AsiaPacific Infrastructure Dec&Jan 2015

AsiaPacific

INFRASTRUCTURE LOCAL GOVERNMENT • CONSTRUCTION • CITIES • ENERGY • ENVIRONMENT • TRANSPORT • WATER • COMMUNICATION

New Zealand Edition

New Year 2014/2015 VOL 4 NO. 6

The changing face of integrated housing Road lighting conference • Wellington super city Auckland transport woes • No to solar Ruataniwha leaks

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New Year • 2014-2015

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FIRST WORD >> Comment – Security by Craig Searle

Protecting critical infrastructure against cyber attacks Industrial control systems are highly desirable targets for sophisticated and well-funded cyber-criminal groups and appropriate security measures must be implemented

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ndustrial control systems (ICS) are increasingly becoming interconnected to an organisation’s network and therefore available to cyber criminals who can use them to sabotage normal operations.

Successful attacks on the ICS can result in significantly detrimental impacts. A power station may not be able to produce power and cities’ smart networks may fail causing widespread chaos. The system could even be used to create physical danger for workers and citizens.

Protecting this critical infrastructure has become more challenging as it is under constant threat.

Critical infrastructure protection (CIP) describes a systematic and pragmatic approach to the protection of assets, supply chains and networks whose unavailability would have a significant detrimental impact on the economic wellbeing of companies and society. Examples include power plants, communication networks, smart networks for cities, etc.

Interconnected and diverse industrial control systems increase an organisation’s level of risk to a variety of threats. Cyber criminals are no longer looking to penetrate systems, gather information and leave the company unharmed. They are now aiming to target and take control of infrastructure and process control systems in order to influence or significantly impact society.

These highly-connected and automated systems lead to significantly improved efficiency, and it is therefore impractical for organisations to disconnect them from the broader network. So it is critical for

organisations to examine possible threats and attacks against these critical assets, as they create new entry points into the organisation’s IT infrastructure.

Cyber criminals are most likely to attack critical infrastructure assets such as power plants and communications networks, which are essential to society and generate highly important outcomes for the economy. A handful of previouslydocumented malicious cyber incidents involving ICS suggest that today’s cyber criminals have the required knowledge and resources to damage or influence any type of infrastructure. These successful attacks encourage cyber criminals to exploit more diverse and influential organisations.

Until recently, organisations had a good understanding of the nature of security threats and where they were coming from. As a result, existing security measures, traditionally security endpoint enforcement technologies such as firewalls, had been sufficient to deal with these attacks. At the same time, the potential outcome of these attacks was likely to be limited to breach of privacy, fraud or loss of competitive advantage.

The new threat includes potential impacts like loss of life and other catastrophic situations, making it even more important to provide an holistic and coordinated approach to protect hyper-linked industrial control systems. Companies need to respond to their changing external environment and evolve away from traditional information technology and operational technology systems.

Recognising the risk The end goal of cyber criminals can be as simple as the theft of highly important or personal information, or it can be to obtain unlimited access to and power over industrial operations. The best responses to the threat of these network intrusions and cyber attacks include enhanced technology and up-to-date security processes.

Verifying systems and processes is key to securing critical infrastructure. Most operations depend on reliable information that comes through the system from a trusted source, which is both intended for, and appropriate to, the system in question. Initially verified sources and information can help protect ICS from malicious access, forced manipulation and control intended to harm the organisation.

BAE Systems Applied Intelligence has four key steps for organisations to identify what is needed to secure their industrial environments and critical infrastructure: 1. Engaging and educating key stakeholders. The organisation needs to work with key engineers and IT staff to understand the criticality of the systems in the ICS environment, their function and the platform upon which they are hosted.

2. System sensitivity mapping.

Organisations need to develop a systems map and group different systems based on sensitivity and criticality. This lets organisations determine which areas are appropriate as a testing environment and which systems entail a high risk of compromising

operations. This system knowledge can then be used as a working tool for all future implementations in the environment.

3. Vulnerability assessment. Once systems are cleared for testing, they need to be subjected to a vulnerability assessment through penetration testing. This process is similar to conventional penetration testing, but within an ICS environment organisations need to make sure that the systems are not saturated or denying service to legitimate users.

4. Threat modelling. With the information obtained from the first three steps, a threat model can be developed to determine the risks.

This process is generally performed when conventional penetration testing on aspects of the ICS environment is impossible. Threat modelling allows the organisation to understand how the systems in the environment could be attacked, the types of compromises that could occur and the likelihood of attacks. This is a key step in the risk assessment of an ICS. Cyber threats are constantly evolving and industrial control systems are becoming increasingly connected. Today’s cyber security must progress even more quickly.

To stay ahead of malicious attacks and prevent cyber criminals from taking control, it is critical to improve a company’s threat intelligence supported by advanced technology, processes and cooperation.

Craig Searle is Head of Cyber Security Asia Pacific at BAE Systems Applied Intelligence i

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THIS ISSUE AsiaPacific

INFRASTRUCTURE

36 Auckland’s $2.4 billion underground rail project may get a helping hand from the government if it follows Transport Agency advice

34 Lawrence Yule Overvalued housing 38 Lee Auton super cities result in local boards with insufficient powers

Transport

Housing

12 -17 Housing New Zealand went to the market to solicit expressions of interest for a novel type of

34-37 Local government

34 Comment: LGNZ President Lawrence Yule addresses the situation of overvalued housing 35 New road funding unit partnership 35 The inaugural New Zealand China Mayoral Forum 35 A new online library to share their process knowledge and experience 36 Rural New Zealand needs to tap into the wealth beneath its feet 36 Exploring the issues facing New Zealand’s water, wastewater and stormwater sector 36 Auckland’s $2.4 billion underground rail project may get a helping hand from the government if it follows Transport Agency advice 37 LGNZ has completed its review into managing risks from natural hazards

10 A variable motorway user charge is the best way to fund and manage Auckland’s transport system 24 The Further North Alliance created by the NZ Transport Agency has outperformed expectations and may represent a watershed in infrastructure contracting for New Zealand and further afield 25 New Zealand’s largest city is facing tough decisions over the funding of the transport options needed to curb rapidly increasing congestion caused by an equally rapid increase in population 26 New technologies are transforming how Kiwis commute

Comment

38 Comment: Lee Auton says super cities result in local boards with insufficient powers and resources

Security

3 Industrial control systems targets for cybercriminal groups

Appointments

6 Jess Woollam is proof that size and gender don’t need to be a barrier in the world of electricity supply line mechanics 6 Alan Cooke, the Dan Carter of building services, joins Babbage Consultants

Cities

8 Wellington could become a “super city” along the lines of the Auckland model if a draft proposal by the Local Government Commission is accepted 9 The NewUrban Group, a joint venture between Beijing-based Huadu Group and local Christchurch businessmen John Fairhall and Bert Govan

mediaSOLUTIONS Editor Geoff Picken 0212 507 559 geoff@ mediasolutions.net.nz Managing partner Phil Pilbrow 027 564 7778 phil@mediasolutions.net.nz

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New Year • 2014-2015

3 Craig Searle Industrial control systems targets for cyber-criminal groups 10 Stephen Selwood A variable motorway user charge is the best way to fund and manage Auckland’s transport system 11 Hamish Glenn Best practice - New Zealand can continue to ‘up its game’ on infrastructure and must become more calculated in its approach to strategic investment 28 Connal Townsend Auckland The Proposed Auckland Unitary Plan (PAUP) is a critical document for Auckland and leaves no room for mistakes - the rulebook will decide what can be built where and how for the decade 28 Simon Bridges Auckland Council are welcome to have a debate about future transport infrastructure investment plans but the government remains “sceptical” 29 Tim Nees Auckland housing market bubble a risk for the whole country 30 Caroline Boot Establishing tendering processes that are consistent, fit-for-purpose, impartial and cost efficient go a long way towards addressing suppliers’ concerns 31 Maira Howson and Eugenia Mc Grath Organisations may recruit, select and retain employees to gain a competitive advantage, but the right product or service means little if the workforce is not able to deliver 32-33 Peter Fraser Disturbing echoes of the ill-fated Clyde High Dam project

Public Private Partnership for the redevelopment of a challenging 12.5 hectares site containing 156 homes nearing the end of their design life on 57 different sites. An alliance of leading developers supported by a leading architect stepped up and won the contract 29 Auckland’s newest special housing area is a huge site at Papakura

Environment

22 Kiwi households may be planning to invest in solar energy according to a recent opinion poll, but the time isn’t yet right

Water

32-33 The proposed Ruataniwha Dam has disturbing echoes of the ill-fated Clyde High Dam project

18-21 Sponsored feature

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CONTENT PARTNERS

Geoff Picken Editor of AsiaPacific Infrastructure

Craig Searle Security Page 3

Stephen Selwood Transport Page 10

Hamish Glenn Best practice Page 11

Paula Brosnahan Transport Page 24

Jill Gregory Transport Page 24

Connal Townsend Auckland Page 28

Simon Bridges Transport Page 28

Tim Nees Housing Page 29

Caroline Boot Tenders Page 30

Peter Fraser Water Page 32-33

Moira Howson Management Page 31

Lee Auton Cities page 38

Eugenia McGrath Management Page 31

Phil Pilbrow is Managing Partner of Asia Pacific Infrastructure

AsiaPacific

INFRASTRUCTURE

Neglecting psychological health and wellbeing in the workplace costs Australian businesses $10.9 billion and New Zealand businesses over $2 billion a year.

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VAcciNAte AgAiNst the cost of work stress contact Peoplecentric today to foster employee health and wellbeing while enhancing performance and productivity.

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P E O P L E > > Jess Woollam and Alan Cooke

King of the castle crowns Christchurch consultancy

Making size and gender count in a man’s world

Babbage Senior Mechanical Engineer Alan Cooke harnessed water’s heat-storage properties to heat the iconic Riverstone Castle that consists of 20,000 concrete blocks laid on 540 cubic metres of concrete in the middle of an artificial lake on an Oamaru dairy farm

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he man described as the “Dan Carter of building services” has joined the Christchurch branch of national design practice Babbage Consultants less than a year after the office opening.

Senior Mechanical Engineer Alan Cooke earned the accolade for his work on the iconic Riverstone Castle project, which he admits was one of the more unusual requests of his career. “How do you efficiently heat a castle made of 20,000 concrete blocks laid on 540 cubic metres of concrete?” he asks.

If that wasn’t enough of a challenge, the castle in question sat in the middle of an artificial lake on a dairy farm outside Oamaru – though the lake proved to be the jewel in the crown by acting as the heat store from which a geothermal heat pump extracted sufficient energy to inexpensively heat the castle using under-floor heating and a few radiators. “Geothermal heat is usually expensive to install due to cost of excavation but when that’s already done you just need to take advantage of it,” Mr Cooke adds.

He has worked in Canterbury and Otago for 33 years as an engineer and consultant and has a strong history in the healthcare sector, having worked on a range of specialist healthcare services and aged care facilities as well as retail, education and commercial properties.

Babbage Building Services is currently undertaking work on a retirement village in Wanaka and is looking to broaden its offer to clients nationally, with aged-care facilities a strong area of growth both for Babbage and also for the construction industry in general.

“This is a fast-growing area of the market as the population ages, and with the increased demand for aged-care facilities comes a growing awareness of the issues faced by an ageing population,” Mr Cooke says. “We have to carefully consider all aspects of our design work, from obvious issues like mobility access to more recent demands like good internet connectivity.”

He says that aged-care facilities and medical speciality suites have their own unique requirements, such as the Linac Bunkers that house the Linear Accelerator used for radiation treatment. “Typically they need metre-thick concrete walls and you have build in as many steps as possible so radiation is absorbed rather than allowed to pass through to other parts of the facility,” Mr Cooke explains. “CT scanner suites, MRI suites, endoscopy units, operating theatres, and isolation rooms all have certain characteristics that mean the buildings they go in to have to be carefully designed.”

His credentials round out the expertise of the Babbage building services team and their strong focus on healthcare; Senior Engineers Matthew Foskin and Tommy Lee having a particular focus on specialist medical facilities such as MRI scanner suites and high-energy radiation treatment facilities and Babbage Building Services division. Principal Craig Cooper and Senior Engineer Aslam Javed having worked on hospital builds in Canada and i Australia.

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New Year • 2014-2015

Electrix electricity supply line mechanic Jess Woollam is one of the few women working in what has traditionally been seen as a men-only job

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ess Woollam is proof that size and gender don’t need to be a barrier in the world of electricity supply line mechanics.

Employed by Electrix in Auckland, she is one of the few women to be working in what has previously been seen as a men-only job.

Following what Jess described as a ‘thoroughly enjoyable’ pre-selection course, she was offered a trainee position with Electrix and two years later she’s a fully qualified member of a fault crew.

The job was suggested by her stepfather, who works as a substation technician, when she was looking after her young son and studying by correspondence.

“I’ve always been fascinated with electricity and the way electronics work and was always ready to pull the car audio system apart … working in electricity supply sounded appealing.”

The job has turned out to be everything she hoped it would be. “With the role I am in now, working in faults, there is no shortage of variety, you never quite know what you will be doing or where you will be,” she says. “I love the storm work and the fact that you are out there getting the power back on for people.”

Ms Woollam’s diminutive 1.62 metre size might have been a disadvantage in what can sometimes be a job that is quite physical in nature. “I am quite small but my approach is to find a way that suits me for the more physical aspects of the job,” she explains.

A lot of it is about technique, she adds. “I’ve also found that sometimes being smaller than everyone else can be an advantage – I can squeeze into the tight little spots that others can’t.”

The 24-year-old very much enjoys working in a team environment, feels as though the guys welcome and respect her contribution and says she’d definitely recommend the electricity supply industry as a career. “It’s an industry that is ready to have people train or re-train to get the skills they need,” Ms Woollam says.

Having obtained her line mechanic qualification, Jess is now looking ahead to further training. “I would like to do switching training and after that the high voltage ‘glove and barrier’ training”.

New Zealand’s infrastructure Industry Training Organisation, Connexis, has developed the Ultimit programme to encourage more women into the electricity supply industry. More information is available at www.connexis. i org.nz and www.ultimit.co.nz

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CITIES

>> Wellington Super City

Super city for greater Wellington Wellington could become a “super city” along the lines of the Auckland model if a draft proposal by the Local Government Commission is accepted by all parties and the public

The shared decisionmaking model of a unitary authority with local boards was the best of several options. Local boards ensure the ‘local’ is preserved in local government, says Commission chair Basil Morrison Wellington must address challenges of investment in infrastructure, changing demographics, the need for economic development and management of the impact of natural hazards and climate change.

These issues are regional in scale and require regional responses

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hat the commission labels “the most significant reforms of a generation” proposes the creation of a new unitary authority, the Greater Wellington Council.

The new body would take over the functions of the existing nine councils: Masterton District Council; Carterton District Council; South Wairarapa District Council; Upper Hutt City Council; Hutt City Council; Wellington City Council; Porirua City Council; Kapiti Coast District Council, and the Greater Wellington Regional Council.

The new council would have a shared decision-making structure: • power would be shared between the governing body (a mayor and 21 councillors) and 60 members of local boards • the mayor would be elected by voters of greater Wellington • councillors and local board members would be elected from eight defined geographic areas.

The mayor and councillors would be responsible for high-level decisions affecting all of Wellington, while the local boards would control council budgets and decisions for local matters in established communities.

Local boards would be created for Wairarapa, Upper Hutt, Lower Hutt, Kapiti Coast, Porirua-Tawa, Ohariu, Lambton, and Rongotai.

Local boards would have responsibility for decisions about local council functions unless there is a good reason for those decisions to be made at a regional level.

Local boards would have powers and budgets for local parks and reserves, recreational and community facilities; arts and cultural facilities and libraries; community

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New Year • 2014-2015

and cultural events; decisions about public spaces such as town centres and main streets; community grants; local transport, waste and recycling facilities; and local economic development initiatives.

Commission chair Basil Morrison says the shared decision-making model of a unitary authority with local boards was the best of several options considered by the commission. “Local boards ensure the ‘local’ is preserved in local government,” Mr Morrison maintains. “They are an integral component of the council structure.

Board members would be elected to speak for residents from defined areas and in turn would govern those areas with their own budgets and certain powers.”

The commission found there were many aspects of local government which had “worked well” ‘till now, he says. “But we also recognised there are limitations, inadequacies and challenges,” Mr Morrison adds.

Perhaps most importantly, he says, strong economic and cultural factors inter-connect the region and give it a common future goal. “There is a case for change,” he argues. “We have proposed a structure of local government to best meet the needs of the people of the entire region over the next 30 years.”

This proposal offers the greatest opportunity to address the significant future issues facing the region, he believes. “Wellington must address challenges of investment in infrastructure, changing demographics, the need for economic development, and management of the impact of natural hazards and climate change,” Mr Morrison maintains.

“These issues are regional in scale

and require regional responses.”

• the elected members of the Greater Wellington Council would be one mayor, 21 councillors and 60 local board members - Wellington has a population of fewer than 500,000 people but is currently governed by nine councils with eight mayors and one regional chair, 95 other councillors, 57 community board members, and nine chief executives • decisions about how to handle the transition to a single rating system would be left to the new council • an integrated rating system would come into force on 1 July 2019 and current rating systems remain in place ‘till then

• the council would have to moderate the impact of any changes for individual property owners - rates would be based on capital value not land value.

