Housing Infrastructure Fund Final Proposals from Tauranga City Council Overview Document 1
Introduction Tauranga City Council submits this application to the Housing Infrastructure Fund. Council looks forward to an increased and sustained partnership with central government in our joint effort to provide for our country s population growth. This Overview Document provides context and key information relevant to the Housing Infrastructure bid. It should be read in conjunction with each individual programme bid. Welcome to Tauranga Tauranga has held a spot at the top of the population growth table for decades and has become the country s fastest-growing regional economy. People are coming to Tauranga from around the country and the world seeking jobs, homes and investment opportunities in our stunning coastal setting. This is showing no immediate signs of abating and our population numbers are set to reach over 198,000 by 2063 68,000 more than today. Perfectly positioned in the golden triangle of economic prosperity with Hamilton and Auckland, Tauranga has a location that is hard to beat. Our city offers a combination of business-friendly infrastructure and an enviable lifestyle. Our sub-tropical climate and extensive shoreline make it a centre of excellence for horticulture and marine based industries. These industries, along with the tourism, specialty manufacturing, construction, freight and logistics sectors are anchored by the Port of Tauranga and contribute to a strong underlying economy. Port of Tauranga is the most efficient port in Australasia and the largest in New Zealand by cargo volume, and is set for a bright future with recent dredging providing access to the larger ships from around the globe. Supporting this, Tauranga has fantastic transport networks including the most efficient state highways in New Zealand. The security gained from forward planning on transport infrastructure contributes to fast, economical travel and freight movements. Our water stands proudly at Grade AA and our ultra-fast broadband network and uptake is one of the best in the country. All this contributes to a GDP growth of 4.4% over the past year, well over the national average of 2.5%; and 4.8% growth in employment in 2016 compared to 2.7% across New Zealand (Infometrics). Topping this all off, Tauranga has room to grow: with just under 320 hectares of vacant industrial land, and currently capacity for just under 10,200 new dwellings in greenfield urban growth areas. We see a bright future ahead. Building a great city We have high aspirations for Tauranga. We want to build a successful city, an internationally competitive city, on the back of our growth. A city that provides for its growth by carefully managing land supply and providing future-proofed infrastructure, while nurturing its environment and its people, and providing opportunities for all to thrive. Successfully accommodating more people and businesses has a cost, but also exciting potential return on investment vibrancy, talent, economic activity, diversity, fresh thinking and innovation. We need to champion the opportunities that growth presents, and take our chance to build a great city. 2
We are thinking ahead about our urban form and how the city should grow and evolve. Our Compact City programme is currently looking at residential intensification, in an effort to limit urban sprawl and create vibrant centres throughout the city. We are investing in our CBD, with major projects on-going to reinvigorate the city centre and provide more community amenities. And we are also actively progressing new greenfield areas to create new communities and significantly increase our housing supply. How do we build a successful, vibrant, internationally competitive city while also managing growth and remaining affordable? We need to balance expenditure to serve new growth with investment in the city for community infrastructure, such as libraries, community centres and art and culture facilities, which help to create a city that fully delivers on social, cultural, environmental and economic well-being. Providing for growth is and will remain one of our biggest challenges in terms of financial management, and a great source of opportunities to be seized in the coming years and decades. Bid Summary Tauranga City Council s bid is for 4 programmes of capital investment to enable growth. Two are City-wide programmes and two are new greenfield programmes. Final Proposal Title Capital Cost ($M) HIF Funding applied for ($M) Number of dwellings to be constructed Waiari Water Treatment Plant 110.7 110.7 38,491 Te Maunga Wastewater Treatment Plant 61.1 54.2 38,491 Eastern Corridor Projects 56.8 37.1 7,706 Western Corridor projects 73.4 43.6 3,066 Total 302.0 245.6 National Policy Statement on Urban Development Capacity (NPS) and Prudent Financial Management requirements The NPS has introduced new requirements on Local Government to have zoned (ten years) and serviced (three years) land available for development. The SmartGrowth partnership has always had an objective of providing 10 years of land supply. The recently higher than predicted growth and the NPS requirement for a 20% buffer has resulted in insufficient land supply being available. The SmartGrowth partnership has been planning to determine how the land supply issue will be addressed (refer attachment 13). The assessment of required and available land supply, together with supporting technical analysis, has been considered by SmartGrowth Committee and the partner Councils. (Refer Figure 5 below). The position of proceeding with increased infill and intensification in existing urban areas together with new greenfield areas of Te Tumu, Tauriko West and Keenan Road has been formally supported by each of the SmartGrowth Partner Councils. 3
