21 October 2016

Phil Goff's speech to Infrastructure New Zealand

Pat Brockie, Chair and Stephen Selwood, CE. Distinguished guests, ladies and gentlemen.

Can I first acknowledge the Infrastructure New Zealand for organising this symposium on the Future of Infrastructure.

I hope delegates have had a productive two days and I am looking forward to getting feedback on your discussions.

In just over ten days, I will be sworn in as the second mayor of the City of Auckland since its amalgamation in 2010.

Fresh from the campaign trail and more than 100 public meetings from Wellsford down to Waiuku, I have a fair idea of Aucklanders’ priorities in terms of the future of their city.

In getting to those meetings, I was at the mercy of our congested city – never knowing whether I’d get there half an hour early or an hour late.

In my first week on the job, I’ve tried pretty much every mode of transport trying to find the best way to get to the city from South Auckland and to get around town.

In the car, it takes me about an hour and a half to get to work at peak time. The train takes about the same, given I have to first drive to the park and ride in Papakura and then walk up to Albert St from Britomart. I had my quickest trip in today on the motorbike which took me about 45 minutes.

I’ve also been using the Mayoral electric bike to get to meetings in town and that’s really efficient but given the “electrics” weren’t working, I’m not sure my muscles can take it as a long-term transport solution!

Auckland is a great city. That’s why so many people want to live here.

We are 35% of the population and the city is currently on track to grow by another million people in the next 30 years.

We are New Zealand’s predominant city.

We’re 37% of its production but we are realising over 50% of the nation’s growth.

Growth is good.

New Zealand needs a city of international scale.

We benefit from the choices and opportunity that size gives the people who live here – choice and opportunity in learning, in work, in play.

We are a city that can compete with the 400 other international cities with populations over a million that are battling it out to attract talent and high-growth businesses as described in KPMG’s Magnet Cities Study.

New Zealand needs a major city which can retain the best and brightest of its own new generation and can attract talent from abroad.

Auckland has to be a centre of learning and innovation.

It is our best prospect for building a diversified and high technology economy.

To attract and retain the talent we need, the city has to provide high paid jobs in high value-add enterprises and also needs to be a good place to live.

Our diversity makes us interesting. With 40% of our people from overseas, we have a depth and richness in culture.

With a stunning environment, but one that needs to be better protected and sustained, we offer recreational opportunities and an attractive natural environment in which to live.

Aucklanders appreciate these things, but out on the hustings they also expressed deep concern about the challenges the city faces which are not being adequately met.

They expressed the desire to see the city governed and managed more efficiently and effectively.

They want an improved culture at Council where we are seen as a “can do” administration ready to cut duplication and waste, and able to do more with less.

I’ll give you an example. The Howick Rotary Club just wanted to advertise a book fair in their community by putting up small real estate-type signs. They were initially told they couldn’t because of by-laws and when they asked if there was a way around that, they were finally told they could apply for an exemption. But that would cost them $170. They thought “hey, that’s fair enough” only to then find out it was actually $170 a sign – a total cost of $8500 – more than they actually hoped to fundraise! No wonder our communities are frustrated.

Our communities want local and central Government to work together to address the infrastructure deficit that underlies our two biggest and most obvious problems.

The first problem is the increasing unaffordability of housing and the second is traffic congestion.

For housing, there are some issues of demand management which are largely within the scope of central government which could take some of the pressure off. Longer term it is about increasing supply.

Around 60% of housing costs are the land, and increasing the supply and better utilisation of land is vital.

The new Unitary Plan, when it is fully implemented, is a big step towards tackling the problem of land supply and therefore cost.

We need to go up and out.

Dealing as quickly as possible with the appeals against the Unitary Plan which relate to intensification is important.

The Environment Court is aware of that and I am sure will prioritise cases and make resources available to resolve these issues.

And from the Council’s perspective, we need to have a resource consenting system that is fast, efficient and responsive to the needs of our city while maintaining the integrity of the process. As Mayor, reviewing our consenting process is a priority.

The bigger problem is the cost of providing infrastructure so that land zoned for housing can be developed.

I am pleased that central government recognises the cost of providing infrastructure cannot be funded from the narrow revenue base of rates.

Nor can infrastructure needs be funded in local government as they are in central government by simply borrowing and increasing debt.

Auckland is constrained in its infrastructure investment by the need to maintain prudent levels of debt in particular in its debt to revenue ratio.