• a Maori Board and a Natural Resources Management Committee would ensure Maori participation in decision-making - the two bodies would have a joint membership of council and iwi representatives and would advise council on environmental and resource management issues, regional planning, and treaty settlement matters.

A proposal for a stand-alone Wairarapa council has failed to meet required tests, as the commission was not satisfied it would have the resources to effectively carry out all local government functions in the future.

The first elections for the new council could occur in October 2016 if the draft proposal proceeds through all its next steps, which include public submissions on the proposal that close on 2 March 2015 and could also include a public poll.

The applications for reorganisation of Wellington councils were made by Masterton District Council, Carterton District Council, South Wairarapa District Council and the Greater Wellington Regional Council in 2013.

Stamp of approval from NZCID The Local Government Commission’s decision to recommend a unified Wellington region has won the backing of New Zealand Council for Infrastructure Development Chief Executive Stephen Selwood.

Supported by local boards, the new body will strengthen the capital’s decision-making, improve delivery of essential services and attract central government and private sector investment to the region, he maintains.

The commission’s proposal gives Wellington the tools to compete, Mr Selwood says. “It provides the opportunity to lift vision beyond current parochial boundaries and put in place a structure to support regional growth and development,” he believes. “Partnership between urban centres and the rural hinterland, as well as between the region, central government and business will all be fostered.”

The Greater Wellington Council will oversee assets of $13 billion, making it the second-largest investor in the region, and empowering it with the resources to implement regional strategic direction.

The commission’s proposal does this without compromising local decision-making, Mr Selwood adds. “The commission’s eight local boards will give communities of interest strong representation within the Greater Wellington Council,” he says. “Whether or not the local board boundaries provide the best representation of local communities and whether they will have sufficient delegated authority and funding will be topics for further debate.”

The commission has put forward “an excellent proposal”, he concludes. “Residents of the Wellington region should be excited at the potential for the future under this proposal for regional i government,” Mr Selwood says.

CITIES >> Christchurch rebuild

Joint venture strengthens Christchurch rebuild diversity Quality commercial and residential development in Christchurch has been boosted by the NewUrban Group, a joint venture between Beijing-based Huadu Group and local Christchurch businessmen John Fairhall and Bert Govan

We can learn a lot from our Chinese partners in terms of efficient and cost-effective project delivery, Mr Fairhall says

One of NewUrban Groups’ current projects is a residence and townhouse development in the upmarket Christchurch suburb Fendalton designed by leading architect David Sheppard

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he new company combines Huadu’s experience in the upper end of China’s property development market with the proven local property market expertise of Fairhall and Govan.

Huadu is one of China’s larger privately owned, family-run property development and construction companies, with experience in the commercial, residential and municipal property sectors.

Founder Zhiguo Wang first visited Christchurch in the mid-2000s before the earthquakes to investigate potential investment opportunities and to build relationships - in response to the Chinese Government’s ‘Go Global’ strategy that encourages successful Chinese companies to partner with international businesses.

Mr Wang has been very keen to bring his company’s skills in development and construction together with his much-needed foreign capital, to help with the city’s rebuild.

Mr Govan, Mr Fairhall and the Wangs recognised they shared similar values and could see the considerable benefits they could bring to Canterbury and the wider New Zealand property industry by working together.

The partners signed a memorandum in 2013 laying out a

proposed business relationship, since when Huadu’s New Zealand business team have maintained a low-key presence in Christchurch jointly developing a business model with their new Christchurch partners.

Industry leader Mr Govan and Mr Fairhall went to China in July with a team of industry experts from New Zealand to review Huadu’s industry-leading construction methodology and material procurement programmes.

“We are delighted to be partnering with Huadu, a company that has won numerous Chinese construction awards over a range of projects from residential through to commercial building types,” Mr Govan says. “The NewUrban Group brings international capital and expertise, delivered through experienced local partners to the quality end of the New Zealand property market.”

One of NewUrban Groups’ current projects is Lintrathen Gardens – a residence and townhouse development in upmarket Christchurch suburb Fendalton.

Designed by David Sheppard of award-winning architects Sheppard and Rout, the innovative design incorporates protected trees into the overall landscaping plans.

Mr Fairhall says NewUrban will be applying Huadu’s expertise in the upper end of China’s development market to all of the group’s ventures.

“We will be adapting Huadu’s technology and construction systems and they will be delivered by leading Christchurch and New Zealand companies to achieve high quality outcomes across all of NewUrban’s developments,” he says.

Huadu commenced operation as a subcontractor focusing on the construction market in Beijing, participating in various large public and private sector projects. It is now comprised of several different business divisions ranging from residential house building, property development, contract construction and municipal public projects to landscaping and international trade.

A current Huadu project under development is Xianghe Industrial Park, located south of Beijing, which will eventually see 300,000 people living on a 42 square kilometre site that includes retail and commercial properties.

“We can learn a lot from our Chinese partners in terms of efficient and cost-effective project delivery,” Mr Fairhall believes. “And as a matter of policy we share this learning with local construction

The NewUrban Group brings international capital and expertise, delivered through experienced local partners to the quality end of the New Zealand property market, says Mr Govan

companies with whom we have long-established relationships.”

Mr Govan and Mr Fairhall’s successful track record in property development spans more than three decades and includes luxury villas and apartment complexes, and an exclusive lakefront development in Wanaka.

They have also owned and developed a range of projects from hospital car park buildings and shopping centres to historic building restorations and the development of the South Island’s first business park located in Bealey Avenue, Christchurch.

Former Christchurch Mayor Sir Bob Parker played an important part in helping the Chinese and Kiwi partners forge a solid working relationship.

“Both parties bring enormous experience to the table. “It has been a detailed process, based on both the Kiwi and Chinese partners identifying where their individual strengths are, and then jointly developing a commercial framework that delivers game-changing value for their clients.” Sir Bob Parker says i

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CITIES

>> Comment - Auckland congestion by Stephen Selwood

Motorway users should pay for the privilege board says A leading expert believes a variable motorway user charge is the best way to fund and manage Auckland’s transport system

Congestion: The work of the IAB clearly shows that failure to raise the extra $300 million per annum needed to invest in the future transport system will lead to serious congestion across Auckland much worse than today

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he charge should be around $2, higher at peak and lower off peak, in line with the Independent Advisory Body (IAB) report to Auckland Council on future transport funding options for Auckland. “Managed correctly, variable charging will enable motorways to run much more smoothly, like they do in the school holidays,” Mr Selwood says. “People will choose to travel at different times, go another way, ride share, walk, cycle or take public transport.”

That means those who pay the toll will benefit through a faster trip on the motorway meaning better productivity for business and less time wasted in log jammed motorways for commuters, he reasons.

“The money raised will support new investment in motorways, local roads, walkways and cycle ways and public transport services that would not otherwise be possible,” Mr Selwood believes. “The more people who choose alternatives to motorway travel because of the tolls, the better it will be for motorway users who choose to pay a toll.”

From a New Zealand perspective, he says the most important thing to note is that the economic benefits of motorway user charges are more than three times greater than the rates and fuel tax pathway. “That’s because direct charging changes behaviour more significantly than increases in general taxes.”

Mr Selwood says the work of the Independent Advisory Body clearly shows that failure to raise the extra $300 million per annum needed to invest in the future transport system will lead to serious congestion across Auckland, much worse than today. “While investment and charges will not “solve” congestion in a growing city, they will enable

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New Year • 2014-2015

us to manage growth far more effectively,” he adds. “The longer we take to decide, the bigger the problem in the future will be.”

He notes that the IAB did not specifically recommend either of two funding pathways - rates and petrol taxes or a motorway user charge – but it clearly sees merit in the motorway user charge because it will both raise the money needed and help reduce congestion on the motorway system.

“There will be a need to add capacity to some arterial roads to handle additional traffic but the transport modelling shows that traffic diversion onto arterial roads is manageable,” Mr Selwood explains.

“The system will use number plate recognition technology identical to that already in use on the Northern Gateway toll road.”

Cordon schemes like London and Stockholm were discounted because, unlike motorway charges, there would be no option to go another way, the camera gantries would have high visual impact in local communities and cordons would seriously distort travel behaviour inside and outside of the ring.

Poll support “Backing motorway charges over rates and petrol tax increases is consistent with a Horizon market research poll commissioned by NZCID in 2012 which clearly showed that Aucklanders will support low level variable tolls on Auckland’s motorways, if this reduces congestion and helps fund major transport projects,” Mr Selwood says.

The survey of 1016 Aucklanders analysed the impact of congestion on people’s lives and probed into how much they might be prepared to pay to address the problem.

“Tolls were the only funding method surveyed attracting majority support, both in principle and for different prices charged for peak, inter-peak and off peak travel,” he notes.

Across the whole group, 63 percent supported tolls in principle and 36 percent were opposed. “Tolling in principle was supported by 47 percent of those who use the motorway system twice a day or more,” Mr Selwood observes.

The survey found that congestion is already having a big toll on people and business, with large numbers of respondents believing traffic congestion is getting worse (57.3 percent) and even more (70.9 percent) believing it will get worse in the future.

Greatest adverse impacts respondents listed were increasing fuel costs (70.9 percent), longer commuting times (67.6 percent),

reducing time for other activities (61 percent), causing stress (60.8 percent) and stopping respondents and members of their households from travelling at certain times (50.4 percent).

“The survey showed that people support the need to invest in Auckland’s transport system and that they understand that pricing the motorways at different amounts by time of day will positively influence when and how people travel,” Mr Selwood concludes.

“In that sense direct user-pay tolls looks to have a much more positive reaction than simply increasing rates and petrol taxes and putting tolls on new roads.”

Stephen Selwood is Chief Executive of the New Zealand Council for Infrastructure Development i

Paying more in the long run Aucklanders may have to pay more than $350 a year to use the city’s motorways to reduce a projected $12 billion transport funding shortfall over the next 30 years.

The Independent Advisory Board charged with suggesting fixes for the shortfall has shortlisted two options - motorway tolls of $2 a trip, or increased rates and fuel taxes.

Road users would pay an average of $2 every time they used the motorway system, regardless of the distance travelled, costing the average Auckland household an extra $345-$371 a year by 2026.

This method may provide greater economic benefits but it would be costly to implement and could cause motorists to change their driving behaviour, the IAB says.

Two toll level options were suggested: • a flat $2 rate during weekdays and $1 during the day at weekends with night time travel free • or a sliding scale, with tolls higher at peak travel periods.

However, the government will have to approve fuel taxes and tolling of existing state highways and previous transport ministers Steven Joyce and Gerry Brownlee have rejected these options.

The alternative proposal would mean the average Auckland household could have to pay an additional $348 a year in rates and fuel taxes by 2026.

The funding would be gathered through: • an additional average annual increase in rates of 1 percent • an additional annual petrol excise duty increase of 1.2 cents a litre • increases to development contributions, road-user charges, public transport fare revenues, tolls on new roads • and general government revenue.

This method provided a more secure source of revenue and was less costly to implement, but the potential economic benefits were not as great.

The board says the council needed to make up the extra $300 million a year needed to improve Auckland’s “incomplete roading system and under-developed passenger transport system” and the cost of doing nothing was more severe congestion.

The IAB says the main pressures on transport systems came from Auckland’s rapid population growth, adding that the region’s population was expected to reach 2 million by 2035 from 1.42m in 2013 according to current estimates. i

INFRASTRUCTURE

>> Comment - Best practice by Hamish Glenn

Advancing global best practice New Zealand must become more calculated in its approach to strategic investment says a NZCID-UK Trade and Investment delegation to the United Kingdom

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arge steps have been taken in recent years to enhance New Zealand’s back office infrastructure capability. Initiatives such as the creation of a National Infrastructure Unit have resulted in improved understanding of national infrastructure needs and strengthened central monitoring and oversight.

Where global infrastructure leaders like the UK are heading however, goes beyond this model. Infrastructure policy is now being used as an instrument to affect broader national and regional objectives.

The old debate over whether infrastructure leads or follows residential and commercial development is being sidestepped and combined infrastructure-development policy has emerged. Under this approach, places are master-planned, funded and delivered as combined infrastructure and development initiatives to promote employment and growth outcomes.

Put another way, governments are using capital investment in homes,

The old debate over whether infrastructure leads or follows residential and commercial development is being sidestepped and combined infrastructure-development policy has emerged businesses and infrastructure to target productivity and job creation in areas with an opportunity to enhance social and economic outcomes. Lower land values in such areas provide development value uplift, which funds the investment in transport and other networks.

Reframing public capital investment policy in this way impacts all facets of infrastructure delivery.

Decision-making becomes more

collaborative. Central and local government must align their plans and processes to achieve joint policy objectives, rather than operate in silos to provide statutorily defined network services.

The private sector, which will in all cases become the predominant investor in residential and commercial property, becomes a partner in planning and, importantly, funding.

Major public transport infrastructure

receives heavy subsidies from land developers, who benefit from improved accessibility.

The promotion of outcomes above processes opens the door to innovations in resourcing. Obtaining capital to advance policy is more important than the source of capital.

The Brits attract money from Europe, Asia, super funds, public funds and anywhere they can get it because they are focused on the end goal.

The established approach in the UK is consistent with that found underway by an earlier delegation to Australia. In both cases the potential of public agencies to promote national objectives through carefully conceived provision of essential services is valued. This gives their nations an advantage over those which limit the public’s role to infrastructure capacity provision.

Hamish Glenn is Senior Policy Advisor at the New Zealand Council for Infrastructure Development -NZCID i

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HOUSING

>> Case study Northern Glen Innes

Benchmark project sets out to change the face of integrated housing It was never expected to be easy. Housing New Zealand went to the market to solicit expressions of interest for a novel type of Public Private Partnership (PPP) for the redevelopment of a challenging 12.5 hectares site containing 156 homes nearing the end of their design life on 57 different sites. complexity of working across so many projects and in a suburb about which there were many negative perceptions, whereas we saw that as an opportunity “I had arguably better local knowledge than anyone among the other groups tendering, and at the end of the day, a degree of local knowledge gives you a degree of comfort. I probably persuaded my partners to pay a bit more than the other tenderers were prepared to pay,” says Mr Dryden.

CCL needed to make diversity a virtue – it may be a two-lot subdivision - there are maybe a dozen of those. There are 20 different designs in its first 40 homes. A lot of bespoke houses by necessity rather than desire

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reating Communities Ltd (CCL) beat out 39 others to make the short list of six candidates invited to tender and won out with some fairly novel thinking of its own. It took on a project which was expected to provide a mix of social and privately owned housing within Auckland’s state housing enclave of Glen Innes (GI), built originally to house the families of servicemen returning from WWII. HNZ set the ball rolling with an enlightened tender process - it went out to developers and said ‘here are some broad parameters we are going to stick to but come to us with

your ideas about how this can be made to work.’

“Seeking that kind of innovation from development partners is the way to unlock the best answers to Auckland’s housing supply/affordability crisis,” says CCL director Murdoch Dryden.

“Our view was that we had a critical mass of homes with which we could change the negative perception of Glen Innes. And sufficient experience and appetite to undertake what was essentially multiple small projects.

“I suspect that many tenderers were put off by the management

Reasons why One of the reasons CCL took such an interest in the GI project is because it believes there is more work to come.

“It is inevitable that there will be more development of HNZ stock the corporation has an enormous portfolio of housing that is nearing the end of its design life, and is

There have been challenges working through Housing New Zealand and coordinating with their tenants, but we have worked through these and adjusted programmes to make things work. CCL General Manager Cliff Arms (left) pictured here with Southside chief executive Chris Jones

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New Year • 2014-2015

inefficiently positioned on large sections in areas that are ripe for redevelopment and intensification,” says Mr Dryden.

Still, getting the GI project up and running has been more complex than originally expected, says CCL partner, Hopper Developments’ Chief Executive Leigh Hopper.

“Understandably, Housing New Zealand had its vision – the corporation wanted to redevelop to get a mixed community with HNZ houses indistinguishable from the others.

“We entered a negotiation for a commercial arrangement with HNZ which was led by Murdoch and Matt Currie [of Arcus Developments].

Our expectation was that we would be on the ground in three months but the reality was that it was close to 15 months before we had a document we could sign, by which time the alliance had outlaid something of the order of $600, 000,” he says.

“HNZ is a bureaucracy and getting decisions out of bureaucracies can be hard work - there are multiple agendas and opinions that need to align before a decision is reached,” says Mr Dryden “There have been challenges working through HNZ and coordinating with their tenants, but we have worked through these and adjusted programmes to make

tive internal requirements that limited their opportunity to benefit from a better partnership model,” he says

Hoppers chief executive Leigh Hopper (left) and fellow director Evans Young - we all know each other and have worked together in various permutations in the past. There’s no skill duplication, we each add value to the others skillset and the strength of the final mix is greater than the sum of its constituent parts things work.”

“My understanding of how the 156 properties were selected was that they had about 40 which, for one reason or another, they had trouble tenanting. There were roughly another 40 of a nature that they were actively phasing them out of their portfolio and the balance was greater than 50 years of age and contiguous with these types of properties.”