Figure 5 Preliminary Assessment of Tauranga Land Supply against the short term demand requirements for the National Policy Statement on Urban Development Capacity Status Quo Plus Greenfield Plus Greenfield Plus Intensification Zoned now Greenfield Te Tumu (15 per ha) + Tauriko West + Keenan Te Tumu (at density higher than 15 per ha) + Tauriko West + Keenan Infill and Intensification Current (20.3%) Current (20.3%) Increased (30%) As at I January 2017 Table based on SmartGrowth household projections Supply 2017 (as at 1 Jan 2017) Supply 2021 (as at 1 July) Supply 2028 (as at 1 July) 9.2 years X 4.7 years X 0 years X 9.2 years X 13.6 years 6.6 years X 10.5 years X 20.9 years 13.9 years TCC therefore needs to progress three new greenfield areas (Te Tumu, Tauriko West and Keenan Road) and significantly increase the level of intensification in existing urban areas (refer Figure 5). The current greenfield areas are being taken up fast by the market and there is a high risk there will be a gap in supply if Te Tumu and Tauriko West are not ready for market within the next 4 years. To deliver on the SmartGrowth agreed land supply and meet the NPS requirements Tauranga City Council will need to bring forward and add to the current capital programs (from the last Long Term Plan) and incur higher debt in the medium to long term. The implication of Tauranga City Council bringing forward capital expenditure in order to meet the NPS requirements is that it will breach its current debt limit (refer Figure 2). When Tauranga City included the impact of exceeding its financial ratios as part of its Draft Long Term Council Community Plan (LTCCP) for 2009 to 2019 this resulted in a qualified audit opinion due to a breach of the prudence requirements under section 101 of the Local Government Act 2002. A copy of this opinion is included as Attachment 2. Amendments were made to the final LTCCP to ensure this breach did not occur. We are very concerned that the requirements of the National Policy Statement on Urban Land Capacity and the desire to speed up development will push Tauranga City into a breach of the same statute. Tauranga City Council s Financial Position Tauranga City Council has experienced high debt levels for many years as it has invested in infrastructure to support a rapidly growing city and necessary services for existing communities. Tauranga City Council has already brought forward planned capital investment for a range of infrastructure projects to meet projected growth and demand which means the debt profile for this Council currently exceeds its prudent debt levels (TCC Financial Strategy) from 2018/19 to 2023/24, as shown on Figure 1. This will need to be addressed by Council through the development of the 2018 to 2028 LTP by reducing (or delayed) expenditure and/or collecting additional revenue. Initially the HIF was marketed as a removal of debt from the Local Authority Balance Sheet, which would have been of significant benefit to Tauranga City Council given its already high level of growth related debt. However, it is now clear that the funds are to be provided on the basis of an interest free loan for a period of 10 years. 4
Figure 1: Tauranga City Current Projected Debt-to-Revenue Ratio Debt to Revenue Ratio (Current) 290% 270% 250% 230% 210% 190% 170% 150% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Current Debt to Revenue Ratio Limit 250% (LGFA Limit & TCC Policy) Limit 225% (TCC Financial Strategy) (It should be noted that the capital expenditure at the later end of the timeline is likely to be understated and both the projects and their costings will be reviewed through the next LTP process.) The key financial ratios show that Tauranga City Council (in providing for its community and growth) is already at the high end for debt and the low end for credit rating compared to most other Local Government Organisations. Three of the four projects proposed through this application were timed, in the 2015/25 Long Term Plan, to ensure Tauranga City Council did not exceed its debt limit. Since this Long Term Plan was adopted a significant number of projects (predominantly growth projects) have been brought forward due to the increased pace of development and Tauriko West (the fourth programme in the bid) added as a new growth area which was not provided for within the term of the last Long Term Plan. Bringing two of the four projects forward on top of this, using funding from the Housing Infrastructure Fund, would create a debt profile as shown by the green line on Figure 2. 5
Figure 2: Tauranga City Projected Debt-to-Revenue Ratio to meet NPS targets as per HIF proposal 330% 310% 290% 270% 250% 230% 210% 190% 170% 150% Debt to Revenue Ratio (to meet NPS targets as per HIF proposal) 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Current Debt to Revenue Ratio Amended Debt Ratio (To meet NPS targets) Amended Debt Ratio (Including Impact of Interest Free Debt) Limit 225% (TCC Financial Strategy) Limit 250% (LGFA Limit & TCC Policy) The establishment of the HIF demonstrates that the Crown recognises that growth Councils cannot, without assistance, finance the capital investment in infrastructure needed to enable high residential and business growth. Unfortunately, the conditions of the HIF are such that it has minimal fiscal benefits for Councils. The HIF is essentially a debt facility that does not address Tauranga City Council s problem of debt exceeding prudential limits. Whilst the interest free period will provide some assistance to accelerate development it does not solve the fundamental debt problem Council is facing. Figure 2 also shows the impact of the HIF fund being interest free (purple line). The impact is minor (compared to the green line) as this interest is not funded by the ratepayer, but capitalised and recovered from the developer through decreased Development Contribution (DC) charges. It is not expected that these reduced DC charges will result in cheaper house prices. If TCC is going to stay within its debt ratios then it will need to delay some or all of these projects. Table 1 shows the amended dates by which TCC would be able to construct these projects without exceeding its ratios. Table 1: Project timing required to keep TCC within debt limits Project Actual Construction Date to not exceed Target Debt Limit 225% 250% Waiari WTP 2023 2021 Te Maunga WWTP 2025 2024 Eastern Corridor (Te Tumu) 2026 2025 Western Corridor (Tauriko West) 2028 2026 6
