Update – October 2014
The NZ Transport Agency Board made some key decisions on the FAR review in May and October 2014.
The FAR review update: final decisions October 2014 [PDF, 58 KB]outlines the framework, the principles and provides a summary of the October board decisions with some commentary. Following is an overview of key decisions.
1. Funding assistance rates framework
The FAR framework [PDF, 82 KB] has been confirmed.
Subject to some transitional arrangements for specific activities (see below) and metro-rail, each approved organisation will receive the same funding assistance rate for all transport activities (except for emergency works and any targeted rates).
2. Approved organisations' funding assistance rates
The overall NLTF co-investment rate is 53%. This means that, across the whole programme, the NLTF will fund an average of 53% of local transport programmes. Councils will receive more or less than the overall co-investment rate depending on their relative ability to fund their share.
The method for setting the normal funding assistance rate for approved organisations has been confirmed. This will be used to determine which approved organisations receive an enhanced funding assistance rate.
The methodology is: centreline kilometres/capital value, plus 1/rating units, plus index of deprivation. Centreline kilometres over capital value identifies what must be spent to maintain the network, relative to the rating base that can be used to raise the local share. The index of deprivation and an inverse of the number of rating units ensure that the least wealthy and smallest communities receive a higher score, standardising the inputs so they are of a comparable scale. They are then added together using methodology, giving each individual approved organisation a 'score'.
The potential NLTF contribution to approved organisations' transport programmes is set by the overall co-investment rate. The NLTF funds available to be allocated as an enhanced rate are the difference between the minimum rate and the overall co-investment rate. Using a common number to multiple the scores of all individual approved organisations, the Transport Agency works from the top of the list (ie local authorities with the highest scores), to progressively increase the NLTF contribution for each approved organisations transport programme until all of the available NLTF funds are distributed. An approved organisations' normal funding assistance rate (expressed as a percentage) is the NLTF contribution to their transport programmes. Any approved organisation that does not receive an enhanced rate will receive the minimum rate.
The minimum and maximum rate
In May 2014, the NZ Transport Agency Board agreed that the minimum funding assistance rate would be 52%, one percentage point below the national co-investment rate of 53%. At the time this was considered sufficient 'headroom' to enable councils who needed it to receive an enhanced funding assistance rate.
Subsequently the Board has decided to reduce the minimum funding assistance rate by one percentage point to 51% which will enable a larger group of approved organisations to receive an enhanced FAR, spreading the impacts of the transition to the new FAR regime more evenly.
Some approved organisations may have made commitments in the 2015/16 financial year on the basis that their minimum normal FAR would be 52%. To recognise those councils who may have made such commitments, the lowest rate that they will receive for this period is 52%.
Funding assistance rates are part of a co-investment system that recognises there are both national and local benefits from investing in the land transport network. To ensure that both partners adopt a co-investment approach, it is important that councils continue to have 'skin in the game', so we have set the maximum FAR at 75%.
Councils' actual funding assistance rates for the 2015–18 NLTP are set out in Attachment 1 [PDF, 175 KB] of the NZ Transport Agency board paper 31 October 2014.
The transition period for the new funding assistance rates system is nine years, or three NLTP investment periods. However, many approved organisations are likely to complete the transition to their normal funding assistance rate sooner.
For the 2015–18 NLTP, councils' normal funding assistance rate will decrease by no more than one percentage point per year.
Elevated funding assistance rates for emergency works will be available only for out of the ordinary, short duration natural events that are greater than 10% of the council's approved road maintenance, operations and renewals programme for the relevant year.
Elevated emergency rates will be set by adding 20 percentage points to a council's normal funding assistance rate, for example, if their normal rate is 52% their elevated emergency works rate will be 72%.
The Transport Agency has consulted on a revised emergency works policy and addressed issues raised during the feedback process.
The emergency works operational policy has been finalised, and can be viewed on the Knowledge Base website.
Targeted enhanced funding assistance rates
If a targeted enhanced rate meets certain criteria it can be used to accelerate the delivery of specific land transport outcomes in exceptional circumstances, for a limited time period and at a specified investment rate.
The Transport Agency has developed operational policy and guidelines on how and for what targeted enhanced funding assistance rates should be used to deliver a specific transport outcome, which is available on the Knowledge Base website.
Total mobility services
As a transitional arrangement, funding assistance rates for total mobility services will remain at their current levels for the 2015–18 NLTP period. During this time, the Transport Agency will review our operational policy for total mobility services.
Special purpose roads
The funding assistance rate for special purpose roads will remain at current levels for the 2015–18 NLTP to allow approved organisations to develop individual plans to transition special purpose roads to the normal funding assistance rate by 2023–24.
The Transport Agency will engage with affected councils individually to review each special purpose road to determine its role, condition and transition arrangements.
The Transport Agency will pay a council's fair and proportional administration costs for administering NLTF investments. This is a change from the current system where a flat rate of 2.25% of NLTF investment is paid towards most territorial authority administration costs.
Guidelines about the change are available for councils on the Knowledge Base website.
From the start of the 2015–18 NLTP, the costs of maintaining level crossings will be funded at an approved organisations' normal funding assistance rate.
The funding assistance rate for level crossing improvements will remain at current levels for the 2015–18 NLTP and transition to the relevant approved organisations normal funding assistance rate after that.
Stock effluent facilities
The funding assistance rate for stock effluent facilities will remain at current levels for the 2015–18 NLTP, and will transition to normal funding assistance rates after that.
Check out the Knowledge Base website for more detailed information about recent changes to the FARs.