HNZ gave tenants early notice of the development work, and committed to prioritising tenant

relocations to locations of their choosing.

“After receiving notice, it was approximately two years before the first construction commenced.

By the time we actually began construction of the first house there were still 46 houses tenanted,” says Mr Dryden.

“There are ways I can think of that we could have done it better again – and thinking objectively there are ways it could work better for HNZ. As an organisation I believe that they were bound by some prescrip-

Location and experience The site is located halfway between Stonefields (at the base of Mt Wellington) where a lot of the housing is selling for $1 million plus, and borders upmarket Glendowie and neighbouring St Heliers, where homes have a $2million plus sale price “For a lot of people Glen Innes are the badlands – without understanding the nuances – it is a big suburb and much of it is very good,” according to Mr Dryden. Glen Innes is in the right location – and it is changing for the better.”

“I had been involved in a reasonable amount of commercial development in Glen Innes and was heavily involved in the Business Association while the Government/ Council Tamaki Transformation Project (a scoping project to positively transform GI and Panmure) was underway. So I knew a lot about what was going on,” says Mr Dryden.

“Our view was that as long as we could get a level of control, we had the critical mass of housing to let us resolve issues in the community and accelerate the development of that community,” he says.

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13

bit of a simplification, a greenfield development has one resource consent – we have 57 resource consents, and the management brain damage that goes with that.

“A greenfield design has the capacity to minimise design variation and there might be as few as 15 design variants in a 500 unit development – we have 20 different designs in our first 40 homes.

Houses in the 2-3 bedroom range sell for anything from sub $500K to the high $600,000s and four bedroom units around the $800,000 mark

Experienced team The CCL alliance is made up of Hopper Developments, which already had experience in joint ventures with councils in Waitakere and had previously partnered with another CCL shareholder, developer Chris Jones of Southside, in building a terraced housing estate in Auckland’s Botany Downs to meet Manukau City’s desire to provide diversity in housing choice. Arrow International associate company Arcus Developments owns a third and Glen Innes expert Murdoch Dryden completes the shareholder team.

“When the project was brought to market I was talking to Chris about how we would structure a bid Arrow arrived about the same time.

I had previously contracted them to undertake development work, so there were existing relationships upon which to build a partnership,” says Mr Dryden.

Mr Dryden says that Hoppers were toying with the idea of putting in a bid themselves - and have a fairly long history with Chris doing different projects together - so it was a reasonably easy kind of a match up.

“We have a team of complementary skills, Hoppers are experienced in the planning, consenting and execution of residential subdivision, Dryden’s have the local presence, knowledge and community trust and acceptance, Southside is a long established brownfields developer in both residential and commercial building, and Arrow is

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New Year • 2014-2015

one of the country’s leading project management players,” says Hopper director Evans Young.

“We all know each other, and have worked together in various permutations in the past. There’s no skill duplication, we each add value to the others’ skillset and the strength of the final mix is greater than the sum of its constituent parts”

Commercial risk Mr Dryden says there is “quite a lot of risk” in a project like this and a “reasonable amount of uncertainty” in what it involved to deal with the infrastructure deficit in the area and how you manhandle 57 different projects and 700 neighbours in some sort of rational progression.

“Developments are high risk per se and this is tougher than most property developments. There are wildly different type topography and topologies and parcel shapes.

If you are in Stonefields which is only 800 metres down the road you can form your land, you can balance your cut and fill and then you can stamp out your design and get replication and repetition and gain all those sort of economies.

“That is just not available to us.

With a spot like ours we need to make diversity a virtue – it may be a two-lot subdivision -- there are maybe a dozen of those. You just have to come up with a brand new design – a lot of bespoke houses by necessity rather than desire.

“That’s one of the challenges of a greenfields vs brownfields development of this nature. While a

Social risk CCL was expecting some political based fallout and was not disappointed.

The Mana Party was involved in questioning the social merits of the development as were local based seasoned protestors such as lobbyists Sue Henry, Yvonne Dainty and Jimmy O’Dea, along with veteran activist John Minto.

“We had meetings with all those guys to try and assure them that what we were doing wasn’t bad.

Frankly I don’t think those people’s motivation is in the interests of the Glen Innes community – they were looking for a political platform.”

The CCL view is the proof of the pudding is in the eating - there are now HNZ tenants who we are moving into their new houses - they are going to see dramatic improvements to the health of their families and their opportunities, and we are seeing those changes in action.

“That’s the only way to address

political scaremongering,” says Mr Dryden. “There have undoubtedly been disruptions to the Glen Innes community, but we are firm in our belief that they are more than balanced by the outcomes.”

CCL says it has strong community support for the changes in which it is involved.

“There is a community housing organisation that’s home grown in Glen Innes called Nga Iwi Katoa and we are quite involved with them, we are quite involved with the marae, we are quite involved with the leadership in Glen Innes.”

“It’s a pretty strong community in Glen Innes, there are a number of very capable and strong leaders within the community and then there are the protestors – the protestors have come from nowhere and they represent a minority. There is a silent majority represented by leaders we are doing a lot of work with,” says Mr Dryden.

Social rewards Housing NZ made a brave decision that they needed to show a commitment to Glen Innes - which they were not shifting people out of.

There is a social history of GI having been relocated out of Freemans Bay in the 1950s and 1960s and there was a strong resistance to that at the time, and there was a resistance in the community to it happening again.

CCL is managing civil works and house build under contract. We are preparing sites – it isn’t how we started but it just works out easier.

House builders don’t like the risks associated with civil works but once you give them a platform and you have got the seices and retaining in, it is a lot more attractive, says director Murdoch Dryden

“But I don’t think there was ever an option,” says Mr Dryden.

“Philosophically we also believe that social housing should be integrated within private housing, rather than the historic practice where it was massed in one location, which might have met short term financial goals, but comes at the cost of long term social, health, educational, employment and ultimately economic outcomes.”

“Putting all the people in one place– we have run that ‘solution’ before and it does not work. I guess the international experience, and for that matter, common sense, says this is a better solution. Our housing is about bringing social housing up the level of private housing rather than depressing the private housing level down to a social housing level.

“It is a balancing act and the jury will be out for a generation before it is decided whether or not it is a success. Intuitively it is a better way of going about it – its good quality housing and we should be putting our vulnerable families in need into good quality housing - this plays out in our taxpayer savings in health and welfare and those sort of things where there is co-relation between poor housing and poor health outcomes.

The project CCL is committed to 260 houses and everything above that is subject to consenting and design. “We haven’t gone in here thinking we need to

Creating Communities and Housing New Zealand staffers on site to check on progress get as many houses as possible. We want the right number of houses – it is not a suburb that warrants apartments in our opinion. We don’t think the economics are there for that,” says Mr Dryden.

Generally the CCL delivery is standalone 3-4 bedroom homes on sections of 400-500sqm and the company is expecting to end up with between 270-300 houses depending on the consenting process.

HNZ buys houses at the lesser of cost plus or the assessed market rate. “This puts the pressure on us to ensure that we deliver houses to HNZ at a comfortable margin

below market. I estimate that over the course of the project HNZ will purchase their homes at a 10-15 percent discount to the market price,” says Mr Dryden.

Pretty much everything in the project is contracted out – CCL is managing civil works and house build under contract.

“We are preparing sites – it isn’t how we started but it just works out easier. House builders don’t like the risks associated with civil works but once you give them a platform and you have got the seices and retaining in, it is a lot more attractive,” says Mr Dryden.

A lot of it is managing your cuts

and fills. From an earthworks perspective it helps to have control of all the sites to manage the complexity around balancing cuts to fills rather than just shoving all the cuts down the end of a greenfields subdivision. You have to pick it up, move it round the corner and drop it off, says Mr Dryden.

Changing times Housing is more expensive today because of items such as development contributions, standards of housing and compliance costs which did not exist when the houses were built 50 years ago. CCL says there

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15

are still expecting to achieve a reasonable commercial profit not excessive but reasonable,” according to Hopper Developments director Evans Young. “Houses in the 2-3 bedroom range sell for anything from sub $500K to the high $600,000s and four bedroom units around the $800,000 mark,” he says.

Mr Dryden is a little more circumspect. “I don’t know much about the reward part yet because it’s been three years and we haven’t got there yet,” he says with a smile.

For the first resource consent the architects needed someone to come over with a ute for the paperwork – and a trolley for moving it into the building. It represented 5.6km of A4 sheets, plus the associated A1 sheets for a building consent site with 19 homes

is more than $100,000 worth of costs associated with building a new house today in the current environment.

“There are also a number of costs in building on brownfield sites like GI such as additional earthworks, retaining, service upgrades, relocations and bridging, that you wouldn’t get on a greenfields site.

All those little things – and some of the big things like GST – all add up.

So when HNZ are buying back new houses it is going to be expensive per se,” says Mr Dryden.

There is quite a bit of profit share in the programme for HNZ. There

is a short period where CCL get 100 percent of the profit, after which a profit share kicks in. The expectation has always been that there would be an element of profit share within the project.

“We are incentivised to deliver the project quickly to maximise our share of the profit – there is a sliding scale on the profit share such that, with time, the HNZ share of profit increases.

“Therefore HNZ gets a guaranteed pot of money - we pay for the land, then they buy back 78 houses at their formula.

Despite the complications, CCL

The process CCL say it has been broadly “comfortable with the operational plan” – the current Auckland District Plan, although it stretched the imagination of Design Architects Construkt (p17).

“The Unitary Plan also has some benefits, albeit it takes with one hand and gives with another,” says Mr Dryden.

“You are doing some of this stuff through the Housing Project Office and while you may get an extra house in here and there it increases your cost elsewhere so it always ends up as a zero sum game. The benefit for us has been having two consenting regimes where you are generating a little bit of competition between one and the other.

“We got mountains of paper work around this project - for the first resource consent the architects needed someone to come over with a ute for the paperwork – and a trolley for moving it into the building.

It represented 5.6km of A4 sheets, plus the associated A1 sheets for a building consent site with 19 homes,” he notes.

The state of play So far CCL have built and settled 23 homes, and have another 11 for sale or shortly to finish and settle.

HNZ is buying back 78 homes in the area close to the Town Centre. Their preference is to have their houses close to transport, employment and retail nodes.

So far CCL have built and settled 23 homes, and have another 11 for sale or shortly to finish and settle. HNZ is buying back 78 homes in the area close to the Town Centre. Their preference is to have their houses close to transport, employment and retail nodes

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New Year • 2014-2015

An important facet of the development is the development of a mixed tenure community allowing for social housing (both HNZ and Community Housing Providers), first home buyers, smaller household units (two bedrooms) and larger family homes.

“We are also committed to blind tenure, whereby it should not be possible to differentiate between Social housing and private housing that is where private housing standards and behaviours are normalised.

Broader challenges Challenges are not the sole prerogative of CCL. HNZ may well end up with balance sheet problems itself in its quest to harmonise social housing on a national basis.

The corporation carries a property portfolio of some $18 billion on its balance sheet and this could be decimated as more and more structured deals with the private sector come aboard.

“In the context of the deal we have done with them they have valuations - the land has a value and it has a building on it,” explains Mr Hopper. “Say the [QV] book value is listed as $400, 000 – the house may not be worth much but bear in mind it might be sitting on a 1000 sqm site.

“So the underlying land value is where the current value is – it might be more than $400k because a developer hasn’t got the associated costs of demolition or removal - part of the deal we have is that they remove the house and there are costs associated with that although some of that may be recoverable

by HNZ. “The reality is that no one could afford to pay that price to HNZ – it does not work – we would need to get back a million dollars a house plus. The best pitch we could give them was way below that if we were to deliver their outcomes affordable houses and a buyback of 78 houses on a cost plus a very small margin. The rest of the return from the project is what we can get in the market,” says Mr Hopper.

“We assume our bid was the best on offer so it goes some way to explaining why HNZ is reportedly having problems in attracting partners in new projects with tighter specs designed to defend its balance sheet,” he says.

“Still the GI houses remain a quality asset on the Government’s balance sheet,” says Mr Dryden.

“No one is setting fire to the money, it is sitting on the government’s books as a quality appreciating asset, and if they need to realise it, they can liquidate it. The cash hasn’t gone anywhere – if anything it has gone into an asset which is going to appreciate.”

Construkt has designs on Glen Innes There are very few projects which set out to alter the tone of a whole suburb and this one does that For more than three years Auckland architects Construkt have been with the Creating Communities every step the way en route to the start of the Glen Innes project, pitching for the project redevelopment as part of the initial bid with CCL. “Overall we are very proud of this project –it sets out to lead a whole suburb transformation. We can see that Northern Glen Innes is going to be gentrified in the positive meaning of that word as a result of the work.

There is a critical mass – you just drive round the streets now – notice three developments sites and three interspersing sites that are not.

You can already see the pressure on them but, better than that, there is now an understanding by the occupants of what can be achieved on those sites,” says Construkt Director David Gibbs.

It may have been a competitive bid and taken time for CCL to be awarded the contract but for Construkt it was a whole design approach that was determined on day one.

“This wasn’t just a fee bid approach, but in the initial submission we undertook analysis of the suburb, site by site analysis and investigated what type of typographies would actually suit the development. There was a high level of thinking and design input right at that very early stage which obviously tied in with the weight of the development arm,” says Construkt Principal Russell Cannons.

“It was portrayed as a master planning opportunity but we don’t regard it as that. It is more of the nature of an infill opportunity and

I think that is valuable in itself as it is very typical of how Auckland will need to grow in the immediate future,” say Mr Gibbs.

“While we are going to have greenfields I think that the realities are that the opportunities that are best going to benefit Auckland will be with transport and roads closer to the city. By their very nature there will be infill opportunities or brownfields operations.

“We put the Glen Innes project in both – brownfields in that the buildings are already there and infill by the nature of the sites that were offered which are very poorly aggregated. We have 57 sites of varying shapes and sizes and difficult topography,” he says.

“It has taken ingenuity to get a good architectural result with these parameters.

“At our brief first meeting with Arrow, I falsely assumed we were dealing with a Master Plan. We explored the real offer that was put out to the market and soon realised it was something totally different.

And the amount of work required in terms of de risking it or at least try to quantify the risk. It involved doing a plan for two thirds of the sites before they embarked on the bid,” he says.

Regardless of Construkt’s expectation of how a social house should look, the HNZ view was that their houses appear to be exactly the same as the private homes.

“And that’s what we have delivered,” say Mr Cannons. “There may be subtleties of difference in the interior features but the appearance on the street is that they are exactly the same.”

It brought more than a few challenges to the architects.

“In order to provide the best bang for the buck one may choose, for example, for the HNZ houses not to put garages in but because of the blind tenure approach they were included on both private and HNZ housing.” says Mr Gibbs.

“What it means is that HNZ have commissioned work which is beyond their minimal spec - the garage example is the prime one,” says Mr Cannons. “When you walk

We fell in a very unfortunate phase relative to the legacy of the Auckland District Plan and the Unitary Plan. And while the programme has now been designated an SHA it came very late and after a lot of the development had already been done,” says Construkt Director David Gibbs (right), here with Principal Russell Cannons.

“By and large we did not get a lot of breaks from council, they were very, very conservative about what they chose to notify

into the house, yes you can see a difference in finishes but in the streetscape this division is reduced.

It has been challenging because even though there is the blind tenure aspect to it HNZ still have quite definitive views on what are acceptable materials.

One of the most interesting things from HNZ point of view is the desire for density – the topology at the moment is largely standalone and while Construkt has increased the density overall HNZ can see the need to move on from that towards terraced houses.

“We too would have liked to see higher density on the project as a whole” says Mr Gibbs.

“No one really understood the impact of the typography and where the development occurred relative to the legacy of the Auckland District Plan and the Unitary Plan. And while the programme has now been designated an SHA it came very late and after a lot of the development had already been done.

“Initially we did not get a lot of breaks from council, they were very, very conservative about what they chose to notify and that was a real disincentive for our client who was under a real obligation to complete the project in a timeframe - which did not allow for the time needed for notifications. The default position was to go to the densities that complied with the old district plan. “It is completely different now and when we are working with council on a site-by-site basis. They are encouraging density. There are obviously reasons about that but you can see the mood within council has changed,” says Mr Cannons.

In the early stages of the projects it looked like one limiting factor for the project was the lack of storm water capacity. “It was surmounted but whenever we touch brownfields regeneration we are coming up with an insufficiency of storm water, sewer and often fire-fighting water facilities. i

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17

LIGHTING

Focus on Smart City investment The award-winning New Zealand conference and exhibition for road lighting authorities and professionals is returning to Auckland in March 2015 with a focus on developing street lighting infrastructure as a platform for smart-city development

Featured speakers include Will Gibson (left), co-founder and Managing Director of Telensa, the UK market leader in smart street lighting control technology and Dr Ron Gibbons, Director of the Centre for Infrastructure Based Safety Systems at Virginia Tech Transportation Institute and a world leading researcher in road lighting, visibility and safety

LED street lighting near Eden Park can be brightened after a match for the comfort and safety of pedestrians and dimmed at other times

R

oad Lighting 2015: Smart City Investment, a two-day conference and commercial exhibition, will examine how cities are joining the LED revolution - not only to improve energy efficiency, reduce costs and improve road safety but also to move towards the Smart City concept – a centrallycontrolled, efficient, digital lighting infrastructure that can be adapted to prevailing traffic and weather conditions and that can facilitate a network of plug-in points for electric vehicles.