Table 1 highlights that in order to remain within its current Financial Strategy target (225%) all of these projects may have to be delayed. TCC has treated the funding received on transportation projects as if it was debt (refer section 6.2 below). Treating this funding as revenue improves our debt position from that shown on (green line) Figure 2 above, but does not resolve the problem. The impact of treating the HIF funding on transportation projects as revenue is shown on (grey line) Figure 3 below. Figure 3: Tauranga City Projected Debt-to-Revenue Ratio to meet NPS targets as per HIF proposal with Transportation HIF funds treated as revenue. 350% 330% 310% 290% 270% 250% 230% 210% 190% 170% 150% Debt to Revenue Ratio (treating transportation FAR as per NZTA advice) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Current Debt to Revenue Ratio Amended Debt Ratio (To meet NPS targets) Amended Debt Ratio (Impact of Transportation as per NZTA) Limit 225% (TCC Financial Strategy) Limit 250% (LGFA Limit & TCC Policy) The impact of exceeding the debt-to-revenue ratio would see a downgrading of the Tauranga City Council s credit rating and an associated increase in borrowing costs. This cost increase would affect not only any new debt, but also the cost of any refinanced debt. As shown on Attachment 1, this funding would not be available from the LGFA. The HIF process has highlighted a difference in the treatment of FAR subsidy on growth projects for Tauranga as compared to other Councils. We are currently working with NZTA to bring TCC in line with other Councils. The impact of receiving a FAR on all growth transport projects within the HIF bid is shown (yellow line) in Figure 4 below. 7
Figure 4: Tauranga City Projected Debt-to-Revenue Ratio to meet NPS targets as per HIF proposal including impact of receiving FAR subsidy on transportation projects. 330% 310% 290% 270% 250% 230% 210% 190% 170% Debt to Revenue Ratio (Showing Impact of FAR subsidy) 150% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Current Debt to Revenue Ratio Amended Debt Ratio (FAR on Growth Projects) Amended Debt Ratio (To meet NPS targets) Limit 225% (TCC Financial Strategy) Limit 250% (LGFA Limit & TCC Policy) Concerns with HIF Arrangements Outlined below are other concerns that Tauranga City Council as with the HIF arrangements. The Crown proposal is to treat the arrangement, for all infrastructure except for transportation, as subordinated repayable within ten years. This is of little practical assistance to Council as both the NZFA and the rating agencies consider total debt and do not differentiate between classes of debt. Transportation projects would be funded by NZTA as a Financial Assistance Ratio (FAR) subsidy. This would be offset by reducing the FAR on other projects over the following ten years. o o o o This arrangement may still be treated as a debt in Council s books and therefore retain the existing debt issues. There is differing advice on this matter, with NZTA advice that the funds are treated as revenue in the year in which they are received (i.e. not treated as debt), whereas the LGFA (Attachment 1) have provided advice that they consider this to be debt and will include it when calculating their debt ratios. As we are unable to obtain a consensus on the correct treatment of the HIF funds in the timeframe required, we have taken a conservative approach and treated this funding as debt. It should be noted that Council may not receive enough FAR subsidy in ten years to offset the initial receipt and it is unclear what would occur in that situation. We note that even if the funding on transportation projects were treated as per the advice from NZTA, this would not resolve the issue relating to TCC debt levels. (Refer Figure 3). The processes and associated timeframes of the HIF fund, including the requirement for Detailed Business Cases, make it unlikely that any funding will be available until the 2018 calendar year. We are concerned that the process for obtaining HIF funding has been established in such a way that, 8
beyond the control of Local Government, is outside the timeframes expected by the Crown and Members of Parliament. Risk Assessment Prior to committing to proceed with a capital investment programme that will achieve the NPS targets, as outlined in the HIF bid, Tauranga City Council would comprehensively assess and conclude on the risks associated with such an investment. Council has determined that it is not in a position to properly complete a robust risk assessment within the required HIF Final Proposal timeframes. Council has identified the following key risks that would need to be assessed: The risk that the NPS rather than an urban form strategy will drive Tauranga into an urban form that does not maximise long-term economic opportunities for the city and New Zealand as a whole and does not enhance quality of life. TCC s fiscal position and ability to repay the Crown if growth slows for a substantial period of time or development becomes unviable, (e.g. interest rates increase significantly). The risk that TCC will not receive the FAR subsidy that has been budgeted in relation to transportation projects. The exposure to risk associated with unplanned events. Even with Council staying within its financial limits, it would remain highly vulnerable to an unplanned event, such as a natural disaster. The impact on other initiatives which require funding (such as the pending review of the approach to solid waste and recovery) that may have an impact on future revenue (and affect the debt to revenue ratio). Projects that enhance the city (such as city heart) or improve the level of service for existing ratepayers (such as Stormwater flooding mitigation improvements) are at risk of being delayed to accommodate accelerating growth projects. Increases in major project costs that may use up the available debt capacity planned for projects included within this bid. Increases in the costs of projects within the HIF bid as those projects progress through the planning stages. The potential action taken by the Crown if TCC elect not to proactively seek to deliver land supply and associated infrastructure required by the NPS. The ability for contractors and/ or TCC staff (at current staffing levels) to accelerate the planning of and delivery of growth areas and associated capital projects. Transportation projects included in the bid being delayed or removed through the required processes of updating the Regional Land Transport Plan changes (including public consultation). Dependence on other parties to progress key actions to enable growth to proceed, including changes to Regional Policy Statement, boundary change under the LGA, RLTP processes. The greenfields density and existing urban area intensification achieved is less than that projected and provided for in the urban planning and infrastructure capacity assessment. This would result in the NPS target not being achieved and infrastructure requirements being different from that currently planned. While we are not in a position to comprehensively assess and conclude on the risks associated with the HIF at this time, we will complete this work through the 2018-28 LTP process. Completing the risk assessment through the 2018-28 LTP process will enable Council to: 9
