated rate tied to the organisations normal funding assistance rate (for
example, a FAR rate of 50% plus say 20% emergency rate uplift would become
70%).

Set elevated rate (for example, a set elevated rate of 70% for all).
With the suggested banding, some approved organisations have overall NLTF coinvestment rates of 70% and 75%. A set elevated rate for emergency works would
clearly need to be significantly greater than these rates to have the desired benefit.
HCC Ref: D-1366102 / Sub #: 401
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7.0
Waitangi National Trust
7.1
HCC supports consistency in the application of the overall NLTF co-investment rate
and, for this reason, favours using the overall NLTF co-investment rate for Tau Henare
Drive and the Hobson Memorial Loop Road.
7.2
The Waitangi National Trust Board manages the Waitangi estate and currently receives
a 100% funding assistance rate for Tau Henare Drive (private road) and four other
sections of private accessway. The Far North District Council also receives a 100%
funding assistance rate for one section of local road which provides access to the
estate.
7.3
The Options Discussion Document suggests two options for setting funding assistance
rates for Tau Henare Drive and the Hobson Memorial Loop Road. They are:


Retaining the 100% funding assistance rate.
Moving to the overall NLTF co-investment rate.
7.4
The main principle of the provisional funding assistance rates framework is that there
is one rate, the overall NLTF co-investment rate, for each approved organisation.
Making exceptions for the Waitangi National Trust contradicts the intent of the
framework and as such should be avoided.
7.5
The remaining private accessways within the estate should not be eligible for funding
assistance as their purpose relates more to the operation of a commercial enterprise.
8.0
Department of Conservation (DOC)
8.1
HCC supports the option of DOC receiving funding assistance at the overall NLTF coinvestment rate for the existing ‘special purpose roads’ and for any other roads that
meet the same eligibility criteria.
8.2
The Department of Conservation (DOC) receives a 100% funding assistance rate for
some 39km of special purpose road (based on obsolete legislation) and no assistance
for a further 2240km of road/track.
8.3
The current special purpose roads are principally used to convey the public to and
from the start of a recreation/tourism area, and do not serve activities undertaken on
a commercial basis, or by clubs or similar groups.
8.4
The Options Discussion Document suggests two options for setting funding assistance
rates for eligible sections of DOC carriageway. They are:


8.5
Moving to the overall NLTF co-investment rate.
Moving to the co-investment rate set for the territorial authority of the district
in which the carriageway is located.
The second option would facilitate collaborative arrangements with local territorial
authorities, but would make DOC an exception to the principle that each approved
organisation has one funding assistance rate for all its land transport activities.
HCC Ref: D-1366102 / Sub #: 401
Page 8 of 10
9.0
Targeted Enhanced Funding Assistance Rates
9.1
By supporting a 53% NLTF rate, HCC recognises that targeted enhanced rates will not
be readily available, but supports their use where possible and appropriate.
9.2
If targeted rates are made available, criteria for accessing targeted enhanced funds
should in the short term focus on the ability of approved organisations to implement
the One Network Road Classification.
9.3
The provisional funding assistance rates framework provides that enhanced targeted
funding assistance rates can be used in exceptional circumstances, for limited time
periods, to either facilitate an activity of national urgency or facilitate a necessary step
change in customer levels of service for an approved organisation.
9.4
The One Network Road Classification (ONRC) work will likely introduce major changes
to how the performance of the road network is managed across the country, so in the
short term, HCC supports targeted enhanced rates being used for works required to
implement ONRC, particularly where roads have a higher Customer LOS and
performance measure to that currently being provided.
9.5
Criteria for prioritisation should be set on the following principles (which roughly align
with key themes in the Government Policy Statement on Land Transport Funding),
which would also apply beyond implementation of ONRC:

Promoting economic development (e.g. focusing on inter-regional freight and
tourist movement through strategic corridors).

Affordability and accessibility (e.g. looking at where investment can be placed
to achieve the most improvements, such as routes with high vehicle kilometres
and/or congestion, and improving access for those with limited transport
choices).

Road safety.
10.0 Transitioning in Changes to Funding Assistance Rates
10.1
HCC opposes across the board transitioning due to the complexities of the subsequent
financial management.
10.2
HCC suggests independent arrangements for approved organisations for whom the
changes result in a funding assistance reduction of greater than 10%. Any agreed
transition should then be completed prior to 2018/19.
10.3
The Options Discussion Document suggests three options for transitioning in any
changes to funding assistance rates. They are:



Transitioning in the changes over a set period of time.
No approved organisations effective overall funding assistance rate decreasing
by more than 2% from the previous financial year.
A combination of the above two options.
HCC Ref: D-1366102 / Sub #: 401
Page 9 of 10
10.4
HCC currently works with four different funding assistance rates. Transitioning in the
increases and decreases over a period of time, say 6 years, would result in a confusing
series of ever changing FARs, as illustrated on the following table.
Year 0
100%
59%
55%
45%
10.5
Year 1
92.0%
57.8%
54.5%
46.2%
HCC FARs Transitioning Over 6 Years
Year 2
Year 3
Year 4
84.0%
76.0%
68.0%
56.7%
55.5%
54.3%
54.0%
53.5%
53.0%
47.3%
48.5%
49.7%
Year 5
60.0%
53.2%
52.5%
50.8%
Year 6
52.0%
52.0%
52.0%
52.0%
HCC’s effective overall rate is currently approximately 51.7%, so transitioning to 49%
for example would only take two years. However, the revenue changes would again be
confusing, as illustrated on the following (simplified) table, where the step down is
carried out in equal reductions, rather than by 2%.
Typical Annual
Revenue
Revenue
Revenue
Budget
Year 0
Year 1
Year 2
Mtce
$6,600,660 $2,970,297
45% $3,102,310
47% $3,234,323 49%
Capital
$13,399,340 $7,369,637
55% $6,967,657
52% $6,565,677 49%
Total
$20,000,000 $10,340,000 51.7% $10,070,000 50.35% $9,800,000 49%
10.6
Calculating the step down to 2% steps based on the effective overall funding
assistance rate (again from 51.7% to 49% for example) also produces confusing
revenue changes and no clear indication of how the revenue would impact on
different activities. This is illustrated on the following (simplified) table, where the step
down is carried out in a 2% step followed by final reduction.
Typical Annual
Revenue
Budget
Year 0
Mtce
$6,600,660 $2,970,297
45%
Capital
$13,399,340 $7,369,637
55%
Total
$20,000,000 $10,340,000 51.7%
Revenue
Year 1
$9,940,000
Revenue
Year 2
$3,234,323 49%
$6,565,677 49%
49.7% $9,800,000 49%
10.7
2015/16 marks the commencement of a new Long Term Planning period and most
approved organisations will be reassessing the allocation of their budget streams.
With the mix of increasing and decreasing funding assistance rates from the current
system to the provision funding assistance rates framework, the opportunity exists to
reallocate organisational share to mitigate the changes and implement the new overall
NLTF co-investment rate in one step. Early signals will be needed to facilitate the
development of the LTP’s by the local authorities. The alternative is to introduce the
new assistance rate for the following 3 year period beginning 2018/19.
10.8
In the rare instance of an approved organisation experiencing a significant change to
the effective overall funding assistance rate which results in an actual funding amount
reduction of say greater than 10% from what they previously would have anticipated,
a one-off transitional arrangement should be negotiated, to be completed within one
LTP period.
HCC Ref: D-1366102 / Sub #: 401
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