Cities of the future will be able to use their road lighting central management systems (CMS) to deliver complex, real-time event

analytics using smart traffic and parking sensors, ambient lighting sensors and sensors measuring temperature, air quality and other indicators that will allow the system to respond to the needs of road users – pedestrians and motorists – in different ways.

Speakers in 2015 will include experts who are leading LEDlighting retrofits in cities in the US, UK and Europe, as well as researchers, financial analysts and professionals with understanding of New Zealand and Australian public sector environments.

Featured among them will be: • Will Gibson, co-founder and Managing Director of Telensa, the

Hamilton City Council’s recent Wairere Drive project has included LED road lighting

18

New Year • 2014-2015

UK market leader in ‘smart’ street lighting control technology which this year delivered the world’s largest wireless street light control system, connecting 125,000 street lights to a central management system for Essex County Council; • Ian Dryden, Team Leader Industrial Design, City of Melbourne, responsible for the design and coordination of cityscape features, including lighting systems, that have transformed Melbourne and its night economy by helping attract 450,000 people to the central city after dark; and • Dr Ron Gibbons, Director of the Centre for Infrastructure Based Safety Systems at Virginia Tech Transportation Institute and a worldleading researcher in road lighting, visibility and safety. Dr Gibbons will present evidence to show that lighting colour and lighting levels have a major effect on road safety.

The event will build on the success of the inaugural Road Lighting 2014 conference which attracted a 236-strong audience, 24 exhibitors, wide media interest, and was the ‘Special Event’ winner at the 2014 Public Relations Institute of NZ Awards. In a post-conference survey, attendees overwhelmingly rated the conference as ‘excellent’ and an event they would attend again.

The conference provides delegates with the opportunity to network with overseas leaders, local specialists

and industry peers to discuss issues and solutions that specifically target the needs of the New Zealand road lighting community.

The challenges facing Council CEOs, CFOs and public lighting asset managers in New Zealand are how to harness the newly available technologies and how to make procurement decisions that will indemnify councils from risk.

The conference will help to provide some of the answers.

The commercial exhibition will feature product manufacturers from US, Canada, UK and Europe, as well as international and New Zealand suppliers of services such as infrastructure finance, consultancy, smart construction, energy services and energy performance contracting.

The Energy Efficiency and Conservation Authority (EECA) is the cornerstone sponsor for Road Lighting 2015. It is being organised by management consultancy Strategic Lighting Partners Ltd, whose directors Godfrey Bridger, Bryan King and Crystal Beavis provide strategic advice and business case analyses for New Zealand and Australian road lighting projects.

For more information go to: www. roadlightingconference.com or contact Strategic Lighting Partners Ltd: Godfrey Bridger godfrey@strategiclightingpartners. com and Bryan King bryan@ strategiclightingpartners.com

LIGHTING

Climate right for LED revolution The climate is right for New Zealand cities to join the LED revolution

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he cost of LED road lights has dropped dramatically, the road lighting standard AS/NZS 1158 is currently under revision to allow for the new technology, amendments to the Local Government Act require local councils to prepare 30-year infrastructure strategies, and the NZ Transport Agency has issued guidelines that strongly support the introduction of LED lighting on the national roading network.

In the wake of these changes Auckland Transport has just announced a major LED retrofit of 44,000 of its 100,000 street lights. Other New Zealand cities have undertaken small-scale LED road lighting projects to test the new technology, but none have yet followed Auckland’s lead to undertake a city-wide retrofit.

Road Lighting 2015: Smart City Investment is designed to help New Zealand councils and road-controlling authorities find the solutions they need.

The answer for many cities overseas has included a combination of cooperative procurement schemes,

Speaking at the inaugural Road Lighting conference, Auckland Mayor Len Brown told delegates that LED road lighting is a “no brainer” and President of Local Government NZ, Hastings Mayor Lawrence Yule, said he was keen to put the message out to councils to “make this transformational change” strategies involving public-private partnerships and performance guarantees that minimise risk.

In the international arena a whole new industry is emerging to offer turnkey LED lighting solutions that are generating energy savings of 50 to 70 percent for municipal customers - with savings reaching 80 percent when LED lighting is

coupled with smart controls.

“Controls-ready” luminaires - with standard universal connectors fitted – are now on the market for road controlling authorities wanting to future-proof their decision to switch to LED and to allow for the opportunity to add or upgrade lighting controls on the system over time and as budgets allow.

Conference sponsor, the Energy Efficiency and Conservation Authority, estimates that a full-scale conversion to LED road lighting would save New Zealand about NZ$10 million in electricity costs alone, not accounting for other savings from reduced maintenance, and reductions in road injuries and street crime that international cities are experiencing.

www.infrastructurenews.co.nz

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LIGHTING

Melbourne’s lighting strategy is boosting the city’s economy Cities wanting to revitalise their CBDs and to create a night economy need look no further than Melbourne and its lighting strategy

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eplacing the city’s old, yellow sodium lighting was one of the most effective steps Melbourne took in the 1990s to attract people back to the inner city.

Now it’s going to change them all again for LED to halve the city’s electricity bill, says Ian Dryden, Melbourne City’s Team Leader in Industrial Design.

Mr Dryden is a keynote speaker at Road Lighting 2015: Smart City Investment, Australasia’s premier lighting infrastructure event.

The conference is designed to assist road-controlling authorities plan a transition to LED road lighting through long-term infrastructure strategies, with a view to halving road lighting energy consumption and maintenance costs, and improving road safety.

Mr Dryden’s experience is that white street lighting has provided a safer, more liveable environment, and helped attract people back to the inner city in droves.

“We had five people living in the CBD in 1992. Now we have 29,000,” says Mr Dryden. “We also have a 24-hour economy with 450,000 people in the city on a busy night and 300,000 on a quiet night.”

Ian Dryden is Team Leader Industrial Design, City of Melbourne, responsible for lighting systems that have transformed Melbourne and its night economy

LED lighting illuminates and decorates the Greek Precinct near the centre of Melbourne In 1992 Melbourne embarked on a strategy to reverse the city’s slide into a car-clogged “9 to 5 economy” and the suburban flight that left central city buildings with only a 40 percent occupancy rate above the first floor.

“People say the city felt dark, dingy and unsafe,” says Mr Dryden.

Armed with research from the United States showing that white light cut vehicle braking reaction times in half, Melbourne made the decision to “turn the CBD white,” he says.

Mr Dryden says the city also “calmed

the streets” with other measures such as wider pavements, but the biggest improvement factor was the road lighting.

Under white lights people felt safer and the city even looked cleaner – ratepayers complimented the city cleaners on their work.

In 1992 Melbourne turned to metal halide technology for its white lighting revolution, but six months ago – after rewriting its lighting strategy to include environmental measures – Melbourne made the decision to

undertake a five-year programme to upgrade all its road lighting to LED. Mr Dryden says under its new lighting strategy, the city expects to reduce its road lighting energy bill from $1.6 million to $400,000 a year.

“The changeover to LED will save 45 percent of the city’s total energy bill.”

Smart controls are part of the plan – to dim the lights when the streets are quiet, but also to assist with maintenance since controls “tell you if a light is out.”

Furthermore the city plans to take lighting in its smaller streets and lanes “off the grid” by powering them with rooftop solar installations.

“We’re on an incremental journey,” says Mr Dryden, “and it’s all funded out of our capital works budget.”

New road lighting specifications The New Zealand Transport Agency is encouraging energy-efficient white LED solutions for lighting on all New Zealand roads through a new set of road lighting specifications

T

he M30 Specification and Guidelines for Road Lighting Design includes a list of luminaires that have been assessed to meet the new criteria, and a process for accepting and adding luminaires to the list.

The Transport Agency says LED road lighting has now matured as a technology. It offers the lowest whole-of-life costs in most instances and a level of controllability unmatched by other systems. The white light provided by LED road lighting offers additional safety benefits over other light sources such as high-pressure sodium (HPS) “The long-term cost savings obtained by replacing HPS luminaires with LEDs are such that in many instances the case to replace now, rather than wait, is compelling,” says the Transport Agency.

The specifications have been developed with input from the

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Transport Agency’s Highways & Network Operations (HNO) and Planning & Investment (P&I) groups, Auckland Transport, Christchurch City Council, and lighting designers and suppliers.

While described as guidelines the Transport Agency says it expects them to be followed unless value for money is better served by not doing so.

According to the Energy Efficiency and Conservation Authority (EECA), independent assessments indicate LED lighting could save up to 50 percent or more of the energy currently consumed on road lighting. This represented a major benefit, along with reduced maintenance costs, for councils making the switch to LED. “If New Zealand’s road lights were switched from high-pressure sodium (HPS) lighting to LED road lighting, it would save the country about 100

gigawatt hours of electricity a year – enough to power more than 11,000 homes,” says Greg Visser, EECA General Manager, Business.

“International experience indicates that energy savings could be increased even further if the switch to LED road lighting is accompanied by a switch to modern lighting control systems that allow for ‘adaptive’ dimming and brightening of road lights to suit the prevailing conditions, from traffic density to weather.”

Support for conference He says EECA is keen to help communicate these findings to road controlling authorities in New Zealand and is supporting the Road Lighting 2015 conference in order to do so.

The conference is designed to assist road-controlling authorities plan a transition to LED road lighting

through long-term infrastructure strategies.

Local body managers and engineers will be encouraged to attend the conference in Auckland by their professional bodies.

EquiP (LGNZ’s Centre of Excellence), the New Zealand Society of Local Government Managers (SOLGM), and the Illuminating Engineering Society of Australia and New Zealand have agreed to lend their support to the conference again for a second year by promoting the conference to their members.

Other bodies that have also agreed to support the conference include the Road Controlling Authorities Forum, Lighting Council New Zealand and the Energy Management Association of New Zealand.

Download the M30 Specification and Guidelines for Road Lighting Design from http://tinyurl.com/l4u7qyy i

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ENERGY

>> Solar power

Golden era yet to dawn Some 40 percent of Kiwi households may be planning to invest in solar energy according to a recent opinion poll, but the time isn’t yet right for most of the country an energy analyst believes

New Zealand electricity generation is already 75 percent renewable and we have other renewable options; thus the imperative to stimulate the growth of PV is not as strong as it is in many other countries says MBIE’s Mark Pickup

Large-scale solar power stations are not expected to play a role in New Zealand in the foreseeable future: there is no policy for regulated feed-in tariffs and subsidies and nor is one envisaged

S

olar photovoltaics (PV) may make economic sense for isolated areas but they’re still largely a lifestyle choice for the rest of the country, Ministry of Business, Innovation and Employment (MBIE) Senior Policy Analyst Energy Markets Mark Pickup told the Solar New Zealand 2040 conference.

“Even in these areas where there may be grid parity, it is important to properly analyse the opportunity cost of an investment – could the same money yield more benefit if invested in energy efficiency measures such as insulation or a heat pump?” he asks. “However, we recognise all this may change in the next 5 – 10 years.”

The current buy-back tariff is generally significantly less than the electricity price – for example, Contact Energy was paying 17c/kWH but has just reduced it to 8 c/kWh while other retailers are typically paying 3.5 – 7c/kWh. “The householder will still face daily fixed charges even if generating and some lines companies may even charge extra to export or connect the PV, meaning there may still be a lines bill even if generation equalled usage,” he says. “At the end of the day, solar PV generation only compensates power companies for the generation or wholesale cost – the distribution and retail costs still have to be paid.”

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Seasonal swings Mr Pickup notes that local peak residential load typically occurs during winter evening periods – unlike many areas in Australia where peak load is driven by airconditioning load during summer daytime periods. “While widespread uptake of PV in New Zealand may reduce total grid-delivered energy consumption, it would have little impact on peak consumption, and consequently network capacity requirements.”

However, this may well change due to a variety of factors including cheaper and more productive PV panels, integrated household demand-side management with solar power, and cheaper batteries that would allow true ‘energy independence’ and/or better peak demand management.

Other factors that could alter the solar equation include the potential ability to connect solar panels directly to water heating elements without the need for an inverter and even solar paint, solar windows and solar roadways.

There is also the potential closure of existing thermal stations, with a UBS study noting that while not all such power plants will have disappeared completely by 2025 “we would be bold enough to say that most of those plants retiring in the future will not be replaced.”

That said, Mr Pickup believes large-scale solar power stations are not expected to play a role in New Zealand in the foreseeable future: there is no policy for regulated feed-in tariffs and subsidies and nor is one envisaged. “Most of these factors occur in countries with lower renewable levels and challenging climate goals in their electricity sector,” Mr Pickup explains.

However, central government does monitor pricing patterns – particularly the potential for adverse social equity impacts and the so-called “death spiral” of utilities with higher PV levels. “We are currently exploring some of these issues, including through the Smart Grid forum that involves a conversation between industry, government and academia and the GREEN Grid research project that is investigating the way New Zealand uses power in order to help the government achieve its target of 90 percent renewable energy by 2025.”

International comparisons PV has seen rapid uptake in other countries with Australia alone building as much PV capacity in five years as New Zealand built hydro in 50 years. Australia’s installed solar PV capacity went from fewer than 1,000 KW in 2010 to 3.5m KW, thanks largely to government subsidies in the form of feed-in tariffs and PV sellers looking for new markets after subsidies were reduced in Europe.

New Zealand may be following a similar trajectory, having already seen a 300 percent increase in installed PV capacity courtesy of a permissive policy environment but without the sales boost of subsidised input.

This growth is expected to continue as the upfront costs of PV units have

fallen globally thanks to technological improvements and economies of scale. “The cost in New Zealand has also benefited from an international over-supply of units and a high exchange rate,” Mr Pickup observes.

He expects further “significant reductions” in the capital cost of PV units, noting that PV that cost US$90 a watt in 1976 had fallen to under $10 by 1990 and was “somewhere” in the region of US$0.80 by 2013. “The projection is for a further 50 percent drop in price by 2035.”

Renewable resources Whatever the motivation, the move towards readily available, renewable, low-carbon PV obviously contributes to the New Zealand Energy Strategy, which includes a target for 90 percent of electricity generation to come from renewable sources by 2025.

“But New Zealand electricity generation is already 75 percent renewable and we have other renewable options; thus the imperative to stimulate the growth of PV is not as strong as it is in many other countries,” Mr Pickup maintains.

“In addition, PV is still a relatively expensive option compared to generation alternatives with a long-run marginal cost of new electricity generation currently 3-4 times that of the cheapest alternative, geothermal.”

The impact on emissions may also be smaller than generally thought as it depends on the extent to which PV displaces fossil fuels rather than other, currently lower-cost, renewable generation methods.

PV also presents some challenges to security and reliability of supply including: • PV is intermittent as it’s not always sunny and generation levels can change very quickly • peak solar generation occurs in the middle of the day and in summer – i.e. it doesn’t coincide with peak demand • without batteries, additional fossil fuel back-up/peaking plant may be required to ensure security of supply Ultimately, he says, MBIE believes PV is still a few years away from being an “economic” investment for the majority. “A risk is that consumers may not make a rational decision based on the costs and benefits of the product over its i lifetime,” Mr Pickup concludes.

TRANSPORT >>Comment by Paula Brosnahan and Jill Gregory

A watershed in infrastructure contracting The Further North Alliance created by the NZ Transport Agency has outperformed expectations and may represent a watershed in infrastructure contracting for New Zealand and further afield

Paula Brosnahan

Jill Gregory

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he Transport Agency set up Further North to obtain the statutory consents for the 18.5 km Puhoi to Warkworth section of the Ara Tuhono–Puhoi to Wellsford Road of National Significance (RoNS), a four-lane, dual carriageway extension of State Highway 1 from the Northern Gateway Toll Road to just north of Warkworth.

The tight timeframes and budgets the government has imposed for its RoNS programme have set the bar high for the Transport Agency, which has responded to the challenge by seeking innovative and cost-effective solutions.

This commitment to innovation is reflected in the contractual model that the Transport Agency created for the Puhoi to Warkworth consenting and preliminary design work.

The Alliance itself is essentially a joint venture, in which the Transport Agency is the owner participant and Chapman Tripp is one of three “non-owner participants”. The other non-owner participants are engineering and environmental consultants Jacobs and GHD. Each of the non-owner participants shares the risk under the Alliance contract, according to a cost limb, profit limb and bonus limb structure: • The cost limb – the owner agrees to pay the target costs of the non-owner participants • The profit limb – the agreed fee, additional to costs, to be paid to the non-owners

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• The bonus limb – if the non-owners’ actual costs come in under their target costs, then the owner and non-owners split the difference. If the actual costs are above the target costs, the overrun eats into the non-owners’ profit.

The bonus limb also provides financial incentives for achieving key performance indicators (KPIs) within key results areas (KRAs).

World first Alliances are being used increasingly around the world for major infrastructure projects. However, to the Transport Agency’s knowledge, the inclusion of a law firm in such an arrangement is a world first.

In its 18-month lifespan, the Further North Alliance has achieved extraordinary results, more than delivering on the Transport Agency’s requirement that it set a new benchmark for industry performance. In our view, this success would not have been possible using conventional delivery methods.