Consider the approach to growth management within the context of all strategic choices for the city. Receive the outcome of the HIF process. For those projects supported in principle, we will complete more detailed analysis for the final business case, which was not possible to do within the timeframes of this bid. Progress the NZTA funding work to a greater level of certainty. This will have a significant impact on our understanding and mitigation of fiscal risk. Undertake more work on the costing of both the HIF projects and non-hif projects. This will have a direct impact on our projected debt levels and financial rations. Significant Assumptions In preparing the HIF bid Council has adopted consistent assumptions across all of the Final Proposals and associated business plans. These Proposals (and Business Plans) should be reviewed in light of these assumptions. Council will stay within its Financial Limits While we have significant concerns in relation to TCCs capacity to fund all of its capital expenditure programme, for the purposes of this proposal we have assumed that it will stay within its 250% debt to revenue limit established through its covenants with the LGFA. There are a number of areas where changes are possible that will improve our financial position, including: Alternative funding approaches, including a delayed repayment of HIF debt as outlined in the proposals. New vehicles for delivering Infrastructure (Urban Development Authorities discussion document released in February 2017). Additional revenue sources (even if they do not directly relate to the HIF funded projects they may improve our overall debt to equity ratio) Prioritisation of capital expenditure through the 2018-28 LTP, which may include not proceeding with some growth projects Reduction in capital costs through innovative or amended design parameters. Future Interest Rates When modelling future debt repayments we have used an interest rate of 6%. While this is slightly higher than TCC s current Weighted Average Cost of Capital (5.5%) it is relatively conservative and recognises that current interest rates are relatively low. Funding Received to be treated as a liability As outlined above, for the purposes of this HIF proposal we have assumed that any HIF funds received will be treated as a liability. It is anticipated that the rating agencies and LGNZ are likely to take these liabilities into account when assessing the Councils credit rating and debt limits. Financial Assistance Ratio (FAR) The FAR rate for TCC is currently 48% (of the cost of the project) but moving to 51% over the next few years. Historically Tauranga City Council has generally not received FAR subsidy on growth projects and as noted above this appears to be different from other growth Councils. For the specific Te Tumu and Tauriko West Proposals we have assumed that TCC will receive a full FAR subsidy for all transportation projects within the bid. We have also included financial forecasts on the basis of the current and past approach of no FAR subsidy on growth projects. 10
We are also in discussion with NZTA re FAR subsidy eligibility for transportation growth projects outside of the HIF bid. The financial forecasts do not include any FAR subsidy on these projects as the analysis and discussion has not yet been concluded. Impact of Inflation and Contingencies The following assumptions have been used for all four of the HIF proposals. Impact of Inflation up to June 2017 Projects are usually assessed as part of the preparation of the LTP and reviewed when annually were appropriate. Where a project has not been recently assessed, we have inflated the previous estimates from the date of that estimate to June 2017. This is the base assessment date for all of our HIF Proposals and will ensure that all the estimates have a June 2017 basis. The inflation rates used (Table 2) are based on the Berl Local Government Construction rates less the CPI index for the same period to give a real cost adjustment. A copy of the detailed breakdown is shown as Attachment 3. Table 2: Historic Inflation Assumptions Financial Year End Individual Inflation Rate Cumulative Inflation Rate 2011-1.49% 3.54% 2012 1.04% 5.11% 2013 1.01% 4.03% 2014 0.17% 2.98% 2015 1.64% 2.81% 2016 1.15% 1.15% Project Contingencies Project contingencies are included within each project cost. Due to the number of variables, there is no set contingency rate. The factors that have been considered when assessing these contingencies include the following: Complexity of Project Age of Estimate Level of detail for estimate (no design, indicative design, detailed design) Number and type of consents required/ obtained Completion, or not, of any land purchases Completion of Geotech assessments Completion of a peer review Impact of Inflation on Future Cashflows For cash flows occurring after the 2017 financial year we have inflated the expenditure. The rates are based on the Berl Local Government Construction rates less the CPI index for the same period to give a real cost adjustment. The inflation rates used are shown in Table 3. A copy of the detailed breakdown is shown as Attachment 3. 11
