Nadine Dodge’s Post

My boss Geoff Cooper was on the radio this morning talking about the question of how much money we should spend on infrastructure (https://lnkd.in/dyzDy-Ta). His key message: any astronomically large dollar figure for additional investment is "not a credible funding number". Instead, it's a motivation to get more efficient at using and delivering infrastructure. The large figures that get cited most frequently are from a report from Sense Partners that the Infrastructure Commission commissioned in 2021 (https://lnkd.in/dUatDZfN). Geoff's correct to say that those figures should not be used as an estimate of what we should spend. They're simply a broad-brush attempt, based on some high-level assumptions, to estimate the scale of the pressure on our infrastructure systems. In their report, Sense Partners clearly state that we shouldn't try to build our way out of our challenges. They say: "The size of the challenge is too large to fix by simply investing more. Adding more infrastructure doesn’t always lead to better economic outcomes either. For example, more roads can also lead to more driving and hence more congestion, which is a cost to society. Rather, we need to invest more as well as reduce demand, increase efficiency and do better integrated spatial planning."

My organisation, New Zealand Infrastructure Commission, Te Waihanga, published a new report this morning entitled "Is Local Government Debt Constrained" this morning. In the report, we cover the available financing tools for New Zealand local government, a historical view on how local government made infrastructure investments in the past, and a consideration of what might be different this time around. Here's what we learned: ➡️ 1. When it comes to debt financing #infrastructure, #localgovernment has plenty of flexibility. But there are obvious tradeoffs for both political and financial capital.   ➡️ 2. What we use debt for matters. Spreading the costs of long-lived infrastructure over generations aligns with intergenerational equity - but the case is less clear for renewals arising from historic underspend on maintenance. Those are costs for this generation. By 2026 over half of all Local Government capital expenditure will be on renewals: just because we can finance infrastructure, doesn't mean we should.   ➡️ 3. #Debt without #revenue means less overall investment. Investing in infrastructure that doesn't generate a revenue stream is often a fine thing to do, but let's do it with our eyes wide open. It means more infrastructure today and less tomorrow. Where we can generate additional revenue from infrastructure services that is proportional to the value created, we should. Implementing such a funding strategy is obviously challenging for local government.   ➡️ 4. We cannot make good use of debt without understanding our asset base. Where are our assets? What condition are they in? How fast do they depreciate? Good asset management complements good debt-financing policy. A big thanks to those in the sector who helped us understand the many nuances in this world. Also grateful to Peter Nunns, Geoff Cooper and Shelly Farr Biswell with the assist landing this one. Enjoy! https://lnkd.in/g74g4M4f

***THIS EVENT IS FOR TG MEMBERS ONLY*** Congestion pricing: Moving from ‘why’ to ‘how’ The Transportation Group is pleased to present this upcoming national event with speaker Peter Nunns, from the New Zealand Infrastructure Commission | Te Waihanga. This event is for Transport Group Members Only When: Wednesday 6 March  Time: 11.45am Arrival | 12pm Presentation Start | 12.30pm Q&A Where: Auckland, Wellington Christchurch and Online You can find more event context and some background and relevant links in the event details (Not a TG Member? You can join here: https://lnkd.in/gDi9BgbG)

Great to see the discussion on advanced site protection here from Jonathan Milne at Newsroom NZ. So often we hear calls to meet #infrastructure needs with greater #funding. But this often obscures the real problem: and we end up treating symptoms, not causes. Without advanced site protection for our infrastructure, provision is predictably expensive - sometimes prohibitively so. The Opaheke Arterial is just one example, where Auckland Council estimate it will cost $78 million to purchase land in advance, or 13 times that if purchased prior to construction. For #school provision, we estimate that without advanced site protection, 54% of the time a community needs a new school, it will be too expensive. The existing system makes advanced land protection hard: specifics are required precisely when we need options. The result is less advanced site protection in recent times, which means we can expect project costs to escalate with need, #valueformoney to be questioned and investment #certainty compromised.

New research day! We've just published our last two research reports for the year, looking at the inputs to infrastructure construction and maintenance: In "Who's working in infrastructure?" we examine the size and characteristics of New Zealand's infrastructure workforce. Thanks to Vaughan Wilson, Rory Bishop, and their colleagues at Scarlatti and Alta for the fantastic work on the underlying data. You can find this report here: https://lnkd.in/d8eTPegh In "Why do construction input costs change?" we analyse local and global drivers of construction wages and prices for five key construction materials. Thanks to Graham Campbell for careful work on some tricky time-series analysis. You can find the report here: https://lnkd.in/dwggMWFt My key takeaway from the research: Infrastructure projects are at the mercy of larger forces when it comes to material costs and the availability of labour. If they want to stay on budget and schedule, the best way to do so is through good due diligence and value engineering on the project site and scope. Bigger, more complex projects are more exposed to material cost inflation and labour constraints to begin with.