The consents for the project were secured within just four years of the Puhoi to Wellsford RoNS project’s inception and are rich in innovations, which we expect will be replicated in other projects by the Transport Agency and other infrastructure providers.

In particular, the final designation and resource consents were granted by a Board of Inquiry without the standard “Condition 1” constraint. Condition 1 requires

The alliance has achieved precedentsetting flexibility in both design and construction methodology, which will give downstream contractors wider scope to build the project as they see fit a project to be constructed in “accordance”, or in “general accordance”, with the plans submitted as part of the application.

On large roading projects – where the application documents are typically prepared years before the build commencement date, and almost invariably before a

contractor is appointed – this requirement can hold up the final project by requiring numerous formal variations to the consent conditions during construction.

To innovate, the Further North Alliance approached the consenting process for the Puhoi to Warkworth motorway by identifying the designation boundary then seeking conditions to ensure any effects within that boundary are appropriately managed.

The final conditions allow the project to be built anywhere within the designation boundary, except where restrictions are necessary to prevent unacceptable environmental outcomes. For example, certain high-value environments are avoided. However, in areas where movement of the alignment would lead to effects assessed as acceptable, flexibility is retained.

The Alliance has achieved precedent-setting flexibility in both design and construction methodology, which will give downstream contractors wider scope to build the project as they see fit without needing to go through a formal variation from the consent process.

Although impossible to quantify at this stage, we are confident that – if widely adopted – these new techniques can deliver significant productivity and cost benefits across the economy.

Paula Brosnahan is a Partner at Chapman Tripp and Jill Gregory is a Senior Solicitor. Both specialise in environmental planning and resource management law and both worked in i the Further North Alliance

TRANSPORT>>Auckland options

Between a rock and a hard place New Zealand’s largest city is facing tough decisions over the funding of the transport options needed to curb rapidly increasing congestion caused by an equally rapid increase in population

State Highways are funded 100 percent through the National Land Transport Fund and are not reliant on rates or other local funding

P

ay more money or accept more congestion – that’s the harsh choice facing Aucklanders following the release of the Independent Advisory Body’s report Funding Auckland’s Transport Future.

The board has presented two transport budget options: • one that remains within current revenue streams – the Basic Transport Network • or a second budget option that would introduce alternative funding pathways to raise the $12 billion needed to build the enhanced Auckland Plan transport network Aucklanders have said they want The basic option would see Auckland Transport focus only on the highest-priority projects and delay approximately $2.3 billion worth of new capital projects and $1.1 billion of renewals until after 2025. “Investment in operating areas, particularly public transport, would also be constrained to 2016 levels,” the board notes.

It would progress key public transport projects but otherwise limit public transport services to 2016 levels and provide minimal improvements for local and arterial roads, walking and cycling facilities and roads to service key population growth areas.

The Auckland Plan Transport Network, meanwhile, includes all the projects identified in the 2012 Auckland Plan, optimised to meet strategic directions for transport and provide best value for money and “significantly better the performance” of the transport system.

“This network is designed to meet the targets and aspirations of the Auckland Plan, for example, providing public transport services that meet demand and optimise performance, completion of the regional cycle

network and major improvements to the arterial road network,” the board believes.

The main elements of the two networks are: • the State Highway programme is very similar for both networks – State Highways are funded 100 per cent through the National Land Transport Fund and are not reliant on rates or other local funding • the Basic Transport Network’s high priority public transport projects will proceed but, once they are completed, very few improvements will take place - service levels will only increase to relieve severe overcrowding • the Auckland Plan Transport Network will connect Auckland, metropolitan centres and the city centre through rapid transit (either rail or rapid bus services) and service frequencies, passenger facilities and bus priorities will all be significantly improved • arterial road improvements in the Basic Transport Network will be limited to the Mill Road project and a modest provision for other arterial road improvements - the Auckland Plan Transport Network includes approximately $1 billion in additional arterial improvements over the period to 2045 • safety improvements will continue in the Basic Transport Network but operational improvements, route optimisation, intersection upgrades and intelligent transport system initiatives will be limited • the Auckland Cycling Network will be only 70 percent complete by 2045 under the Basic Transport Network and other walking and cycling initiatives will be “very limited” • maintenance and renewals in the Basic Transport Network will be

The Basic Transport Network’s high priority public transport projects will proceed but, once they are completed, very few improvements will take place - service levels will only increase to relieve severe overcrowding funded at 75 percent of the desirable levels – some assets are likely to fall into “very poor” condition • the Basic Transport Network will fund only 40 percent of the desired transport investment to planned growth areas in the southern area (Pukekohe/Paerata/ Drury); the Northwest (Kumeu/ Huapai/Whenuapai) and the north (Warkworth and Silverdale/Dairy Flat).

Over 30 years the Auckland Plan Transport Network delivers the four main projects in the Auckland Plan: • the City Rail Link • the Auckland Manukau Eastern Transport Initiative (AMETI) • East-West Connections • and the additional Waitemata Harbour Crossing.

“It also delivers rapid transit connections, supports infill and greenfield growth areas and covers the cost of renewing and maintaining Auckland Transport’s assets,” the board adds.

The Auckland Plan Transport Network provides additional motorway lanes to improve freight movements, enables the completion of the Auckland Cycle Network and also includes measures to achieve Auckland Transport’s four-stage intervention process including: • new technologies and applications • route optimisation • CCTV and Analytics • and Network Operating Plans.

All parts of Auckland Transport’s capital programme would be affected by the Basic Transport Network, particularly after 2025 when Auckland Transport can only afford the following initiatives: • a constrained renewals programme (allowed to increase 1% pa in real terms to reflect increasing cost pressures and network growth)

• Auckland Transport’s on-going operational requirements (including investment required to replace AT’s business assets, digital technology and maintain PT’s integrated ticketing system) • continuation of the highest priority programmes from the first decade – including the walking and cycling, safety, minor PT, bus and transit lane, network performance and seismic strengthening programmes • continuation of Auckland Council’s mandatory programmes (Local Board Initiatives and seal extensions) • completion of the highest priority projects begun in the first decade which are not complete by 2025 (i.e.

AMETI and Mill Road), and finally • 40 percent of the estimated costs associated with the RUB / TIGGA greenfield growth roading networks.

All other projects including high priority rapid transit network extensions (such as the NorthWestern Busway and rail to the airport), extra lanes on the motorways to support freight movements, fully supported growth in greenfields areas and completion of the walking and cycling network by 2045 will not be achieved under the Basic Transport Network.

The Auckland Plan Transport Network provides strong economic benefits compared to the Basic Transport Network, the board maintains. “With benefits exceeding costs there is a sound economic justification for the higher level of investment.”

The two options presented in Funding Auckland’s Transport Future are now open to public consultation until the end of February 2015, when a final decision will be made on the preferred choice. i

www.infrastructurenews.co.nz

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TRANSPORT>>Smart cities

Smart technology means a rethink on transport infrastructure New technologies are transforming how Kiwis commute; creating major opportunities and risks to New Zealand’s infrastructure investment, says a recent think tank discussion paper

Government challenges include safeguarding fuel excise revenue that funds transport infrastructure and charging road users fairly says NZIER Principal Economist Nick Allison

Disruption on the road ahead!

How auto technology will change much more than just our commute to work NZIER public discussion paper Working paper 2014/5, November 2014

A

host of new innovations look set to dramatically reduce the cost of car travel, notes New Zealand Institute of Economic Research (NZIER) Principal Economist Nick Allison.

“These new technologies are already here in new car markets and on our smart phones, making car commutes safer, cheaper and more comfortable,” he says.

Crash avoidance systems, car sensors that smooth traffic flows, apps that help share car commuting cost, hybrid plug-in vehicles that cost as little as a $1 a day to run and falling oil prices are great for consumers but the pace of change presents major headaches for government.

“As electric and hybrid vehicles become more common, less petrol will be used,” Mr Allison observes.

“Therefore, government challenges include safeguarding fuel excise revenue that funds transport infrastructure and charging road users fairly and efficiently.”

NZIER’s Disruption on the road ahead report notes that land transport

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is big money: government will invest $3.4 billion next year and grow spending on land transport to $4.4 billion a year by 2024/25 – well above OECD norms.

Some of the expenditure compensates for past underinvestment in Auckland but government spending plans show no sign of slowing anytime soon with passenger transport outgoings of $547 million (2013) also at record levels.

“The benefits from the new technologies will arrive well inside the 40-year planning horizon of road and rail investments we make today and have the potential to significantly affect the expected returns from these investments,” the report predicts.

“The question for government is how it might best reconfigure its transport expenditure patterns to take account of the new technologies, while it should also decide whether it should facilitate the more rapid adoption of the technologies by consumers and thereby enable reductions in road and other infrastructure investment.”

The disruptive technology shifts now arriving in the automobile market will deliver: • large safety improvements that reduce fatalities • environmental benefits that reduce pollution like carbon emissions • added capacity to the existing road network – in many cases avoiding the need to invest in so much tarmac to solve problems such as congestion.

The effects are already being felt locally, with near-autonomous technology such as assisted braking available on many new models and driverless vehicles set to transform Kiwi commutes over the next two decades - a recent survey of local transport officials revealed that 54 percent believe cars that don’t require a driver’s attention will be commonplace by 2030 or 2040.

Crash control New crash avoidance technologies are also transforming safety on the road: the US Highway Loss Data Institute (HLDI) estimates that electronic stability control (ESC) lowers the risk of a fatal singlevehicle crash by about half and the risk of a fatal rollover by as much as 80 percent.

Forward collision avoidance systems now available offer even larger safety gains, with features including autonomous braking and adaptive headlights that shift direction as the car rounds bends potentially reducing insurance claims for property damage and injuries.

Road controlling authorities spend around $300 million per annum on safety works including wide shoulders, safety barriers and skid resistant surfaces on roads, and a further $350 million is spent on road policing and safety promotion.

“This raises an important question

for transport agencies to consider: dollar-for-dollar could investment in cars with lane-keeping technology and ESC offer higher social returns than traditional road safety investments?” the report asks.

Unfortunately New Zealand’s average light vehicle fleet age is around 13 years and possibly 30-40 percent of the vehicles on the road don’t have ESC, though faster adoption could be aided by nudge-type policies that encourage people to scrap old cars and buy cars with collision mitigation technologies on board.

Smart adaptive cruise control (ACC) now comes not only with a package of safety features such as autonomous braking but also ‘driverless’ features that may further reduce congestion in cities like Auckland and Wellington – key targets for the government’s road investment programme.

ACC keeps the following distance between vehicles constant, manages braking deceleration rates and can shorten vehicle following distances; potentially increasing road capacity by forestalling the tipping point at which throughput collapses when drivers brake and slow unevenly, sending a ‘backward shockwave’ and causing upstream congestion.

Estimates suggest ACC could effectively add between 43 percent (sensors alone) to 250 percent (car-to-car communication) to road capacity, depending on the technology and driver behaviour.

“New technology will extract more and more value out of our existing tarmac and we need to learn how to take advantage of this,” the report advises. “We need to start incorporating this technology change into our transport investment planning and modelling.”

Price plunge Other technology innovations and market forces are reducing motoring costs and may maintain or even increase demand for road use by private vehicles - for example, the petrol engine is becoming more efficient, with the US Energy Information Association (EIA) projecting fuel economy gains to more than offset increases in travel from 2012 to 2040.

The EIA sees crude oil prices bottoming at around USD$91 per barrel as new fracking technology

means the US is now producing as much oil as Saudi Arabia – the world’s largest oil producer.

“Large exchange rate fluctuations and unpredictable geopolitical disruptions in the markets aside, that scenario suggests we are unlikely to see real pump prices approach the record set in 1984 anytime soon,” the report predicts.

Electric and hybrid engines also provide a genuine alternative to the combustion engine, with the New Zealand cost of the fully electric Nissan Leaf halving this year while its range was extended to 175km.

General Motors has signalled that it will release an electric vehicle (EV) with a 360km range in 2016, while market leader Tesla has just released a new model sedan which has a battery range of over 400km.

The energy density of rechargeable batteries has increased over eight fold in the last 60 years, and Tesla expects to cut the cost of an EV battery by more than 30 per cent following its USD$5 billion investment in a new battery factory that will single-handedly double the global production of batteries.

Elsewhere, UBS Global Research (2014) forecasts a rapid decline in battery costs of 50 per cent or more by 2020 – so EVs may become more competitive even in the context of falling oil prices.

The New Zealand market recently saw the launch of plug-in hybrid electric vehicles (PHEVs) such as the Mitsubishi Outlander, with an operating cost of around NZ$1 per day for the average commute and a petrol motor for longer trips.

Less than one percent of the light fleet is hybrid, but their numbers are growing at a compound annual rate of 26 percent, providing a new market for electricity providers who are beginning to offer deals specifically for overnight charging of PHEVs. Hybrid and electric cars have the potential to erode New Zealand’s payas-you-go road funding base, as they may pay minimal petrol excise duty and avoid paying road-user charges if the engine is petrol.

Revenue reduction This doesn’t bode well for government revenues, given estimates that hybrid-type vehicles will comprise between 75-84 percent of the New Zealand vehicle fleet by 2050. If three percent of the light passenger vehicle fleet become PHEVs travelling in full electric mode, the loss in fuel excise revenue will be around $30 million annually.

Governments will need to reassess what is the most fair and efficient means of collecting revenue from road users as hybrids become commonplace, the report notes, adding that extending the current road-user charging system to hybrids to avoid excise revenue losses would have high compliance costs and more evasion.

The most intuitive solution is a distance-based charging regime that uses global positioning technology.

“Work on developing an alternative charging system needs to be progressed soon given the pace of technological change and the lead time required for implementation,” the report maintains.

Public transport will see more competition as technologies make private car use more attractive, and will also have to contend with smart phone software apps that offer passengers alternatives to the bus.

Auckland has been successful in growing public transport patronage thanks to large subsidy increases, though patronage gains have come from a fall in car-passenger trips rather than drivers as actual car trips have increased by around 23 percent since 2001.

Auckland’s 50 percent increase in the use of use public transport required a 250 percent increase in expenditure over the last 10 years, with the taxpayer subsidy for a return rail trip ranging from $15-$50 per head. There is a risk that any significant loss in passenger commuter numbers will lead to even greater public funding demand in the future.

New software innovations such as the Uber app are now beginning to compete for commuter public transport passengers by lowering overhead costs, improving coordination between passengers and drivers, reducing driver downtime and cutting the price of shorter trips within Auckland by 30-40 percent.

More relevant to commuters are apps such as Carma carpooling, which connect neighbourhood passengers and drivers through smart phones and uses a default fixed rate per km, tracking trip distance and then automating payment at trip end.

Apps such as MonkeyParking could reduce city centre congestion by up to 30 percent with their ability to arbitrage regulated travel and parking prices, allowing drivers to identify a person leaving a park, negotiate a price and be guided to the slot.

“As such, the market has provided a technology-based solution to a challenge that most governments have consistently failed to address: the use of peak pricing to curb travel demand,” the report notes. “If changes such as these lead to a drop in public transport patronage, there is a risk of per-person public transport subsidy levels growing further.”

Tapping technology Growth in public transport patronage over the last decade has been supported by increased expenditure, large increases in pump prices and the largest economic recession in decades; tail wind support that may no longer continue over the next decade.

Passenger transport will also need to adapt to new technology challenges.

Auckland’s 50 percent increase in the use of public transport required a 250 percent increase in expenditure over the last 10 years, with the taxpayer subsidy for a return rail trip ranging from $15-$50 per head Cheaper, safer and more convenient private transport will also affect the urban environment as the net cost of providing electric lines infrastructure to suburban households may fall significantly, making urban living more attractive if households can generate their own power.

Roof top solar panels have fallen in price dramatically and can be used to charge electric cars and other household appliances - electric vehicles batteries can also be used to store energy for household power usage.

“As driverless and near-autonomous vehicles make car use more attractive, we may then see further pressure put on metropolitan urban limits,” the report says. “As the new technologies have significant environmental benefits from reduced emissions, urban planners will need to find other rationales for limiting urban sprawl.”

Further extensive social and economic impacts of the new car technologies include: • more efficient combustion engines and electric vehicles will likely reduce New Zealand’s reliance on oil imports, improving its long-term current account balance • scarce hospital system resources can be redirected away from expensive emergency response and intensive care services often associated with car accidents • the expected large reduction in serious accidents and fatalities will reduce required insurance premiums and Accident Compensation Corporation levies - it will also significantly reduce the amount of assets they need to hold in provision for serious injuries and fatalities • investors in transport infrastructure such as toll roads, tunnels and bridges, freight logistics and passenger rail need to start factoring in the implications of driverless vehicle technologies for demand and productivity gains • a wealth of investment opportunities will also be created on the IT side • smart cars and electric vehicles have disruptive implications for a range of more traditional New

Zealand businesses such as taxi and rental car companies, motor vehicle servicers, and tourism operators • the potential transition towards a significant electric vehicle fleet in New Zealand and abroad presents downside risk for the upstream fossil fuel sector, refining, and petroleum retailers.

Big benefits A partial analysis of the benefits of the new technologies – focused only on the widespread market uptake of electric vehicles – estimates a net benefit to New Zealand of $10.5 billion.