Table 3: Future Inflation Assumptions Financial Year End Individual Inflation Rate Cumulative Inflation Rate 2018 0.80% 0.80% 2019 0.89% 1.70% 2020 0.84% 2.55% 2021 0.81% 3.38% 2022 0.78% 4.19% 2023 0.76% 4.98% 2024 0.73% 5.74% 2025 0.70% 6.48% 2026 0.67% 7.20% 2027 0.65% 7.89% 2028 0.67% 8.61% 2029 0.65% 9.32% 2030 0.63% 10.01% Population Projections Through Smartgrowth, this region has had an extensive population and housing projection work (NIDEA) completed. These projections are reviewed after every census, with the most recent being in 2014 (TCC monitor and amend these as required, either based on actual growth or updated information from SNZ). Generally these projections have been higher than the Statistics NZ (SNZ) median growth figures and have been found to be accurate predictions of growth in the Western Bay region. The TCC housing predictions are compared to actual new dwelling consents every six months to confirm that our predictions are accurate. In February 2017 SNZ updated their population predictions. These showed higher growth than the NIDEA projections out to 2031, at which point the NIDEA projections accelerated ahead of the SNZ figures. TCC have remodelled our population projections as per the SNZ figures out to 2031 and used the higher NIDEA projections after that. TCC growth statistics used for these proposals are shown on Table 4 below. Table 4: Population and dwelling statistics for Tauranga City Council Year Cumulative Population (Stats NZ) (A) Cumulative Population (TCC) Cumulative Occupied Dwellings (stats NZ) (B) Cumulative Occupied Dwellings Cumulative Total Dwellings (C) 2013 (Census) 119,800 119,800 47,700 45,878 50,259 2018 134,600 134,600 51,900 52,287 57,309 2023 145,800 145,800 55,800 58,359 63,987 2028 154,900 154,900 59,800 64,245 70,464 2033 163,600 164,084 63,700 70,177 76,990 2038 171,700 173,949 67,200 76,157 83,566 2043 179,500 181,293 Unavailable 80,573 88,424 2048 Unavailable 186,694 Unavailable 83,706 91,872 2053 Unavailable 190,624 Unavailable 85,994 94,390 2058 Unavailable 194,770 Unavailable 88,415 97,051 2063 Unavailable 198,374 unavailable 90,713 99,580 12
Key (A) Updated Stats NZ figures. These figures have been updated from those included in the HIF: Call for Final Proposals Document. They can be confirmed through the following link. http://www.stats.govt.nz/browse_for_stats/population/estimates_and_projections/subnati onalpopulationprojections_hotp2013base-2043.aspx (B) The SNZ figures referred to in the HIF: Call for Final Proposals Document. They have been included in this table to highlight that these are considerably lower than the figures used by TCC in the HIF Proposals. (C) These are the Housing figures used by TCC within the Final Proposal Documents. They take into account both the higher growth in the updated statistics and an allowance for the unoccupied houses (approx. 10%). The majority of the unoccupied houses relate to holiday homes. We have used the TCC figures within these Final Proposals as: The figures are based on more up to date information. They take into account the total number of dwellings, not just the occupied ones. Our regular monitoring has demonstrated that our modelling tends to be more accurate than the Stats NZ estimates. For the proposals, the figures have been adjusted to take into account the difference between the reporting dates for the statistics (2018, 2023, 2028, etc.) compared to the required dates for the HIF proposal (2017, 2022, 2027, etc.). Risks As noted above there are a number of risks that we have not had time to properly assess before completing this Proposal. For the purposes of this Proposal we have assumed that none of these risks will impact on TCC s ability or decision to complete these projects within the advanced timeframes. Consultation Requirements The growth and capital investment proposals are subject to a number of consultation processes. These include: Regional Land -+ (Undertaken by NZTA) 2018-28 Long Term Plan 2019 and 2020 Annual Plan Territorial Boundary adjustment (Western Corridor projects) Regional Policy Statement Urban Limits Line Change (Tauriko West Projects) For the purposes of these Proposals we have assumed that there are no material changes or delays arising from any consultation process. Developer Commitment to Accelerating Development To successfully accelerate development the support of developers and also SmartGrowth partner Councils is needed. 13
Council is entering into relationship agreements with the landowners in both the Te Tumu and Tauriko West areas. These agreements provide for significant co-funding of the structure and community planning process. Tauranga City Council is also actively working with its SmartGrowth partner Councils to progress Regional Policy Statement changes (to change the urban limits line) and boundary adjustments (to transfer land into the jurisdiction of Tauranga City). (Refer attachment 13 for SmartGrowth agenda report and resolutions and respective resolutions of the SmartGrowth partner Councils.) The commitment of all these parties is evidenced in the attached letters of support. (Rather than include the same letters multiple times we have attached all of the letters of support from TCC partners and developers to this summary document. Table 5 shows which of these letters relate to which programmes within the bid). Table 5: Breakdown and Location of Letters of Support Proposal Support Group Supporter Name Attachment Number Smartgrowth 4 Overall programme Bay of Plenty Regional Council support and all TCC SmartGrowth Partners (BOPRC) 5 Proposals Western Bay of Plenty District Council (WBOPDC) 6 TCC SmartGrowth Partners As above As above Carrus 7 Bluehaven 8 Waiari Water Kaituna 14 Trust 9 Treatment Plant Developers Ford Land Projects 10 Element IMF 11 Classic Builders 12 TCC SmartGrowth Partners As above As above Te Maunga Wastewater Treatment Plant Eastern Corridor (Te Tumu) Western Corridor (Tauriko West) Carrus 7 Bluehaven 8 Developers Kaituna 14 Trust 9 Ford Land Projects 10 Element IMF 11 Classic Builders 12 TCC SmartGrowth Partners As above As above Carrus 7 Developers Bluehaven 8 Kaituna 14 Trust 9 Ford Land Projects 10 TCC SmartGrowth Partners As above As above Boundary Adjustment Western Bay of Plenty District Council (WBOPDC) 6 Developers Element IMF 11 Classic Builders 12 14
Attachment 1: Letter from LGFA on breaching Debt Covenants 15
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Attachment 2: Qualified Audit Opinion on Draft LTCCP for 2009-19 18
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Attachment 3: Berl Inflation Adjusters 22
Attachment 4: Letter of support from Smartgrowth 23
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Attachment 5: Letter of support from Bay of Plenty Regional Council 25
Attachment 6: Letter of support from Western Bay of Plenty District Council 26
Attachment 7: Letter of support from Carrus 27
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Attachment 8: Letter of support from Bluehaven Management 29
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Attachment 9: Letter of support from Te Tumu Kaituna 14 Trust 31
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Attachment 10: Letter of support from Ford Land Projects (Pty) Ltd 35