Currently, the maximum ratio set by Standards & Poor’s is 270% and Auckland’s current ratio is approaching 250%. Our debt currently stands at $8 billion and will grow by another $2 billion over the next 3 years and this is within the prudential limit by our credit rating agencies.

With the need to meet half the cost of the City Rail Link - some $1.5 to $1.7 billion dollars over the next few years - Auckland’s ability to take on new debt is constrained.

Breaking the debt to revenue ratio would put at risk our AA credit rating and potentially add millions to Council’s interest costs.

Treasury and central government agencies understand the scale of Auckland’s infrastructure needs which come from unprecedented growth and the revenue constraints on the city to meet that growth.

We can look overseas for better models such as in Sydney where infrastructure needs are met not just by local government, but in large part by the state government which has broader sources of revenue.

I welcomed the Government’s announcement of its Infrastructure Fund a couple of months ago. It was an acknowledgement that high growth areas need additional assistance.

However, that $1 billion spread over five growth areas won’t accelerate housing construction in Auckland to the levels needed to meet housing demand. I also acknowledge that the onus is on Auckland Council to demonstrate to the Government that we have our house in order for extra capital to be made available.

From my own experience, I understand the constraints they are working under.

Likewise, I believe central government understands we need to work together to tackle Auckland’s problems.

Our role in Auckland is to prove to the Government that our finances are being tightly and efficiently managed with a focus on value for money. That process is already underway.

We need to demonstrate that Council and CCOs are working properly together.

We need to review building consent processes to achieve best practice.

We need to act within the powers we have to weaken the economic incentives for land banking.

Auckland needs to act with urgency on these matters because the construction sector needs early signals about infrastructure spending and any acceleration of housing construction in Auckland so it can plan. That is critical.

I agree with the PWC Report this week that smart government is about smoothing volatile boom and bust cycles to the extent possible to reduce the damage they do to capacity to build infrastructure.

There is a huge cost to doing nothing.

Auckland will suffer if smart young people choose not to live here because they cannot afford a home.

Just today, there are projections that we won’t be able to staff our primary schools because young teachers are paid the same whether they live in Auckland or outside, where housing costs are much cheaper.

When even young professionals on good salaries can’t afford to live and work here, I really worry about our lower income workers.

The second issue is how much congestion is costing Auckland.

Productivity losses alone are estimated at between $1.5 billion and $2 billion.

That’s money wasted - down the drain with nothing to show for it.

There is no silver bullet.

Technology such as Uber car sharing and driverless vehicles will help, but we shouldn’t sit back and expect that to be the only solution when our population will grow by another million.

Motorway investment can help but no great city has built its way out of congestion with roads.

Cycleways to allow kids to get safely to school could take up to 10% of traffic off the roads during rush hour.

Increasing our public transport, heavy and light rail and busways is critical to relieving pressure on our roads, as it is in almost all international cities.

The developments we need here are, in many cases, not even within the next 10 year plan 2018-2028.

As Mayor, I will prioritise the development and signing off of a business case for rapid light rail in the isthmus to bring it into the Long Term Plan.

Auckland must also plan for rail from the city centre to the airport given we have 3.5 million tourists a year growing to 5 million, and the airport region and CBD are our fastest growing areas of employment.

Funding is critical to bring transport developments forward.

Many Auckland roads, which carry much heavier vehicle loads than roads elsewhere that are classified as Roads of National Significance, get half the funding of other regions.

The City Rail Link likewise gets only 50% funding with the rationale not obvious for this.

Auckland clearly needs to pay its fair share and I’m not dodging that.

It was lonely on the hustings arguing that road pricing of some form was needed, but I did. But I firmly believe that a regional petrol tax is needed now and congestion charging further down the track.

The Government will expect that Auckland raises its fair share of infrastructure cost.

Putting it on rates though - where revenue raised bears no relationship to use of transport services - is not the right way to go.

I’m looking forward to meeting with central government to discuss and negotiate how we can jointly address our infrastructure problems.

We need to act on our shared awareness that failure to confront Auckland’s challenges will provoke a sharp political response from the electorate to both central and local government.

The Auckland Transport Alignment Project and cooperation on housing regeneration and intensification by central and local government is a good start.

Much more needs to be done.

Both levels of government have the incentive to do it.

Because we know that for New Zealand to succeed, Auckland must succeed.

Thank you for your time today.

ends

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