The report identifies several areas where government should be proactive including: • ensuring urban and transport planning reflects the likely risks, opportunities and transition issues these new technologies bring to the reshaping of cities and transport networks • revising the road sector’s approach to cost-benefit analysis to take on board the potential impact of the new technology on required road capacity and road design • recognising the emerging competition for public transport passengers and considering how public transport can be made more attractive to customers • ensuring the Accident Compensation Corporation component of vehicle registration fees is continuously updated to reflect the riskiness of different vehicles so new car buyers receive appropriate price signals • assessing whether nudge-type policies, which encourage people to scrap old cars and buy cars with crash avoidance technologies on board, have better life-saving returns than current infrastructure safety investments.

“In sum, given the opportunities, risks and challenges associated with the new vehicle technologies, it is important to widen the public policy discussion away from its narrow focus on road and public transport investment priorities,” the report i concludes.

www.infrastructurenews.co.nz

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T R A N S P O R T > > C o m m e n t A u c k l a n d b y C o n n a l To w n s e n d & S i m o n B r i d g e s

Parking a nightmare The Proposed Auckland Unitary Plan (PAUP) is a critical document for Auckland and leaves no room for mistakes - the rulebook will decide what can be built where and how for the decade

T

he Property Council has made extensive submissions to PAUP throughout its lengthy process, and is now presenting evidence to the Independent Hearings Panel, which will be taking oral submissions in a decision-making process which may take up to three years.

For optimal infrastructure outcomes in troubled Auckland, the timely provision of physical and social infrastructure and effective coordination and integration with subdivisions and housing is essential. The PAUP’s overlay has the potential to cause difficulties for infrastructure providers in establishing linear networks across Auckland.

Why? Because complexities arise when infrastructure overlays boundaries or zones, and is therefore subject to different and sometimes contradictory rules, creating costs and delays. Auckland Council must amend the PAUP to ensure a more streamlined process for infrastructure provision to avoid knock-on detrimental consequences for development and housing intensification.

While the PAUP’s greater recognition of the importance of infrastructure in the regional policy statement should be supported, it is natural that efficient, timely provision of robust integrated infrastructure be a substantive part of this document.

Infrastructure is also key to the effective operation of the Auckland Housing Accord and Special Housing Areas legislation. Assuming these processes will continue for the initial three-year period, the PAUP must recognise this and aim to ensure Auckland Council plays an active role in coordinating infrastructure input to aid timely development and growth.

The PAUP’s parking provision is a major issue right now. It significantly restricts CBD parking as it proposes a blanket control across most of the area. This is based on the most restrictive provision in previous, and currently operative, plans.

It can only be assumed the council wants to encourage people to use public transport into the city centre rather than drive in. But if adequate public transport and parking are not available, business owners will lose money.

Who wants to travel to an area where buses and trains are too difficult to get and parking is too expensive and restrictive?

The PAUP needs to adopt a more balanced approach to issues such as parking within the CBD and more flexible rules within the city fringe and for some retail activities. At this stage, the council cannot rely on current levels of public transport provision to justify heavy parking restrictions.

Public parking for visitors makes up a significant part of the PAUP’s parking provision of the CBD. At the moment, parking buildings and short-term parking is a discretionary activity within the document.

This, combined with planning restrictions, means the council is seeking to encourage communal parking that is either within buildings or underground.

This creates a disincentive to people coming into the city for retail activity, to whom accessible parking is not readily obvious.

Before imposing restrictive policies such as maximum parking limits on developments and mandating provision of cycle facilities, the council should ensure that sufficient levels of available public transport exist. We know that is not the case for Auckland.

For cycle facilities to be effective the council must ensure there are cycle paths and sufficient accessibility for cyclists to workplaces and workplaces are reasonably close to dense residential areas, otherwise the PAUP’s cycle facilities provision is redundant.

Not accounting for these realities, the PAUP risks severe unintended consequences and inefficiencies such as businesses relocating to other areas.

This would serve a devastating blow to the city centre and everything must be done to ensure this does not happen.

Connal Townsend is Chief Executive of the Property Council NZ, which represents the interests of the commercial property investment industry – including commercial, industrial, retail and property funds

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New Year • 2014-2015

i

Transport funding sceptics Auckland Council are welcome to have a debate about future transport infrastructure investment plans but the government remains sceptical about the options in the council’s funding of Auckland’s Transport Future report

W

e agree that Auckland must have a transport system that meets the demands of its growing population and we are committed to working with the Auckland Council to help make sure Auckland succeeds, says Transport Minister Simon Bridges.

“This is why the National-led government is spending more than ever before to help build the city’s transport network; around a billion dollars a year.

“These include very large projects like the Waterview Connection, the widening of the North Western Motorway, the electrification of commuter rail, and the acceleration of motorway projects on the Northern and Southern Corridors.

“These projects will make a big difference to congestion in Auckland,” he maintains. “But we remain very sceptical about the options being presented today to Aucklanders and whether the programme proposed will further alleviate congestion.”

The minister believes Aucklanders would need a “very clear sense “of what results they are getting and whether the new projects would deliver tangible value for money for commuters. “They also need to have the discussion about how much more Aucklanders are prepared to pay for their transport.”

Funding Auckland’s Transport Future describes two potential future transport networks for Auckland; a ‘basic transport network’ and an ‘Auckland Plan transport network’.

It put forward two options to raise an additional $300 million per year that would be needed to deliver the second of these – annual increases in rates and fuel taxes or charges for vehicles using the motorway network.

Rates issues are a matter for the Auckland Council, the minister says.

“In terms of a regional fuel tax or an increase in national fuel tax, the government is not supportive of new taxes or raising the national tax for the benefit of one region,” Mr Bridges affirms. “We are also not at all convinced by the motorway charge, and we have been clear that it’s not our preferred policy.

It is important to note, he adds, that the Auckland motorway system has been built by taxpayers, and any revenue raised from it would firstly belong to taxpayers. “However the Mayor is, of course, welcome to have a discussion with Aucklanders on the overall level of transport investment Auckland, on the mix and timing of additional projects, and the possible methods of paying for those projects,” Mr Bridges admits.

The government

is not supportive of new taxes

or raising the

national tax for

the benefit of one region

Simon Bridges is the Minister for Transport in the current National-led Government

i

C I T I E S > > Auckland bubble by Tim Nees

House prices in Auckland a risk for the whole country

H

ouse prices in Auckland that have risen 34 percent since 2011 will be sustainable for as long as there is the demand and the means for buyers to continue purchasing, the University of Canterbury’s architect-in-residence and urban commentator Tim Nees says.

The surge in house sales is well underway in Auckland but as soon as demand stops many property owners and individuals who have leveraged borrowings off inflated equity will be in trouble, he predicts. ``The reasons for such rapid inflation in Auckland’s residential property market will involve a number of contributory factors so there is no one solution or suggestion which will slow the trend,” Mr Nees believes.

Government policy will need to be based on thorough research into the causes and effects. “It may also be wise to question the contributory factors of Auckland’s growth and whether one super city should be encouraged to grow to a level that it dominates New Zealand’s national market and whether

Auckland’s dominant status should somehow be rebalanced,” he adds.

“This may involve investing in other cities and regions to attract quality development that may then ease the pressure on Auckland.”

“There will come a tipping point when the number of properties being sold, to either realise capital gain or profit or to repay debt, will exceed the demand or the price-point of the demand and values will then drop. “The effects of the bursting-bubble are a risk not just for Auckland but for the whole country.’’

Mr Nees raises the question: is Auckland’s problem a lack of stock or a highly active speculative rental and investment-led market? “If it is the latter a question is whether more land and more stock slow that speculation down or provide more properties, for those who can afford to invest,” he says.

There are also many sustainability issues - social and environmental - that tend to be ignored by the development of greenfield sites, he believes. “A more beneficial approach would be for the state

to invest in social housing within established urban and suburban areas in order to guarantee homes for those who can’t otherwise afford them.”

In Spain, social housing is sold to eligible purchasers well below the real estate value, but this doesn’t undermine private property developers so there is room in the market for the state-supplied product. “Although it is built at low cost it is frequently well-designed, thanks to the Spanish government’s

support of quality architecture and their investment in the built environment of their cities.”

Currently New Zealand appears to be doing the opposite. “State housing stock has either been sold or been allowed to run down,” Mr Nees observes. “Instead of investing in housing stock, money from Housing New Zealand is being redirected into rental subsidies, which may enable tenants to meet market rents.” ``But the money goes directly into the pockets of landlords and keeps rental prices up at otherwise less affordable levels. It could be said that this approach will encourage landlords to obtain even more properties, including ex-state houses. ``A long term sustainable vision is needed for housing in this country, a vision supported by the government that is fair to all levels of the market and works at a national level, not just a regional level. It needs to include good quality decent housing that has been planned well, and that people can afford to rent or buy. And if rented, is adequately maintained.’’

Auckland special housing area A

uckland’s newest special housing area has just been announced - a huge site at Papakura.

About 350 residences could rise on 27ha of land which includes the ex-Papakura Golf Course, defunct for more than two years, as well as adjoining property.

The former Papakura Golf Course and the adjoining property which borders the new Opaheke Park, have been recommended to Housing Minister Nick Smith in Auckland Council’s latest tranche of Special Housing Areas.

Special Housing Areas (SHAs) have been identified across the city where fast-track development of affordable housing can take place to help combat Auckland’s housing crisis.

The SHAs are in selected areas earmarked for development, all within the Rural Urban Boundary which defines the extent of urban

development in Auckland during the next 30 years.

Dr Smith and Auckland Mayor Len Brown also announced another 17 of these areas, saying

they would yield an additional 8000 homes and bring the total number of SHAs to 80.

This latest housing project will be developed under the Auckland

Housing Accord, which was last year agreed by Auckland Council and the government to assist in addressing the supply side of Auckland’s housing shortage. i

www.infrastructurenews.co.nz

29

M A N A G E M E N T > > Te n d e r s

Get what you want from your 2015 tenders I dare you to defy in 2015 Mick Jagger’s 1969 hit “You can’t always get what you want“

Y

ou can get what you want, if you know how, and if you invest some of that captivating energy that the Rolling Stones put into their Auckland performance last month.

This year has been a landmark for infrastructure procurement in New Zealand. The evidence is the ‘wall of work’ that’s heading towards the public construction sector as the economy gets stronger and momentum gathers in Auckland and Christchurch infrastructure projects.

This progress goes a whole lot deeper. It’s been exciting to see a growing recognition of the power and the benefits of Clever Buying from government client organisations. Procurement workshops that I have attended and led in our main centres have focused on the importance of procurement planning.

We’ve seen a range of targeted tendering tools and practices emerge, that give evaluators confidence that they will select the best supplier for the job.

This is reinforced by MBIE’s procurement arm, which has developed helpful advice for client organisations. Armed with those methods, clients are guided to understand their project and their market, and then tailor the procurement process to first eliminate unsuitable suppliers, then focus tightly on the key aspects that will make a positive impact on the success of the project.

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New Year • 2014-2015

The beauty of this intense focus on procurement is that it meets the objectives of both clients and suppliers. In simple terms, everyone recognises four essential characteristics of a sound procurement process. It needs to be: Consistent and transparent – so that suppliers and evaluators have clear common understanding of the basis on which the selection is made Fit for purpose – so that the decision is based on the projectspecific success factors of each individual situation, and these are the primary focus of the evaluation questions Impartial and fair – so that suppliers have confidence that their bids will be evaluated for their merits, and that conflicts, bias or other areas of potential prejudice are managed in a structured and defensible manner Cost-efficient – so that the time and efforts expended by both clients and suppliers are scaled appropriately in relation to the value and risk profile of the project Clever Buying is about developing and using tools that achieve these four goals - tools that are easily accessible, logical and proven to save significant time and effort from the procurement process.

Clever Suppliers will spend some time thinking about how their bidding processes can make the most of this new procurement environment in 2015. Suppliers have been vocal in complaining about the problems they experience in the procurement environment - Irrelevant questions and arduous information requirements for projects that are heavily weighted on price has brought valid protests.

Tendering is taking over from more traditional selling techniques and companies struggle need to put resource into this form of doing business.

Establishing tendering processes that are consistent, fit-for-purpose, impartial and cost efficient go a long way towards addressing suppliers’ concerns Jobs for the Boys New Zealand’s ‘two degrees of separation’ means that clients and suppliers are often well known to each other. This can create the perception that ‘schmoozing’ the evaluators is the best way to win work. Recent significant court decisions against biased or unfair evaluation decisions have fired warning shots at government organisations which ignore the principles of impartiality.

Government’s Five Principles of Procurement, introduced in 2013, are gradually being recognised by clients, which has to be a step in the right direction.

Dog-eat-Dog Price Wars The fear of being the next company to go belly-up, compounded by the pressure from clients who placed heavy weightings on tender box prices, created a contracting environment where any short-cut was worth doing if it won you

the job. It was no surprise that companies made the most of any potential variations to claw back a bit of profit.

Most infrastructure companies will be heartily glad to see the back of the post-GFC era.

The priorities of clients in establishing tendering processes that are consistent, fit-for-purpose, impartial and cost efficient goes a long way towards addressing the concerns of the bidding community.

Within the new procurement environment of 2015, tendering has become a specialist skill, and you risk wasting time and effort if you expect your staff to write winning bids without learning how.

Clever suppliers will need to ask: 1. Does our process include a structured go/no go decision, some time before the RFT is released?

2. What are we doing to make sure our clients recognise our successful projects?

3. Do we spend time at the start of a tender, understanding our clients’ priorities and developing a bid strategy that’s compelling?

4. Are our bids just going through the motions and answering the questions, or have we made an effort to make them focus on our clients’ priorities?

5. Do we mention our clients more than we mention ourselves?

6. How do our bids stand out from our competitors’ bids? Have we provided a compelling reason why the client must select us (that no others can copy)?

7. Do our staff really understand what it takes to put together a winning bid?

8. Should we organise some training for them, or some help from the experts?

Caroline Boot is a director of Plan A Tender Specialists and Clever Buying. She offers training for bidders through Lift Your Game courses and for evaluators through the Clever Buying course.

For more information, see www.plana.co.nz or www.cleverbuying.co.nz. i

MANAGEMENT >> Comment – Performance by Eugenia McGrath and Moira Howson

A recipe for engagement Organisations may recruit, select and retain employees to gain a competitive advantage, but the right product or service means little if the workforce is not able to deliver

I

t is the people who determine if the company moves forward or remains stagnant. Central to this is having a workforce that actually cares about the company, and their jobs, enough to deliver. This is employee engagement, linked with higher productivity, greater performance, less employee turnover, workplace injuries, absenteeism and financial gains. Engaged employees are happier, mentally and physically healthier - and quite possibly nicer to be around in the workplace.

A good way to think about engagement is as “a positive, fulfilling, work-related state of mind that is characterized by vigour, dedication and absorption.”

Engaged employees are those who maintain a sense of well-being while demonstrating loyalty, passion, involvement, and extra effort and initiative beyond what is required just to do the job.

After two decades of business and academic research linking engagement to organisational outcomes, researchers are starting to investigate the conditions and experiences that make for engaged employees.

What they have found is that job and personal resources such as supervisor support, having the ability to choose tasks, feeling recovered from the previous day’s work and being hopeful and optimistic are linked to better employee engagement.

These resources, which create an environment that nurtures employee learning, development and goal attainment, have been found to offset the negative effects of job demands such as time pressure and work overload which constrain an employee’s ability to perform at their best. Therefore, organisations have a vested interest in building an engaging environment.

Training employees, providing them with good social support (especially for the extroverted), giving regular feedback, an opportunity to make decisions, encouraging independent

and creative thinking, and leading by way of motivation are all organisation-driven resources that increase engagement.

Social support is key. Research shows that when people have positive interactions at work they are more engaged in their work, highlighting

the important role that workplace friendships play.

However, it is not just organisations that build a positive environment – employees also have a responsibility to use their personal resources in order to experience engagement. These personal attributes are a positive self-belief, optimism, ability to bounce back in the face of adversity (resilience), finding meaning in their work, and a sense of belonging.

Creative combinations When coupled together, organisational resources activate and allow individual resources to achieve desired goals. For instance, employees who take advantage of downtime such as free evenings between works periods are more likely to show up at work the following morning feeling fresh and engaged, which in turn prevents them feeling exhausted by the end of the work day.

This cyclical pattern shows that feeling rested before starting work boosts engagement and engagement boosts feelings of

rest. Recent research, conducted by the University of Auckland has shown that on mornings after a good night’s sleep, employees feel more positive and as a result are more engaged in their work. In sum, having good workplace friendships and getting good quality sleep before work is crucial to maintain high levels of engagement.

The good news is that engaged individuals are energetic and experience a higher level of selfbelief, and despite putting in simultaneous, mental, emotional and physical effort at work, they still manage to unwind at the end of the day and leave work at work.

The more engaged employees are at work, the more likely they are to go home feeling a higher degree of control over their leisure time, relax more, forget about work and participate in activities where they learn something new.

However, if the cycle is interrupted, with a run of poor quality sleep and little to no time to rest and engage in non-work related leisure activities, even the most engaged employees may experience burnout, strain and fatigue.

Overall, research on conditions and resources that foster engagement provides practical implications for organisations and employees, who can both contribute to creating an environment that enables engagement to flourish.