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Attachment 11: Letter of support from Element IMF Ltd 38
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Attachment 12: Letter of support from Classic Builders 40
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Attachment 13 Report to SmartGrowth Joint Committee Committee Name Committee Meeting Date August 2016 Author Purpose SmartGrowth Implementation Committee SmartGrowth Strategic Advisor Ken Tremaine and Implementation Manager Bernie Walsh (on behalf of the Chief Executives Group and Implementation Management Group) Deciding on the next steps in progressing future urban growth areas as outlined in the SmartGrowth Strategy 2013; Progressing in line with meeting the requirements of the proposed National Policy Statement on Urban Development Capacity; Responding to SmartGrowth Forums position papers Settlement Pattern Review timing and location of future urban development (10 to 30 years) Executive Summary Keeping work on track, enabling co-investment 1 The Committee has reached an important decision point for determining the next set of urban growth areas for the SmartGrowth Western Bay of Plenty sub-region. The aim is to ensure timely development capacity in the next 10 to 30 years and enable SmartGrowth to meet new government planning requirements. There is also a need to focus on the current Regional Policy Statement (RPS) and its targets and policies including a 25% intensification target (average of 20 dwellings/ha). 2 The amount and extent of population growth in the Bay of Plenty sub-region, along with the new proposed National Policy Statement (NPS) on Urban Development Capacity and continuing market pressures, show the need to stay on track with ensuring there is sufficient development capacity in the region. There is a considerable time lag between deciding on new urban areas and their delivery to the market in a timely manner. It takes a minimum of 3 to 5 years to do detailed structure planning and complete the Schedule 1 Resource Management Act (RMA) plan change process 3 The projects outlined in this paper identify new land and capacity that can, in time, deliver additional housing and business land and meet new government planning requirements. Appendix 1 outlines a Western Bay of Plenty Sub-Region Indicative Growth Sequencing programme. This is an 42
update of the current table in the RPS. A change to the RPS will be required to give effect to the Settlement Pattern Review and the requirements of the NPS, once confirmed. That change will require updating the indicative growth sequencing (Appendices C and D of the RPS) and looking at enabling the management of growth to occur more easily and simply, given the fast changing dynamics of urban housing supply and demand. Four integrated projects, meeting new planning requirements 4 A set of four integrated urban growth projects Tauranga Compact City, Te Tumu, Keenan Road and Tauriko West - aligning with the SmartGrowth Corridors, are now recommended for progressing for residential and business land development. As a consequence of the work done on the Keenan Road urban growth area and the Western Corridor, Tauriko West is more favourable than Keenan Road to develop in the short term. 5 The projects identified will enable the region to accommodate its projected household and population increase and meet any ongoing obligations under the Government s new proposed National Policy Statement on Urban Development Capacity. 6 Decisions are needed now on these future growth areas to ensure the region is in a strong position for supporting business cases that will go to the NZ Transport Agency (NZTA) board for consideration in October 2016. 7 Decisions and recommendations are drafted in a manner that they are subject to positive outcomes from the Board meeting in respect of the Tauriko Network Programme Business Case to ensure ongoing alignment between these projects. Likewise, the NZTA Board is seeking evidence of conditional SmartGrowth support of the recommended programme (subject to public consultation). This is reflected in the Western Corridor Strategic Study recommendations. Partner council chief executives are also working on a Heads of Agreement with NZTA outlining planning and investment principles. Current intensification activity 8 Due to questions from Committee members about intensification progress, Tauranga City has extracted consent data. This data now gives us a very good and clear picture of current intensification activity. The data gives us a considerable level of confidence because it is signalling well in excess of 25% - ie beyond the RPS benchmark for an acceptable level of intensification. The table following summarises the projects consented and in the pipeline : Resource Consents Special Housing Areas Pipeline Projects 224 units 278 aged/retirement units 383 freehold dwellings 350(+) freehold dwellings 2 large-scale retirement complexes (400+) units Total 957(+) freehold dwellings 678(+) aged care/retirement units 43
9 These projects, particularly those in the pipeline, if they proceed to development, would likely be spread over the next five years and actively lift the level of intensification. 10 Averaged over five years, this represents around 330 dwelling units per annum. Using the 2015/2016 figure for total new dwellings for Tauranga City (1493), 330 dwelling units per annum would represent a rate of approximately 22% per annum for infill/intensification from 2016-2021. When added to typical rates of infill (around 12% per annum) this equates to approximately 34% of total new dwellings being delivered through infill or intensification. 11 Community and key stakeholder views The position papers put forward by the SmartGrowth forums and Bay of Plenty District Health Board strongly support the concept of a compact city. Further analysis of the positions, commissioned by SmartGrowth from consultant Liz Davies, has highlighted six common themes supported across the majority of papers that particularly relate to the settlement pattern review and new urban growth areas. The forums are also seeking commitment, can do creativity and leadership reflected in a weaving together of partner and forum strands of expertise. The six common themes are: 1. Co-creating or designing solutions/community-led planning 2. Urban design (including cultural design, heritage, crime prevention through environmental design (CTED), ecological design) 3. Planning and funding for social infrastructure 4. Compact urban form 5. Housing affordable, housing choices, energy/resource efficient 6. Active transport options and public transport. 44
