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New funding assistance rates for better outcomes from local transport investment

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The NZ Transport Agency has finalised new Funding Assistance Rates (FARs) for transport investments made by local authorities and other ‘approved organisations’, following an extensive review of the FAR system.

The NZ Transport Agency has finalised new Funding Assistance Rates (FARs) for transport investments made by local authorities and other ‘approved organisations’, following an extensive review of the FAR system.

The Funding Assistance Rates Review has been underway for almost two years, including extensive engagement with local authorities and the wider transport sector, looking at ways to simplify funding arrangements and provide better value to all users of the land transport system. The NZ Transport Agency Board has now made a number of key decisions to implement changes recommended by the review.

Transport Agency Chief Executive Geoff Dangerfield says the changes are aimed at improving the system to better match funding assistance levels with each region’s needs and ability to pay.

The funding assistance rates system identifies how the costs of delivering transport activities are shared between central government through the National Land Transport Fund (NLTF) and local government (primarily through local body rates). Funding assistance rates are not subsidies, but part of a co-investment system which recognises that there are both national and local benefits from investing in the land transport network. Funding assistance for transport activities is provided to local government (and other approved organisations) through the National Land Transport Programme (NLTP), which is updated every three years.

Transport Agency Chief Executive Geoff Dangerfield says the changes to funding assistance rates, being introduced from next year with the 2015/18 NLTP, will update and streamline the system to ensure that funding for local transport programmes is directed where and when it is most needed.

“The FAR system is a fundamental part of the country’s transport investment framework which had not undergone a robust review for over 30 years. The current system is complicated, with many different rates applying to different activities in different areas, and it doesn’t provide the consistency or the long-term certainty that councils or the Transport Agency need to ensure that New Zealanders are getting the most from our combined investment in the transport systems that they rely on to get to work, travel and do business every day. The changes which are being made as a result of the review will ensure that the system is fairer and more effective in directing funding to the areas and to the activities where the transport network as a whole may suffer if local authorities can’t afford to deliver or maintain what is needed in their areas.”

Under the new FAR system each approved organisation will receive a single funding assistance rate for all of their transport activities, with the exception of emergency works and other exceptional circumstances. Currently a single council may have to navigate through more than a dozen different rates of funding assistance to provide different transport activities.

Mr Dangerfield said that under the changes 59 councils will see their overall funding assistance rates increase or remain the same as current levels, while 20 councils will move to lower rates. In order to address concerns about the impact of any sudden changes for councils with reducing funding assistance rates, the Transport Agency will be gradually transitioning changes to the new rates over the next nine years, beginning next year with the rollout of the 2015/18 NLTP, through to the end of the 2023/24 NLTP funding period.

The new system has established that the overall ‘co-investment rate’ for all local transport programmes combined will be 53%, with individual councils receiving a higher or lower funding assistance rate depending on their relative ability to fund their share.

“This means that when we add up the total amount of funding provided to all approved organisations across the country through the NLTF, it will come to 53 percent of the full cost of delivering all of those local transport activities, but the councils which need the most assistance will get a higher than average rate of assistance and those that are more able to afford it will pay for a larger share of their own programmes.”

A standard FAR rate of 51% has been set, which no approved organisation will receive less than, with a top rate of 75% for mainland councils and 85% for the Chatham Islands.

Mr Dangerfield said the difference between the standard FAR rate of 51% and the overall average co-investment level of 53% would provide the ‘envelope’ of NLTF funding which will allow the councils in greatest need to receive higher than average levels of funding assistance.

“This provides the flexibility needed to better match funding assistance levels with a region’s specific needs and their ability to pay. For example, the new system will see the level of funding assistance for the Far North District increasing from a current average rate of 58% to an increased rate of 59% next year, rising to 66% by 2024. On the flipside New Plymouth District, with a greater ability to pay, will move from a current overall funding assistance rate of 53% to the lower standard rate of 51%.”

The Transport Agency has written to all approved organisations this week informing them of their funding assistance rate for both the 2015-18 National Land Transport Programme (NLTP) period and at the end of the nine-year transition period in 2023/24. At the end of the transition period 41 councils will receive the standard FAR rate of 51% and 38 councils will receive higher rates.

Further details on all the decisions made by the NZ Transport Agency Board are set out in the attached A3 document Funding Assistance Rate Review Update: Final Decisions October 2014. You can also read more about the Board’s latest decisions at www.nzta.govt.nz/far(external link)

For more information please contact:
 
Andy Knackstedt
Media Manager
NZ Transport Agency

T: 04 894 6285
M: 021 276 3222 
Eandrew.knackstedt@nzta.govt.nz

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