First, how can individuals and organisations make the most of the recent finding that sleep quality equips individuals with positivity which they bring to work, enhancing the quality of their work interactions? One way is to ensure employees working shifts have enough downtime between shifts to get adequate rest, or providing those working shifts with links to sleep education resources.

Second, management can benefit from the nourishing qualities of friendship for engagement by encouraging workplace friendships, setting up social events and buddy and mentoring programs which provide the potential for increases in transferred engagement.

Lastly, results imply that engaged employees manage to leave their work at work and know how to

Eugenia McGrath

Moira Howson

Employee engagement is linked with higher productivity, greater performance, less employee turnover, workplace injuries, absenteeism and financial gains unwind. Organisations should therefore continue to foster engagement; both for the immediate impact on desirable performance and other outcomes and also for the longer term benefits, with engaged employees taking their sense of motivation and positivity from work to home, unwinding into their evening activities, and bringing it back the next day.

Eugenia McGrath is a Consultant and Moira Howson a Senior Consultant at PeopleCentric, a team of industrial and organisational psychologists who work with a variety of organisations to maximise employee potential and promote the value of psychology in driving i business performance

www.infrastructurenews.co.nz

31

WAT E R > > Policies

Dam not financially watertight Peter Fraser believes the proposed Ruataniwha Dam has disturbing echoes of the ill-fated Clyde High Dam project and should not receive public funding, a leading economist claims

Without some form of subsidy, the dam is neither attractive to investors nor viable for farmers – even with the starting point of the water being zero-priced from a resource rental perspective and implying the opportunity cost of the water is also zero, says Mr Fraser

T

he Ruataniwha Water Storage Scheme (RWSS) appears a straightforward and compelling proposal but it contains serious financial flaws and there are other options, says Peter Fraser of Ropere Consulting.

The Hawkes Bay Regional Council (HBRC) scheme consists of a 96 million cubic metres storage reservoir located in the upper Makaroro River, storing water during periods of high flow and over winter.

Water from the public and privatefunded scheme would then be released improving river flows in the Tukituki Catchment through summer for aquatic life and other river users, while at the same time providing secure water to irrigators.

“In practice, building dams and developing irrigation schemes have often been easier said than done,” the former head of dairy policy for the former Ministry of Agriculture notes.

“A comparison with the Clyde High Dam provides potentially the most instructive lessons.”

The starting point for the Clyde High Dam was a series of “highly distorted” price signals regarding water resource values, capital costs, electricity costs, and project risk that made any robust economic analysis of the proposal highly challenging.

“However, the major problem was the unwavering and blinkered pursuit of dubious political imperatives masquerading as regional and national development goals,” he maintains.

These included claims that: • without development, the hydro potential of water in the Clutha was essentially being ‘wasted’

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New Year • 2014-2015

There are cheaper alternatives to irrigated grass if the objective is ‘drought-proofing’ a farm • water could be used to produce hydro power, which could then be used to produce aluminium at an Aramoana smelter that was never built • aluminium could then be exported, adding to export earnings • the city of Dunedin could be re-vitalised via a major industrial development and thereby avoid inevitable economic decline.

The arguments presented in support of the RWSS also appear “eerily familiar” including: • water that is currently flowing into the sea is ‘wasted’ as it could be used for the irrigation of farmland • irrigation will increase production as it can facilitate a switch from drystock farming to intensive dairy • the resulting milk can be turned into commodity ingredients such as milk powders for export – thereby assisting to achieve political objectives regarding export growth • the RWSS also satisfies regional development goals by arresting the economic malaise that has settled across the Southern Hawkes Bay. Conditional commitment HBRIC, the investment arm of Hawke’s Bay Regional Council, has conditionally committed $80 million towards the $275 million project, but the investment will not go ahead if HBRIC cannot convince farmers to sign up to take at least 40 million cubic metres of water from the scheme.

“HBRIC’s own analysis shows the entire project has a net present value of minus $27m when discounted over 35 years at the public sector discount rate of 8 percent,” Mr Fraser says. “The notion that the RWSS is a regional, let alone a national, ‘game changer’ is therefore illusionary.”

Central to the RWSS is the $300m Ruataniwha Dam, which will provide the storage capacity for the irrigated water, but securing private sector investment has proved challenging.

Mr Fraser believes the reason is not difficult to ascertain – for investors to receive a commercial return of 16 percent and the public sector discount rate (PSDR) of 8 percent to be met implies a water price that is uneconomic for farmers at 37.5 cents per cubic metre.

“The fact that two major private sector investors in Trustpower and Ngai Tahu have withdrawn is therefore a much more serious concern than merely securing sufficient project finance,” Mr Fraser believes.

“As a result, without some form of subsidy, the dam is neither attractive to investors nor viable for farmers – even with the starting point of the water being zero-priced from a resource rental perspective and implying the opportunity cost of the water is also zero.”

HBRIC has, however, set the water price at around 25 cents per cubic metre – but also requires farmers to enter into 35 year ‘take-or-pay’ contracts. “The immediate result of setting a fixed price is that there are insufficient cash flows generated to service private sector equity participation unless the public sector partner accepts a nil return, which implies a $243.75m lump-sum subsidy,” Mr Fraser believes.

Given the water price is fixed, the key question then becomes the volume of water available as this determines the free cash flows generated and the degree of financing the project can sustain.

Key questions Mr Fraser says questions remain whether 96m cubic metres is an achievable volume or a theoretical maximum reservoir capacity and if there is sufficient water to provide farmers their contracted flows whilst also guaranteeing minimum summer river flows (including environmental flows for flushing purposes).

These questions are critical, he

insists, as the entire 96 million cubic metres would need to be fully contracted and generating a minimum of 25 cents per cumec of distributable earnings to achieve the PSDR of eight percent per annum, which allows little room for annual operating costs of over $5 million.

“In short, unless the claimed volume of 96m cubic metres can be stored and sold then the storage part of the project is not viable from a public perspective either as it fails to meet the PSDR.” However, construction of the dam is possible if less than 96m cubic metres are sold if: • total cost is no more than $300m • project finance can be secured at an assumed public sector risk-free rate (PBRFR) of 5 percent • cents/cubic metres are available for distribution • 83m cumecs or 86 percent of maximum storage capacity is subject to 30 year take-or-pay contracts generating a 6.9 percent gross return.

“Under these assumptions, the capital costs will be repaid over 26 years, albeit with an implicit lump sum public subsidy of $41.25m,” Mr Fraser explains: “While public sector investment at less than the PSDR can be justified if there are broader societal benefits, HBRIC’s own analysis shows that no such benefits exist.”

“While various scenarios can be explored involving slightly more water (HBRIC is now claiming 104m cubic metres is available) or a longer time period (HBRIC assumes 70 years) these do no materially change the viability of the dam or the scheme in general” Mr Fraser says.

Given the critical role played by the take-or-pay contracts which effectively underwrite the construction cost of the Ruataniwha Dam by making it ‘bankable’, the RWSS would make more sense if it was a farmer-owned entity – potentially a cooperative.

“This is because such an entity aligns commercial risk with commercial reward and is underpinned by a tangible bottom-line – something that a public sector entity is likely to lack as ultimately it can socialise losses to rate and/or tax payers,” Mr Fraser explains.

Cash challenges Farmer ownership, however, is not without its own set of challenges - for example, he says it is questionable whether a farmer-owned entity can access long term debt at the

PSRFR without some form of public sector involvement (e.g. a guarantee or underwrite).

“Unless the guarantee was premised on a sufficient volume of take-or-pay contracts to fund the debt servicing costs of the dam, such an arrangement would effectively remove the symmetry between commercial risk and reward – thereby exposing rate and/or tax payers to financial losses.”

The cost and ability to finance debt funding has the effect of focusing attention squarely on the on-farm viability of irrigated water at circa 25-27 cents/cubic metre, as this will drive whether farmers have any commercial incentive to participate in the scheme.

Another key factor is the regional climate, and in particular an OctoberMarch window for grass growth which will determine when irrigated water can be utilised.

Irrigation could be used as drought insurance or as a means to boost production, implying the application of water during the October-March window to grow additional grass and thereby increase milk production.

“Clearly there are also permutations where both options could be used simultaneously, but in both cases it is cheaper to simply purchase supplements as and when additional feed is required rather than grow irrigated grass - 40 cents per kilo for

supplements versus 70 cents per kilo for irrigated grass.”

The frequency that irrigated water is needed also becomes critical – the Tukituki catchment can get very dry but isn’t drought-like every year. “This is critical as a take-or-pay contract means that the farmer will be paying for water every year regardless of whether it is used or not,” Mr Fraser says.

If on average a farmer only used 100 percent of contracted water every second year then the effective cost of water increases to circa 54 cents/ cubic metre – and potentially more if severe drought is less frequent.

“This will drive the cost of producing a kilogram of dry matter of irrigated grass even higher relative to supplements.”

The ‘down year’ issue may be eliminated in the option to boost production as it is assumed water is taken and used every year to grow additional grass, but the more production increases are driven by higher stocking rates then the bigger the ‘feed gap’ that will appear from April-September.

“Given it is pointless to apply additional water to grass at this time as it simply will not grow, then the consequence is the need to buy supplementary feed for the additional cows to get the additional milk that was promised through the use of irrigation.”

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Support shortfall There are therefore cheaper alternatives to irrigated grass if the objective is ‘drought-proofing’ a farm, while operating a year-round feed pad is more cost-effective than growing irrigated grass for part of the year if production is increased by boosting stock numbers.

“In this situation it is difficult to see how even a farmer-owned entity could reconcile the need for take-and-pay contracts in order to underwrite dam construction costs,” Mr Fraser says. “Indeed, the most likely result is that the farmer entity would not attract sufficient farmer support to make the construction of the dam possible.”

Moreover, it is estimated that it takes approximately 1000 litres of water (or one cubic metre) to produce one litre of raw milk. “In the absence of large-scale land change use to intensive dairying, it is difficult to envisage a land-use option that would require 96 cubic metres of irrigated water annually in the Tukituki catchment, let along 104m cubic metres – especially as climatic conditions do not favour a switch to horticulture.”

Mr Fraser says the implication is that absent dairy expansion the Ruataniwha Dam represents a sunk investment and a stranded asset.

“The presence of dairy implies a very

low implicit return on water – a litre of raw milk is currently worth less than 50 cents at the farm gate and even a shadow price of 10 cents per cubic metre or 1/100 cent per litre would represent 20 percent of the farm gate value of the marginal milk produced.”

An alternative to intensive dairy is enhanced dryland farming, Mr Fraser believes. “For example, the Ministry of Agriculture and Forestry report considerable success from the use of lucerne in drought-prone Marlborough.”

MAF highlights the success of Doug Avery, who realised in 1998 after farming through a prolonged drought that his family’s South Marlborough farm was no longer financially, environmentally or socially sustainable.

The Averys subsequently embarked on a journey that’s seen the farm’s profitability and production curve trend ever upwards, the key to which has been drought-proofing the property with lucerne.

These days around a third of the Avery’s 1500-hectare property is planted in lucerne, which he believes is the key to sustainability for dry-land farmers. “In other words, options regarding enhanced drystock farming are worth considering before undertaking large-scale engineering solutions,” Mr Fraser concludes.

“However, they are significantly less exciting.” i

new zealand council for infrastructure development

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L O C A L G O V E R N M E N T > > Housing by Lawrence Yule

Building a more affordable housing environment Housing affordability has rarely been out of the headlines over the past 12 months

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he international Economist magazine found New Zealand house prices were among the most overvalued in the world, house prices in Auckland continued to hit record highs and in November the New Zealand Institute of Economic Research (NZIER) warned that the overvalued Auckland housing market and slowing global growth are key risks to New Zealand’s economic outlook.

One prong of the government’s approach to tackling this issue is a new Productivity Commission inquiry, which focuses on what influences land supply for housing.

The government has asked the commission to “examine the by-laws, processes and practices of local planning and development systems across New Zealand’s faster-growing urban areas”. This will, most likely, reignite debate about the role of local government in addressing housing affordability.

Local Government New Zealand (LGNZ) strongly supports identifying solutions to address housing affordability and welcomes the commission looking at how land planning systems can better benefit cities and how local authorities make land available for housing.

However, when considering housing supply and affordability, it is important to recognise the many factors at play.

The priority cannot continue to

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be simply on how to provide more housing in Auckland or other areas deemed unaffordable. It must be on how we create and support vibrant economies and communities in the many areas of New Zealand with good land supply.

If we can do this, migrants will look beyond a handful of metropolitan areas, and skilled Kiwis will have confidence to move from areas of housing pressure to other regional

LGNZ strongly advocates that the most effective way forward is through a coordinated effort between local and central government - to drive regional development and revitalise regional economies

centres to buy homes, raise families and enjoy productive careers.

We need to find ways to develop our regional centres into environments which offer opportunities in education, employment and business. We see a real opportunity to develop a shared national strategy to strengthen regional economies to make other areas in New Zealand attractive places to live.

And, even in areas deemed to be unaffordable, overall, land shortages are not the issue. Research commissioned by LGNZ has found that apart from a small number of metropolitan areas, residential land supply shortages are not a universal problem in New Zealand.

Productivity problems Major issues impacting housing supply and affordability include timing of private sector land sales, release of land by developers and how long developers take to build once land has been zoned. Banking policy, construction costs, and the high cost of building materials – highlighted in the Productivity’s Commission last report in 2012 – also play a part.

Another recent NZIER report also found that demand for bespoke housing, poor project management and slow uptake of technology were factors in slowing productivity in the building sector.

Additionally, council roles in

planning are not always clear cut.

Changing zoning plans is complex and frequently subject to litigation as decisions are often challenged. The time this process takes is a significant issue that influences the very first step in the process of making land available for housing and local government is calling for legislation to be simplified.

The other significant issue for local government is funding infrastructure for high growth areas where existing communities cannot always cover the costs of future population growth.

Local government will be determining how it can work with the government on changes to the Resource Management Act (RMA) – and providing input on ways to make RMA processes more efficient and accessible for the public.

That includes reviewing Housing Accord processes that streamline and better focus public participation, template formats for consistency, plan provisions with greater clarity around expected outcomes and more accessible e-planning tools.

Ten local authorities are now listed on the Housing Accords and Special Housing Areas Act schedule. This means these areas can enter a housing accord with the government.

These have recognised the benefits of a truncated approach for residential rezoning and consenting.

There is opportunity to examine applying these provisions more widely to the RMA, beyond residential development in particular locations.

Statistics from the Ministry for Environment show that timeliness of consenting has never been better.

Ninety seven per cent of consents are processed within statutory timeframes.

Addressing housing shortages is about much more than “cutting through the red tape”. LGNZ strongly advocates that the most effective way forward is through a co-ordinated effort between local and central government - to drive regional development and revitalise regional economies.

With a joined-up approach from local and central government, we could achieve much more.

Lawrence Yule is President of Local i Government New Zealand

LOCAL GOVERNMENT >> Partnerships

Local government joins forces to increase efficiency Road funding unit

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ocal Government New Zealand has joined forces with the NZ Transport Agency (NZTA) to establish a new Road Transportation Unit.

The new unit is part of EquiP, LGNZ’s Centre of Excellence which was launched in March to work directly with council staff, mayors and elected members to provide customised guidance and tools that drive efficiency and have effect throughout local government.

The unit flows out of the work

undertaken by the cross-sector Roading Efficiency Group. It will assist with the introduction of vital tools such as the One Network Road Classification, add in gains from clustering and collaboration of local authorities and be supported by practical advice on how to maximise the value from these tools over the longer term.

NZ Transport Agency Chief Executive Geoff Dangerfield welcomes the initiative. “We’re

particularly pleased to be entering a new stage of our relationship with LGNZ and councils,” says Mr Dangerfield. “The Road Transportation Unit will play a key role in leading the sector and will create further opportunities to embed a one-network approach as we seek to ensure the best return on our investment in maintenance and renewals work, as well as service improvements for our joint i customers.”

The Road Transportation Unit will play a key role will create further opportunities to embed a one-network approach, says NZTA Chief Executive Geoff Dangerfield

NZ China mayoral forum

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he inaugural New Zealand China Mayoral Forum held recently in Auckland was the first of a regular exchange between mayors and governors from the two countries designed to increase engagement and create significant economic benefits throughout New Zealand.

China President Xi Jinping and Prime Minister John Key met with local government leaders, LGNZ President Lawrence Yule and President of China People’s Association for Friendship with Foreign Countries Li Xiaolin as part of his official visit to New Zealand.

Following the forum, President Xi, Prime Minister Key, Mr Yule and Madame Li participated in a ceremony acknowledging a new Agreement to establish better connections between New Zealand and the more than 600 cities and provinces in China.

“China is our biggest trading partner

and as such our relationship with them is extremely important to our economy,” LGNZ President Lawrence Yule observes. “This Forum and Agreement provides a platform for regions, towns and cities across New Zealand to strengthen trade, economic, investment and cultural links with China.”

Mr Yule notes that currently New Zealand faces uneven economic growth, with some regions growing faster and attracting population more than others. “This agreement is a significant step to effectively building a level of sub-national engagement between the two countries that supports our regional development policy.”