Next steps - decision-making objectives and recommendations to partner councils 12 It is recommended that the SmartGrowth Implementation Committee agree the following core decision-making objectives to accompany the recommendations to partner councils set out below. The sub-region s objectives in progressing the four recommended integrated projects and associated work is to accommodate future population, business and household growth, manage and optimise the future supply of, and demand for, business and residential land, enable timely compliance with the Government s requirements under the new proposed National Policy Statement on Urban Development Capacity, show strong support for transport investment business cases going to the NZ Transport Agency board for approval in October 2016, respond to the SmartGrowth Forums position papers, take an enabling and integrated approach to development opportunities and proposals, and inform the review of the Settlement Pattern going forward. (a) Compact City project Agree to support Tauranga City Council advancing a comprehensive project starting in 2016/17 to deliver intensification within the current footprint of Tauranga. Agree that progress will be regularly reported back to the committee where relevant, with milestones reflecting the National Policy Statement (NPS) for Urban Development Capacity expectations and include input from partners at all stages; and that principles and objectives of the Compact City approach will be applied to the wider Western Bay where applicable. (b) Western Corridor Tauriko West Agree to prepare a structure plan and begin the RMA process (including a change to the Regional Policy Statement (RPS)) for a new Urban Growth Area in Tauriko West starting in 2016/2017, subject to positive outcomes from the NZTA Board meeting in October in respect of the Tauriko Network Programme Business Case. Agree to structure planning/rma processes for the extension of the Tiko Business Estate (lower Belk Rd) starting in 2016/17, likely to be required in the next 5-10 years. Keenan Road Agree to retain the Keenan Road area (within Tauranga City) as an urban growth area and continue planning and community engagement work on timely rezoning for the remaining Keenan Road area (possibly including Merrick Road/Joyce Road extension). 45
NZ Transport Agency s Tauriko Network Programme Business Case Agree the committee is supportive of 1. NZTA s Tauriko Programme Business Case and recommended programme at a concept level in terms of how it affects and enables the Settlement Pattern Review approved by SmartGrowth to be delivered. 2. The business case moving to the next stage. 3. Partner councils and SmartGrowth giving NZTA letters of support (reflecting 1 and 2 above) and these letters being presented as part the Tauriko Programme Business Case to the NZTA board in October. (c) Te Tumu Structure Planning Agree to retain Te Tumu as an urban growth area and note that Tauranga City Council has resolved that structure planning in the area will be undertaken in conjunction with a Schedule 1 Resource Management Planning (RMA) process starting in 2016/17. (d) Approve and formally receive all of the detailed reports including the SmartGrowth Forums position papers as discussed at earlier SGIC workshops and meetings, namely, Western Corridor and Keenan Road reports (SGIC agenda May 2016) Te Tumu Strategic Planning Study and Compact City reports (SGIC agenda June 2016) SmartGrowth Forum Position Papers eight position papers and a further position paper from the Bay of Plenty District Health Board (SGIC agenda July 2016) Discussion Paper Settlement Pattern Review (SGIC agenda July 2016) Tauriko West Update (SGIC agenda July 2016) (e) Agree that SmartGrowth works with its partners and forums to refine the current approach to planning (see Appendix 2) to ensure compliance with the new NPS for Urban Development Capacity, subject to its finalisation in October 2016; agree this will include a consistent subregional engagement approach amongst partners and SmartGrowth Forums. (f) Agree that this refinement work will aim to optimise sub-regional planning by integrating NPS requirements such as housing assessments, developing an intensification strategy and housing targets, with implementation of RPS policies and responses to the forum position papers. Community engagement and communications (g) Agree to a strong commitment to continuing sub-regional communication and community engagement through the SmartGrowth Forums and other activities including recommendations (e) and (f). Noting that further and formal community input on the above actions will also be carried out through the statutory implementation processes of the individual partners. (h) Agree that SmartGrowth s independent chair will develop and implement a SmartGrowth communications programme centred on the above high level decisions/recommendations, to boost communications and lead community conversations on long term sub-regional planning for quality places. 46
It all starts here the SmartGrowth Strategy 2013 delivering a Western Bay that is a great place to live, learn work and play 13 In 2013, the SmartGrowth strategy partners agreed an updated SmartGrowth Strategy. The strategy has a 50-year horizon with a strong focus on the next 20 year planning period. It is the spatial plan for the western Bay of Plenty sub-region. In a nutshell, SmartGrowth is the region s leaders working together to produce a unified, smart plan for the western Bay of Plenty s future. The aim is to have strong decisions, backed by good evidence and made by unified leaders in partnership with communities. 