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NZTA borrows big to build
The Ministry of Transport has warned that blow-outs for public private partnerships will create a deficit of around $1.9 billion in the National Land Transport Fund, the pot of money for transport projects funded by fuel taxes and road user charges.
The Ministry said the deficit called into question the ability of the New Zealand Transport Agency, which administers the fund, to secure additional debt.
This could potentially frustrate the Government’s efforts to use the fund to finance more transport infrastructure, which it had planned to do.
The National Land Transport Fund (NLTF) is used to fund investment in transport infrastructure projects, particularly roading and highways. It is almost always in deficit because it has a long pipeline of future projects that register as liabilities on its balance sheet.
However the current deficit is larger than previous ones.
At 30 June 2018 the fund posted a deficit of $1.1 billion, a year earlier it posted a deficit of $528 million, and the year before that, it posted a deficit of $497 million.
The increased deficit points to the large amount of infrastructure investment undertaken by the fund.
An NZTA spokesperson told Newsroom the increase represented borrowing to advance infrastructure projects.
“The current deficit represents that the Transport Agency has used borrowings (debt and PPP’s) to advance certain projects such as Transmission Gully and Puhoi to Warkworth,” they said.
“The borrowings will be repaid from future NLTF revenue. It is similar to a corporate taking on debt to build a new plant, and then paying that back over time,” they said.
Ministers warned of future liabilities
Each year NZTA must publish a Statement of Performance Expectations or SPE, which includes a view on its management of the land transport fund. The Ministry of Transport then briefs the Transport Minister, currently Phil Twyford, as part of its monitoring role over NZTA.
In the briefing to Twyford, the Ministry raised concerns that the forecast statements of the agency show a “growing deficit against the fund of about $1.9 billion, primarily the result of the increased draw-downs for private-public partnerships”.
It notes that while the “NLTF is placed to meet current debt servicing obligations, the forecast statements highlight the growing challenge in using the NLTF, as a single revenue source, to fund future transport projects”.
This could mean the Government looking further afield for future transport infrastructure, although just where the Government would look is unclear.
Twyford said the the deficit was normal, and helped to fund important projects.
“I’m advised that it’s normal for the NLTF to be in deficit as borrowings are used to help fund specific projects. Using debt to help fund infrastructure means that we can build projects like Transmission Gully sooner. The deficit will be repaid from future NLTF revenue,” Twyford said.
National's transport spokesperson Paul Goldsmith said the main issue was to make sure the projects the funding had been spent on were of high quality.
Public private partnerships to blame
The briefing notes that public private partnerships are the main reason for the deficit. They represent a $1.3 billion liability to the fund, up from $855 million last year. The main culprits are the Transmission Gully project and the Ara Tūhono – Pūhoi to Warkworth project.
They represent unfunded future liabilities for the fund.
NZTA requests more money, but assurances sought over value for money
NZTA also notified the Ministry of Transport of a $32 million increase in NZTA’s operating budget, equating to an increase of roughly 9 percent on the year before. The Ministry briefed Twyford that it considered there was a “potential risk around the extent to which the budgeted increase in operating expenditure represents good value for money”.
It said it had sought assurances from the agency that the increase would represent value for money.
MFAT staffer Ngaire Best, who co-wrote the paper to Twyford, told Newsroom NZTA’s costs had increased because of increased road safety advertising campaigns, cyber security investment and responding to the new Government’s Government Policy Statement for Land Transport, the road map for transportation spending.
She said the budget increase had been revised down to 6 percent.
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