Infrastructure Funding and Financing (Wellington Sludge Minimisation Facility Levy) Order 2023

Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development (HUD) is responsible for administering the Infrastructure Funding and Financing Act 2020, and also has the roles of ‘recommender’ and ‘monitor’ under the Act.

Wellington City Council's sludge minimisation facility

The sludge minimisation facility will be adjacent to the existing wastewater treatment plant at Moa Point. This facility will utilise chemical and mechanical processes to handle and dispose of wastewater sludge. It is intended to improve the stabilisation, and reduce the volume, of Wellington City’s wastewater sludge, reduce carbon emissions associated with the disposal of sludge at the Southern Landfill, and enable future economic and population growth via increased wastewater management capacity.

For more information on the sludge management facility, visit Wellington City Council’s webpage: Projects - Moa Point sludge minimisation facility - Wellington City Council(external link)

Leviable properties

The levy applies to all properties within the district in which Wellington City Council is entitled, at any time, to charge general or targeted rates under the Local Government (Rating) Act 2002 (Wellington City Council rating area), excluding protected Māori land. Levy remissions and postponement policies will be established by the SPV and Wellington City Council, but are expected to be similar to existing Wellington City Council rates remission and postponement policies.

If the boundaries of the Wellington City Council rating area are updated over time, the levy area will automatically update alongside it.

Categories of leviable land

The levy applies differentially to properties that are expected to have their wastewater treated by the sludge minimisation facility and properties that will not be connected to the sludge minimisation facility. Properties in some of the northern part of Wellington (refer to the map below) typically have their wastewater treated by a facility in Porirua. Additionally, some properties are not connected to the wastewater network at all. Despite not being connected to the new sludge minimisation facility, these properties will still pay the levy, albeit at a lower rate.

Charging properties unconnected to the sludge minimisation facility a lower levy reflects that, while they are not directly using the new facility, they still receive some benefits from the facility, such as reduced waste and carbon emissions and increased capacity for growth.

Base and commercial properties

The levy will also apply differentially to base properties (which includes residential) and commercial properties. 75% of the levy will be charged to base properties and the remaining 25% will be charged to commercial properties.

Protected Māori land

Protected Māori land can only be included in a levy area with the written consent of the owners of the land. This consent must be provided in advance of the recommendation report being provided to the Minister of Housing.

Protected Māori land is defined in section 11 of the IFF Act(external link) and generally includes Māori freehold land and Māori customary land. However, it also applies to several other categories of land, including general title land owned by Māori if it was previously Māori freehold land, but had its status changed by Part 1 of the Maori Affairs Amendment Act 1967 or an order of the Māori Land Court made on or after 1 July 1993.

While there are some parcels of land in the Wellington City Council rating area that meet the definition of protected Māori land, there are no parcels of protected Māori land included in the levy area.

The Levy period

The levy will be charged for 33 years, from 1 July 2024 to 30 June 2057.

As noted below, the intended annual levy for the last three years of the levy period (2055-2057) is $0. However, levies could still be charged in these final years if levy collections for prior years are lower than the annual levy set for those years.

Eligible costs

The levy will enable the SPV to provide up to $400 million of funding towards the eligible costs of Wellington City Council’s sludge minimisation facility.

Levy revenue may be applied towards the following types of eligible costs:

• the costs of constructing the eligible infrastructure, including establishment costs;
• the financing costs such as interest and fees, debt repayment and equity return;
• the cost of administering the levy;
• general operating costs of the SPV; and
• any further costs of the SPV in complying with the IFF Act or the proposed levy order.

Eligible infrastructure 

The eligible infrastructure to which the levy applies is:

• the sludge minimisation facility which is to be located at Moa Point, Wellington (adjacent to the wastewater treatment plant that exists on the commencement of the Order) that is to be built to utilise chemical and mechanical processes to handle and dispose of wastewater sludge (with a view to improving the stabilisation of, and reducing the volume of, wastewater sludge).
• Works in relation to the following, to the extent that those works are necessary or desirable in connection with the construction of the sludge minimisation facility:
  • the Moa Point Treatment Plant and other wastewater infrastructure in the vicinity of Moa Point;
  • the existing sludge pipeline;
  • the Carey’s Gully dewatering facility; and
  • the Western Treatment Plant (Karori).

