The Infrastructure Funding and Financing Act 2020

About the Act  

The Act introduced a new funding and financing model for the provision of new and upgraded infrastructure for housing and urban development. The Act enables infrastructure projects to be delivered free of local authorities’ financing constraints or from charging high upfront costs to developers.  

Aotearoa New Zealand’s cities are growing quickly, with housing supply and associated infrastructure often not keeping up with demand. Councils are responsible for delivering infrastructure such as water and roading, but have maximum levels of debt that they’re allowed to take on. These borrowing constraints can lead to postponements in investment in viable infrastructure projects, including the infrastructure needed for new housing developments.  

Read the Infrastructure Funding and Financing Act 2020 (external link)

Special Purpose Vehicles  

The new model enables special purpose vehicles (SPVs) to fund infrastructure projects that support housing and urban development. SPVs will repay any finance raised by charging a levy to those who benefit from the infrastructure (for example, landowners in the area serviced by the new infrastructure).  

SPVs can also be responsible for the construction of the infrastructure and the Act provides them with a number of powers to facilitate this. However, in most cases SPVs will just be responsible for funding and financing the infrastructure, and another party (e.g. a local council) will be responsible for construction. 

If an SPV is responsible for construction, ownership and responsibility for the ongoing maintenance and operation of the infrastructure will be transferred to the responsible council or infrastructure provider upon completion. 

Levies

Those benefitting from the new or upgraded infrastructure (e.g. landowners in the area serviced by the new infrastructure) will be charged a levy by the SPV. These levies are charged annually for a specified amount of time (up to a maximum of 50 years), until the SPV’s financing is repaid. Councils collect the levies from affected property owners and pass them on to the SPV.  

Levies are included on a property’s land and information memorandum (LIM) and any levy amounts owing are included in rates assessments and invoices sent out by local councils.  

It’s unlikely that levies will meet the total cost of a project. Additional funding will likely be required from other parties such as councils, developers or the Crown.  

Cost of raising finance

The maximum levy revenue will always be higher than the amount of funding raised for a project. Funding raised through the Act’s model is usually capital from the private market. To be able to borrow capital, lenders require that interest is paid on the amount borrowed. Interest payments are the price of debt financing. Like a mortgage, the larger the capital and the longer the repayment term, the greater the total amount of interest accrues to the principal amount borrowed.

What infrastructure is covered 

The Act can be used for the funding and financing of the following types of infrastructure: 

• three waters infrastructure such as water supply, sewerage, sewage treatment, or stormwater drainage  
• transport infrastructure such as roads, cycleways, rapid transport, rail, walkways, ferries and associated infrastructure  
• community facilities such as reserves  
• environmental infrastructure that manages risks from natural hazards, including mitigating or avoiding those hazards and environmental restoration. 

Regulating SPVs 

The Act creates a monitoring, reporting and disclosure regime to make sure SPVs act appropriately. This includes ongoing reporting requirements for SPVs, such as publishing an annual report every levy year. 

HUD has been appointed the monitor under the Act, which means if there’s a significant problem with an SPV it can inquire and direct an SPV.  

How levies are authorised  

Levies can only be charged if they have been authorised by an Order in Council made on a case-by-case basis. Orders in Council are approved by Cabinet, after a recommendation by the Minister of Housing.  

In its role as recommender, HUD has to provide advice about levy proposals to the Minister and recommend whether to approve them. 

Proposing a project  

Anyone can propose that an infrastructure project is funded using the SPV model, including local councils, iwi, or private developers.  

Project proposers can either develop proposals themselves and submit them directly to HUD (in its recommender role), or work with Crown Infrastructure Partners (CIP). CIP acts in a facilitation role, assessing the feasibility of potential projects and assisting levy proposers to develop levy proposals. CIP will also use its commercial expertise to assist with structuring and raising finance for projects. We encourage you to talk to HUD or CIP if you are thinking of proposing using the model. 

Excess levy at the end of the levy period

After the levy period ends, the responsible SPV may have some levies it has collected which were not used, called excess levy. The SPV must pay any excess levy to the responsible levy authority (usually the local council).

If the excess levy is higher than the “excess levy threshold,” the responsible levy authority must distribute the excess levy among affected ratepayers by crediting their rates records. Credits will be calculated using the same method as the most recent levy payments. If the excess levy is lower than the excess levy threshold, the responsible levy authority may keep the excess levy.

The excess levy threshold is calculated by multiplying the minimum credit for each ratepayer, called the $e, by the number of ratepayers. $e was set at $50 in 2020 and will be adjusted every year that levies are collected in line with the Consumers Price Index. For the year 1 July 2024 to 30 June 2025, $e is $52. 

Levy orders 

Information and links about levy orders made under the Infrastructure Funding and Finance Act 2020 are published on these pages:

Learn more about the Western Bay of Plenty Transport Systems Plan

Learn more about the Wellington Sludge Minimisation Facility

Crown Infrastructure Partners

Crown Infrastructure Partners (CIP’s) role is to work with central government, local government, developers and land owners to assess the feasibility of an IFF transaction and advance the transaction through the process (including raising of finance). For further information on using the Act, please visit the Crown Infrastructure Partners website(external link)