Transport Minister Phil Twyford & Finance Minister Grant Robertson announced on Wednesday that Cabinet had agreed to launch a procurement process for the Auckland rapid transit light rail network.
They also mentioned that the NZ Super Fund had made an unsolicited proposal last month to form an international consortium “to design, build & operate Auckland’s light rail network”.
The fund put it slightly differently, saying it had offered “to assess the viability of the Auckland light rail project for commercial investment”.
The fund added that it “understands & respects the Government’s need to run a procurement process and looks forward to further engagement with the NZ Transport Agency”.
Mr Twyford said: “The Government is committed to progressing light rail to transform Auckland. It will be a magnet for private investment in urban renewal and will be able to carry 11,000 commuters/hour – the equivalent of 4 lanes of motorway.
“We are investigating innovative solutions to tackle congestion and build a vibrant & modern city.”
Mr Robertson added: “The NZ Transport Agency will now set up a robust process to explore a range of possible procurement, financing & project delivery options. This process will invite & assess all potential proposals and report back to the Ministers of Finance & Transport. The Transport Agency will work with the Treasury & the Ministry of Transport in this process.”
The procurement process covers both the city-Mangere & city-north-west lines. The recently announced 10-year transport plan for Auckland earmarked $1.8 billion in seed funding, with the option of securing private investment in the network.
Fund investment still tentative
Critics of Auckland Council & the Government’s proposal for the light rail line, especially the proposed path down Dominion Rd, skipped the notion that the Super Fund would “assess the viability” and stretched their criticism to the fund’s as-yet-tentative investment.
The New Zealand sovereign fund was created in 2003 and had $12 billion of funds when the National-led government suspended contributions in 2009. While suspending contributions, then-finance minister Bill English also told the fund he wanted it to increase its investment in New Zealand, aiming for an eventual target of 40% of its portfolio. The new government said in December it would resume contributions and would add $7.7 billion through to June 2022.
The fund has $5 billion (13.2%) of its $38 billion invested in New Zealand and about 2% invested globally in infrastructure. It’s returned 10.5%/year since inception – despite an $881 million loss in 2008, first year of the global financial crisis – while many other sovereign funds around the world have continued to struggle.
Sovereign funds have come looking for over a decade
Representatives of many of those funds have visited Auckland over the last 15 years to talk investment, and Auckland Council & its isthmus predecessor, the Auckland City Council, have acknowledged such funds as potential infrastructure financiers without indicating any steps have been taken to advance beyond a passing idea.
The NZ Super Fund’s acting chief executive, Matt Whineray, said on Wednesday: “The Government has signalled its intention to accelerate core infrastructure investment in a number of areas. We consider the Auckland light rail network to be an infrastructure project of sufficient scale & significance to be an attractive prospect for investment. We wish to explore whether a NZ Super Fund-led consortium leveraging our international relationships can fund & deliver the project, on a fully commercial basis.”
The NZ Super Fund has identified as its potential partner CDPQ Infra, a wholly owned subsidiary of Caisse de dépôt et placement du Québec (CDPQ) responsible for developing & operating infrastructure projects. Mr Whineray said other members could be added to the consortium.
The Quebec provincial government created CDPQ in 1965, initially to manage its new universal pension plan. It’s become a leading institutional fund manager, with a net $US238 billion of assets. CDPQ Infra is responsible for developing, building & operating Montreal’s 67km light rail network.
Mayor says intensification in suburbs will follow
Auckland mayor Phil Goff said: “Light rail will facilitate new & more intensive housing along major arterial routes, including Mangere, Mt Roskill & West Auckland, and better connect centres of employment across our city. It will help to meet Auckland’s need for more housing for our rapidly growing population.”
Mr Goff said the light rail funding would be on top of the $28 billion earmarked by the Government & council to address congestion. He added: “Light rail will replace buses on routes that are already facing congestion and has been adopted by cities across the world to move large numbers of people more quickly & efficiently. “Unlike heavy rail, light rail does not require the purchase & demolition of thousands of houses to extend rapid transit services to new areas of Auckland.”
9 May 2018: Government statement on light rail project
Auckland Transport, Airport & Mangere rail
Charles Marohn, Strong Towns, 19 September 2016: Infrastructure spending for dummies
Revitalization News, 15 July 2015: Funding infrastructure to rebuild equitable, green prosperity
Rick Rybeck, report for Washington DC Tax Revision Commission, 2013: Funding long-term infrastructure needs for growth, sustainability & equity
Just Economics LLC (Rick Rybeck)
6 March 2017: Property Council joins call for new infrastructure funding
Tracking ideas Sun27Sep16 – sprawl v compact, inclusionary housing, infrastructure funding, related pieces, Making NZ
14 August 2017: Billions astray, but political thinking on Auckland transport infrastructure is positive
24 July 2017: New Crown entity will advance housing infrastructure
12 June 2017: NZ infrastructure body takes lessons from Scotland
15 February 2017: Steamrolling & funding
3 July 2016: PM talks $1 billion infrastructure fund, English talks payback frame, Smith talks grabbing more power
10 June 2016: Joyce hunts for foreign direct investment in Singapore
6 December 2015: How Panuku proposes to lead transformation of Auckland
24 August 2015: An action plan called 42
26 November 2014: Auditor-general issues blunt warning on infrastructure
30 September 2014: Super guardians pose some investment thoughts
14 May 2009: Finance Minister Bill English direction to the fund to increase NZ allocation
2 June 2009: Fund response to Finance Minister Bill English on increasing allocation to NZ investment
Attribution: Government, council & Super Fund releases.