China’s outbound investment is projected to exceed $1.25 trillion over the next 10 years, he notes. “We want to ensure that New Zealand, and most

LGNZ President Lawrence Yule and President of China People’s Association for Friendship with Foreign Countries Li Xiaolin celebrate the signing of the new Agreement with China President Xi Jinping and Prime Minister John Key importantly our regions, attract some of this investment.”

Chinese mayors have indicated they are most interested in New Zealand opportunities in agriculture, tourism, technology and education.

Several cities have hosted successful mayoral delegations to China in recent years that have resulted in business deals for companies in those regions.

“We’re committed to building strong economies and vibrant communities across New Zealand,” Mr Yule adds.

“Having an agreement with one of the world’s most powerful economies is a significant step to supporting our regional development policy and complements central government’s role to increase regional economic growth across of all of New Zealand.” i

libraries and museums, recreation and leisure, community development, animal management and compliance as well as customer services and service delivery.

“When you think that each process required meetings and input from a number of managers before it was developed, then add in the costs of analysis, development, documentation review and approvals, it’s clear that each process may represent anything from one thousand to tens of thousands of dollars in costs and

time,” Mr Seselj says. “Councils have made a substantial and very real investment in developing these processes, which they’re now making available for sharing.”

While all processes in the library were developed by councils using Promapp software, councils do not have to use Promapp to access or download processes from the library.

Council staff can use the library to search for and view processes in map and procedure form, print, share, i download and deploy them.

Free process library

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embers belonging to half of the councils in New Zealand have registered for free access to a new online library that allows them to share their process knowledge and experience with other councils.

The library contains about 1000 processes developed by councils and uploaded to the cloud for sharing.

Business Software provider Promapp Solutions announced its intention to make the library available to all councils.

“New Zealand councils have a history of sharing with each other, but this is the first time that sharing has been centralised nationwide, and demand for access to the online library has been high,” says Promapp

Solutions Chief Executive Ivan Seselj, which provides business process management software.

“This online library allows councils to spend a few minutes browsing processes that have already been created by other New Zealand councils, instead of spending hours creating one from scratch.”

The library includes processes for activities where there is high public interest such as building consents, resource consents, wastewater management, environmental health and environmental monitoring and liquor licensing.

The library also includes an extensive set of processes for dealing with land information, parking,

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LOCAL GOVERNMENT >> Research

Local government activities and reports Rural economies

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ocal Government New Zealand has welcomed the recent report by the New Zealand Initiative stating why the resource-rich parts of rural New Zealand need to tap into the wealth beneath their feet.

Poverty of wealth – why minerals need to be part of the rural economy observes that regional parts of New Zealand experiencing economic and population decline may have significant opportunities in mineral wealth.

The report outlines the shift between the growth of urban New Zealand and the challenges of rural New Zealand – and looks at ways to lift the economies of rural areas

through mineral extraction.

LGNZ ran a September seminar – Royalty payments: the case for a local share – seeking a policy change for the distribution of a share of royalties from mineral, oil and gas extraction to the communities where the activity takes place.

Every year the government receives hundreds of millions of dollars in royalty payments for oil, gas, coal and mineral extraction in New Zealand.

These payments are, in part, made possible by the regions which provide much of the infrastructure and housing needed to support these industries.

This point is reiterated in the New Zealand Initiative report, which states since all royalties and taxes from mineral projects accrue to central government, there is little means for local government to defray locally borne costs – hardly an incentive to embrace mining development.

The report also states that a strong barrier to rural mining lies in the unintended consequences of central government’s Resource Management Act (RMA).

LGNZ supports sensible reform of the RMA, he adds. “The plan making and consenting processes are complex, costly and inefficient and reform needs to enable effective and reliable

There is little means for local government to defray local borne costs – hardly an incentive to embrace mining development, the report says decisions so that benefits can be more quickly realised,” says LGNZ President Lawrence Yule.

The report says that while rural New Zealand faces significant headwinds, encouraging responsible mining that garners community support is one possible means of reversing this i economic decline.

Water infrastructure

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GNZ has released the issues paper Exploring the issues facing New Zealand’s water, wastewater and stormwater sector as part of its sector-led 3 Waters project.

The sector-wide research provides a clear picture of the state and performance of local potable, wastewater and stormwater assets and services at the national level for the first time.

The 3 Waters project is a collaborative effort between LGNZ, its members, IPWEA, SOLGM and central government agencies including the National Infrastructure Unit of Treasury.

“With an estimated $35 billion total asset replacement value,

the 3 Waters are a significant and important infrastructure asset for New Zealand which we need to manage prudently and invest wisely, particularly with changing demographics and expectations ahead,” says LGNZ President Lawrence Yule.

The information collected shows the potable, wastewater and stormwater system in New Zealand is generally sound and currently performing largely as expected. However LGNZ has found that new demands may mean that future levels of service may need to change.

The project has identified three focus areas for further investigation by the sector:

• investing to replace and renew existing assets

• investing to meet rising standards and increasing expectations including Drinking Water Standards in the Health Act, new freshwater standards in the National Policy Statement for Freshwater Management and calls for greater management of the resilience of three waters assets • providing end-users with the right mix of incentives to use water infrastructure and service efficiently.

LGNZ is now consulting with councils and stakeholders to test the scale and scope of these issues and an appropriate solutions mix, feedback from which will inform the development of a White Paper due for release in March this year. i

is timed to coincide with a major shopping centre redevelopment due for completion before the World Masters Games in April, 2017.

The agency has come out in strong support of the plan, strengthening Auckland Mayor Len Brown’s positioning of the rail project as his key “transformational” transport priority.

“We think this is a sensible sequencing of enabling works which will minimise disruption of critical intersections in the CBD and enable compliance with the planning conditions that only one intersection can be out of action at any one time,” it has told Mr Bridges.

“A more compact construction

schedule at a later time would prove too disruptive.”

The agency also discusses the possibility of the major construction phase of bored tunnels to Mt Eden and the construction of two underground stations starting as early as 2018 and being completed by 2022 for around $2 billion.

It is concerned about missing an early start despite Prime Minister John Key’s insistence last year that the government would consider supporting a pre-2020 construction start only if ambitious patronage and employment creation targets are met.

“The risk of not being involved

in these early stages is that the key elements of the project get determined in the meantime,” it says. “If the Crown is to be a future funding partner, it needs a mechanism to identify options and risks around planning, design, procurement and financing.”

The agency has suggested to Mr Bridges a possible role for itself as a technical partner with Auckland Transport to help “manage Crown risk.”

“This would be consistent with the transport system arrangements that have been forged with Auckland Transport and Auckland Council over i the last 3-4 years.”

The 3 Waters project is a collaborative effort between LGNZ, its members, IPWEA, SOLGM and central government agencies including the National Infrastructure Unit of Treasury

Auckland rail

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uckland’s $2.4 billion underground rail project may get a helping hand from the government if it follows Transport Agency advice.

The agency’s briefing to Transport Minister Simon Bridges notes a risk if the government doesn’t get on board before 2020 with its promised half-share of the project’s cost.

Its advice has been prompted by Auckland Council’s plan to begin “enabling works” in 2016 by building twin “cut and cover” rail tunnels from Britomart to Wyndham St, beneath the Downtown shopping centre and Albert St. The council is budgeting up to $250 million for the plan, which

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LOCAL GOVERNMENT >> Natural hazards

The search for a national approach to natural hazard risk management LGNZ has completed its review into managing risks from natural hazards and released a think piece on the findings

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anaging natural hazard risk in New Zealand – Towards more resilient communities finds there is a need for a national approach to managing risk from natural hazards, including principles for hazard reduction.

The think piece pinpoints two core ideas: • the first is the need for issue and place-specific responses to natural hazards, rather than a one-size-fits-all approach • the second is the need for integration and collaboration to develop and deliver effective responses across the many players.

LGNZ President Lawrence Yule says communities would benefit from improving resilience locally and nationally across hazard threats, supported by a policy platform to better integrate and align risk reduction measures, and a portal for natural hazards information.

“This paper was commissioned because we want local and central government to think hard about how we might do better for our communities and how we might collectively take control of the responsibility of natural hazard risk management,” Mr Yule says.

New Zealand is more exposed to potential losses from natural hazards than ever before and that exposure continues to increase: the shock of an event that might be easily absorbed in a larger economy can have a severe impact here.

“New Zealand’s system compares well with other nations but we can do better by working smarter.

Collectively, we must take opportunities to improve community resilience, locally and nationally, and across all threats,” says Taranaki Regional Council Chief Executive Basil Chamberlain, who chaired the LGNZ steering committee that developed the think piece.

“Having hazard resilient communities requires in the first instance that our hazard management systems are themselves more resilient. This will be aided by being more strategically organised and focused and our operational activities being more integrated, cohesive and ultimately, effective.”

There are major knowledge gaps that inhibit sound planning and

good decisions due to the lack of alignment between the multitude of parties involved from private and public sectors to multiple individuals, communities and organisations.

“Internationally, New Zealand is reasonably well regarded for being conceptually in a ‘good practice’ space in our overall approach to natural hazards management and perhaps rightly so,” Mr Yule says.

“We understand the need to apply effort across the continuum from hazard mitigation to adaptation, and across the four ‘Rs’ – from risk reduction, readiness, response and recovery aspects.”

Committee conclusions New Zealand has a well-developed Civil Defence Emergency System (CDEM) that aims to integrate the full range of risk management activity in a single co-ordinated system. Working within that system local government has, over a period of many years, successfully implemented a range of planning and operational responses delivering its statutory responsibilities and building more resilient communities.

However, managing risks associated with natural hazards is a seriously challenging business. Property rights and associated legal issues, information and knowledge gaps and the inevitable difficulty of keeping enough people focused, aligned and imbued with a sense of urgency often pose impediments to better and more effective outcomes.

What is very clear is the need for greater sharing of expertise, building of capacity, and alignment of thought across the local and central government sectors and beyond to the wider public and private sector players with roles to play.

That broad conclusion is reached because it is clear from the soundings taken as part of the preparation of this report that, despite a solid and sensible framework being in place and the numerous examples of good practice that can be found across local government, several major issues persist: • There is little national ownership of risk reduction. The overwhelming emphasis at the national level is on the readiness, response and recovery dimensions of CDEM. This is

problematic since there are statutory functions requiring risk reduction efforts across several players and functional activities. Practical and cost effective management of natural hazards means achieving the optimal allocation of effort across all four “Rs” – something that will vary by natural hazard and by place.

• While a variety of risk reduction activity is occurring (mostly at regional and territorial levels), it has little strategic leadership in terms of a clear direction and collective agreement on principles and practices. Further, there is a lack of clarity about where responsibility for natural hazard risk reduction lies.

Given the challenging policy issues that exist, this is likely to be leading to sub optimal outcomes.

• There is little or no monitoring of hazard risk outcomes or the effectiveness of risk reduction measures taken by management agencies.

It is, therefore, difficult to assess system performance or confirm the proposition set out in 2 above.

• There is not a consistent basis to make risk management decisions. There are various risk assessment methodologies, no standards of acceptable risk and as a consequence wide variation in practice. In general, there is a low level of quantified risk assessment.

• Information on hazards to inform management action is dispersed across many agencies. Hazards managers are faced with an array of guidance on different aspects of hazard management (not necessarily coherent in its entirety).

• The public often relies on incomplete (and sometimes inaccurate) information about natural hazards when making significant investment and risk management decisions.

• Finally, the context within which we try to manage natural hazards risk continues to change but that is

not always taken into account. In particular, the outlook for climatedriven natural hazards risk is not necessarily understood nor appropriately accounted for in national, regional or local risk and response assessments and decisions.

LGNZ recommends that it advocate on behalf of the local government sector for the following: Natural hazards and community resilience strategy A pan sector natural hazards management initiative to set clear strategic direction on among other issues the introduction of key practice issues (on a hazard by hazard basis) and the appropriate policy response to hazard management generally and determining the appropriate place for local discretion and communityspecific responses and national consistency in natural hazards management.

Importantly, the process and any output should be collectively developed across local and central government and the broader hazards management sector. This should be nationally led and supported, but not nationally imposed.

Natural hazards policy platform A mechanism to research and resolve natural hazards policy issues.

This may take the form of a natural hazards policy platform as a parallel structure to the existing natural hazards research platform. Such a mechanism would inform research needs and promote policy innovation on an on-going basis, using expertise from across the natural hazards management sector.

Single information portal: An enhanced and more integrated approach to making natural hazards information available. Bringing together existing natural hazards management guidance material for practitioners should drive greater alignment of thinking. Making information on the nature and location of natural hazards more accessible for the public (at either the national or regional level and including national datasets such as LiDAR), should aim to overcome existing issues with information quality and dissemination, and assist people to make better individual risk management decisions. i

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L A S T W O R D > > Local government reform by Leigh Auton

Does size really matter Forgive me for ‘banging on’ about reform of public entities, especially local government, but I do worry about the strategy behind the reform of some of our public institutions

We need to ensure our public institutions can deliver efficiencies and effectiveness gains, but likewise they must allow residents to have an ability to influence or shape outcomes for their communities at a local level

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s readers may have gathered from my previous articles, I am not opposed to reform of entities, especially where the outcomes are explicit and compelling. I currently chair a board in the mental health and disability sector, which has agreed to merge with a similar-sized entity to create a national organisation with over 1000 employees and a balance sheet of circa $60 million.

Both organisations are clear that size does matter in this industry, my board having determined several years ago that we needed scale if the organisation was to deliver better services to its client base.

In the case of government, I assume the agglomeration of departments that came together to make up MBIE was based around shared synergies, greater back-office capacity and delivering better outcomes for the taxpayers and residents. I haven’t any feeling or evidence that this may or may not have occurred. Indeed my limited contact with MBIE has been positive.

My key concern, and this relates to how services are provided on the ground, is how such large-scale entities stay in touch with their customer base, especially those outside the main population centres.

The issue is, as I see it, that larger public entities tend to become more centralised, policy development is

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less informed by areas away from Wellington and Auckland, and the potential for enhanced bureaucracy and/or distance from customers is greatly increased.

Which brings me to local government reform. As I have previously written, I don’t see what the government strategy is for local government reform. With no criticism of the Local Government Commission intended at all, I am unsure as to the framework for reform that they have been commissioned to advance.

Unlike the 1989 reform of local government, there doesn’t appear to be a basis of principle on which the current reforms are intended to operate. Maybe I am wrong, but much of the reform seems to be ad hoc, and dependent on initiatives not necessarily agreed in regions, to advance amalgamation.

To date, these reform efforts look problematic as to likely outcome.

From my experience, the government should be tackling the reform of local government functions rather than the size and scale of local government units.

There is a case for the latter, in some areas, but in my opinion this would fall out of a reform of critical functions.

In the case of local government functions, such as transport and roading, the three waters and planning frameworks, size does

matter. Regionalisation or greater of these functions, with appropriate changes to governance arrangements and principal retention of local government ownership, would greatly improve transport outcomes, most certainly the delivery of water services, and provide greater synergies of planning policy framework across regions. The opportunity for greater iwi engagement, such as in water, would potentially be a good outcome of such reform.

Auckland action The outcomes from the reform of these functions in Auckland, are in my opinion, evident. Strategic transport issues are finally being addressed, a vertically integrated Watercare is delivering on efficiencies and effectiveness in water and wastewater, and the single Unitary Plan for Auckland will ultimately be a boon for the city.

These reforms can be delivered in the rest of New Zealand without wholescale amalgamation. Many regions are addressing this through strategic collaboration and shared services, with degrees of success.

Others are not.

My view is that the central government should mandate the Local Government Commission to more specifically place pressure on the reform of functions, without necessarily looking to amalgamate

councils per se. If we had such reform, I have little doubt that New Zealand would gain huge economic efficiency and effectiveness gains.

Such reforms, without forcing local government reform directly, would take away some of the angst of communities that they would lose their ‘local’ from local government. I personally think they have a point.

While Auckland is a work in progress, the amalgamation of councils and the creation of 21 local boards has been a mixed blessing.

There is no doubt in my mind that the council is more distant from the many communities of Auckland.

Local boards are by and large doing a good job, but hampered by a lack of delegation and support.

Policy making is being centralised with personnel being withdrawn from places such as Pukekohe and Orewa.

My question is, will the policy makers based in the CBD understand communities such as Franklin and Rodney? And finally, the Auckland Council is very big, some 10,000 personnel. Can an organisation of this size be flexible, nimble and be able to reach out and reflect the many places of this large region? It can be done, as a matter of organisational culture, but much harder than doing so in the smaller councils that are found in the rest of New Zealand.

In my opinion, size of organisations intended to reflect the political dynamics and aspirations of local communities does matter. Too big, or institutional arrangements such as local boards with insufficient powers and resources, limits the ability of such institutions to shape their ‘place’. And that ability, to be able to determine the outcomes desired by local government, lies at the core of local government.

So size, big or small, does matter in my opinion. We need to ensure our public institutions can deliver efficiencies and effectiveness gains, but likewise they must allow the resident, ratepayer or taxpayer to have an ability to influence or shape outcomes for their communities at a local level. Therein lies the challenge.

Leigh Auton is a Director of Auton & Associates and has 35 years’ local government experience. He is a chairman/director/trustee on several boards and provides consulting advice to public and i private sector companies

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