Collecting the levy

The levy liability for a property will be included in the rates invoice issued by Wellington City Council for that property, and levies will be paid to the Council alongside rates. Wellington City Council will pass on the levy revenue it collects to the SPV.

Levy remission and postponement

The SPV’s policies for levy remission and postponement are published here: 

Levy remission policy (PDF, 448 KB)

Levy postponement policy  (PDF, 196 KB)

Annual levy resolutions

Each annual levy resolution contains the information necessary for Wellington City Council to correctly assess the amount each rating unit should be charged during the levy year, and the total amount of levy revenue that the SPV intends to collect in the levy year.

The annual levy resolutions for this levy will be published here no later than the May before the start of the levy year to which the resolution relates.

2024/25 Annual levy resolution (PDF, 955 KB)

Annual Reports

Sludge Finance LP’s annual reports will be published here once available.

Forecast excess levy

Excess levy is levy revenue that, at the end of the levy period, has not been applied to eligible costs. The SPV will estimate the first forecast excess levy prior to the first levy year and subsequently, the SPV is required to periodically forecast its excess levy. The first forecast was completed as at 1 October 2023. Future forecasts will occur on the first 31 December after the completion and commissioning of the sludge minimisation facility, and at least every subsequent 31 December thereafter.

To calculate its forecast excess levy, the SPV will add its cash balances to its forecast of the expected levy revenue over the remaining levy period and its forecast of the expected drawdowns of debt and equity funding over the remaining levy period, and subtract its forecast of the expected eligible costs over the remaining levy period.

Forecast excess levy - 1 October 2023  (PDF, 418 KB)

Reduction in maximum levy revenue

If at any time the forecast excess levy is greater than $1 million (excluding GST), the SPV will be required to reduce the maximum levy revenue to ensure the forecast excess levy no longer exceeds $1 million. In addition, the SPV will be required to make corresponding amendments to the intended annual levy revenue for the remainder of the levy period.

The reduced intended annual levy revenue would be used for setting the annual levy for levy years beginning after the reduction occurs.

Reductions in maximum levy revenue could occur if, for example, the SPV’s financing costs decrease, or construction costs for the sludge minimisation facility are lower than anticipated.

The Special Purpose Vehicle

Sludge Finance LP is the responsible SPV for the purposes of the Sludge Minimisation Facility Levy Order. This SPV is a wholly owned subsidiary of Crown Infrastructure Partners. Sludge Finance LP is entitled to the levy that is collected under this order but is not responsible for the construction of the sludge minimisation facility.

Crown Infrastructure Partners is unable to sell its equity in the SPV unless consented to in writing by HUD as the IFF Act monitor. If it does so, HUD will be able to direct the SPV to not pay distributions to the new equity holders. However, certain rights of financiers (for example, the right to appoint a receiver, a receiver and manager, an administrator, or a liquidator to the SPV, or to acquire the partnership interests in the SPV and shares in its general partner) will be provided for without requiring HUD’s consent.

Limits on return of capital

The Levy Order limits the returns on capital that the owners of the SPV may receive. The SPV is required to ensure that the cumulative net equity cashflow in each year does not exceed the equity cashflow cap for that year.

The cumulative net equity cashflow is calculated by subtracting capital injections in the SPV from the payments made by the SPV to its owners.

The equity cashflow cap is calculated by following these steps:

1. For the relevant levy year and each preceding levy year, calculating the lower of:
   1. The amount of unpaid levy for the year; or
   2. 5% of the annual levy for the year.
2. Summing the lower amounts calculated in Step 1 and adding the total amounts of penalties and interest imposed and recovered from levy payers since the first levy year (less the costs of recovery).
3. Subtracting the amount calculated in Step 2 from the amount specified for the relevant levy year in the below table.