14 The strategy is founded on five key pillars partnership; integration, collaborative leadership; integration; evidence-based and a live, learn, work and play approach. The concept of live, learn, work and play is anchored in the both the strategy and the settlement pattern. In practical terms, this means that we should be applying the concept across all our decision-making in the subregion. The aim is to ensure the provision of land and services for housing, business, education, rural production, community activities and recreation and more importantly, emphasises the linkages between these activities. At the local community level, it means we want to provide opportunities for people to meet most of their daily needs within their own communities. It supports the design of neighbourhoods and communities in a way which promotes social interaction, connectivity, access, a strong sense of community and sufficient housing choice to cater for a range of ages, incomes and household sizes. These outcomes all align with what our SmartGrowth Forums are telling us they want in their position papers and need to be delivered on the ground. The devil is in the implementation July SGIC forums chair discussion session. These outcomes are also reflected in the current Regional Policy Statement and its targets and policies including a 25% intensification target (average of 20 dwellings/ha). Using this robust framework for future land-use and growth and spatial management decision-making 15 The SmartGrowth sub-regional settlement pattern is a cornerstone of the strategy. It makes provision for sustainable urban and rural development capacity in the sub-region, specifically for the next 20 years, and generally for the next 50 years. The settlement pattern is underpinned by a desire to achieve a more compact urban form. Development is concentrated in key growth areas and corridors in order to achieve infrastructure efficiencies, avoid productive rural land and protect important natural areas. 16 The recommendations and decision-making principles in this paper have come from agreed actions (under 21G) in the SmartGrowth Strategy 2013 including identifying new urban growth areas and confirming existing ones and sequencing triggers. 47
Current operative 2013 spatial settlement pattern 17 The value of the settlement pattern as an integrated, long term blueprint for development is in sending clear and unambiguous signals to the market and providing investment certainty. Failure to do this will create uncertainty and place undesirable speculative pressure on land prices affecting, amongst other things, the ability to use land for productive purposes, the protection of the natural and cultural environment and the efficient delivery of infrastructure. 18 Essentially if we leave growth unplanned for, private plan changes or other market forces will make the calls and the region will be forced into reactive ad hoc planning, rather than sustaining communities and enabling new ones. We will also have no integration between land use infrastructure needs and funding. 19 Officers have investigated fully the 2004 Settlement Pattern, currently anchored in the Regional Policy Statement and the city and district plans. We needed to better understand the challenges to full implementation, how to stay nimble and agile to market and population changes and what further work is needed to consolidate the SmartGrowth approach and investments to date. This paper reflects this work and our findings including an overview of the wider settlement pattern review sequencing programme. 20 The current steps in our growth and urban development planning are summarised in Appendix 2. 48
The proposed National Policy Statement on Urban Development Capacity what does that mean for our future SmartGrowth decision-making? 21 A new proposed National Policy Statement (NPS) on Urban Development Capacity was released in June 2016. It is expected to come into force in October this year. In the NPS, the Tauranga urban growth area (which relates to both Tauranga City and Western Bay of Plenty District) is classified as a high growth urban area with 15.1% projected population growth over the ten years from 2013 to 2023. We are second only to Auckland in projected growth at 18.1%, and ahead of Hamilton at 14.8% and Queenstown 14%. 22 The NPS requires councils to anchor agreed regional housing targets in a Regional Policy Statement. It also requires them to do regular three-yearly housing and business land assessments. Both assessments must estimate the supply of development capacity to meet demand in the short, medium and long term and identify any insufficiency in development capacity. 23 Local authorities must consult with infrastructure providers, community and social housing providers and the property development sector. They also require local authorities to monitor on a quarterly basis or as often as possible a range of indicators including housing affordability indicators, resource and building consents, price signals and business land vacancy rates. 24 The relevant local authorities must work together to agree data and projections which is already undertaken through the Annual Development Trends Report. This is then used to ensure coordinated land use planning and infrastructure provision, including expected levels of service for infrastructure. 25 The aim of the NPS is to drive responsive planning and ensure councils respond to market signals and other triggers to ensure a rolling supply of development capacity including a supply of a range of housing types and price points. 26 In the medium to long term this means amending plans and policy statements to provide more development capacity and provide a broad indication of timing, location and sequencing of development to demonstrate that it will be sufficient. Sufficient is defined in the NPS as the provision of enough development capacity to meet demand, plus to take account of the likelihood that not all capacity will be developed, an additional margin of at least 20% over and above projected short and medium term demand; 15% over and above projected long term demand. Long term is defined as within 30 years, medium within 10 years and short term is three years. Councils are also required to take account of enabling development in areas where there is highest demand and that it is commercially feasible. NPS compliance requirements begin in October 2016 27 As soon as the new NPS comes into effect in October, SmartGrowth will need to work with its partners to meet the assessment requirements. By the end of 2018 we will need to provide a future land release and intensification strategy alongside our targets to provide certainty that there will be sufficient development capacity in the medium to long term and that minimum housing targets will be met. 49