Chapter A2 Sources of funding assistance and the NZTA's funding principles

A2.7 The NZTA's funding principles

Introduction

This section sets out the NZTA’s principles for funding assistance. These principles underlie all funding assistance policies and procedures in this manual.

Value for money

All funds available to the NZTA will be allocated to land transport activities that provide best value for money within the legislative provisions.

The NZTA will allocate all the funds that it has available to land transport activities in a manner that:

• meets the requirements of the governing legislation
• gives effect to the current Government Policy Statement (GPS) by:
  • contributing to the targets in the GPS
  • keeping allocations to activities within the bounds stated in the GPS
  • taking account of the guidance of the GPS
• delivers value for money by prioritising funding to activities that are:
  • most effective (the right activities)
  • implemented efficiently (in the best way at the right time)
  • economical (at the right price)
• delivers maximum benefits to users of public land transport networks.

In the above context, value for money means that:

• maintenance and renewal activities must deliver an appropriate level of service while minimising the whole-of-life asset cost
• network operations and network services (such as passenger transport services) activities must maximise the effectiveness of the services for the resources consumed
• improvement activities must deliver the maximum short- and long-term change to the effectiveness of the land transport networks, and network operations or services in support of transport strategies, for the resources consumed.

Funding assistance methods

Funding assistance will be related either to the approved organisation’s ability to pay or to the type of activity irrespective of the approved organisation.

Funding assistance to approved organisations for approved activities will be provided either as:

• a financial contribution at a rate reflecting the approved organisation’s ability to fund its share of the cost of the activity, or
• a fixed proportion of the cost of the activity dependent on the type of activity irrespective of which approved organisation is undertaking the activity.

Funding assistance will be given in accordance with the edition of the NZTA’s Planning, programming and funding manual that is current at the time of funding approval.

Priority and readiness

Activities will only be approved for funding when the NZTA considers they have sufficient priority and are ready for implementation.

The NZTA will only give funding approval for activities when they have sufficient priority to warrant funding and when the activities are ready to be implemented, so that available financial resources are used on activities with the highest priority.

The assessment methodologies in this manual will be used to assess activities or combinations of activities to determine their readiness and priority for funding.

Delivery as specified

Payment will only be made for completed portions of approved activities that have been delivered as specified in the funding approval.

Payment will only be made for completed portions of activities when:

• the activity has funding approval from the NZTA
• the payment matches the value of the activity completed, up to the approved funding level
• the activity has been completed to the standard and the other terms and conditions imposed by the NZTA in the funding approval.

Exceptions to this policy must be individually agreed between the NZTA and the approved organisation.

Procurement

To be eligible for funding assistance, activities or combinations of activities must be procured in accordance with the NZTA’s procurement policies.

The NZTA’s Procurement manual sets out the requirements for procurement of land transport activities and combinations of activities, including the definition of administration activities and in-house professional services (which are exempt from the LTMA procurement requirements). All other activities must be procured in accordance with procurement procedures approved by the NZTA.

No retrospective funding

In general, the NZTA will not provide funding assistance retrospectively.

Any organisation that commits or commences a new activity prior to funding approval from the NZTA, or commits expenditure on an activity in excess of the funding approval, does so at its own risk.

In general, the NZTA will not provide funding assistance retrospectively.

Exceptions to this general principle are:

• projects within a block allocation where the funding approval permits adjustment of funding to projects within the total block allocation and where over-expenditure on the project can be offset by under-expenditure on other projects
• fees for the investigation and design phases of improvement projects, which may be claimed when the construction/implementation phase of the project is approved.

Use of competent personnel

All activities that receive funding assistance from the NZTA must be managed and carried out by competent personnel.

The NZTA requires that persons with appropriate skills and experience are employed to manage and implement activities that receive funding assistance from the NZTA.

NZTA compensation when purpose or ownership changed

The NZTA expects compensation for property and infrastructure it has funded if the purpose or ownership is changed.

The NZTA expects that property and infrastructure for which it provides funding assistance will be in public ownership and continue to be used for transport purposes.

Should the use of the property and infrastructure change, the NZTA must receive compensation from the owner for its contribution to the property or infrastructure in the same proportion of the current value of the property and infrastructure as its contribution was to the value at the time of the contribution.

While the NZTA is prepared to consider funding of infrastructure not in public ownership for transport purposes, it will do so only on the condition that the above compensation principle is a condition of funding approval, and that a similar condition applies to any subsequent private owner of the facility if its use for transport purposes continues.

Intellectual property rights

The NZTA expects that it will share ownership of intellectual property rights created by its funding and may make these rights available to other parties that it funds, unless specifically agreed otherwise.

The NZTA expects that, when funding is provided to create intellectual property, it will consider the ownership and use rights of the intellectual property on a case-by-case basis and where appropriate seek shared ownership of the intellectual property rights, with the ability to make these rights available to other funded parties. Where funding is provided to a project that will create intellectual property relating to information and communication technology, the NZTA shall take into consideration the State Services Commission’s Guidelines for treatment of intellectual property rights.

Third party funding

The NZTA expects that approved organisations developing projects will seek supplementary funding and that the NZTA and the approved organisation will share any such funding and also share any cost reduction arising from third party involvement in the project.

This will occur when either:

• the scope of an activity is changed to benefit a third party either by agreement or through the application of the betterment provisions of the Public Works Act 1981, or
• a third party beneficiary or user of an activity, service or transport facility funded by the NZTA pays fees, fares, rent or any other payment for their benefit or use.

The revenue generated from the third party or parties will be shared between the approved organisations funding the activity and the NZTA in proportion to their funding, unless otherwise agreed at the time of initial funding approval.

Financial servicing costs

In general, the NZTA will fund its share of the direct capital cost of projects, but may instead fund financial servicing costs subject to specific agreements.

The NZTA will not fund depreciation, interest costs or any other financial servicing costs of capital projects, directly or indirectly, unless by specific agreement, and will not meet such costs when it also funds the capital project itself.

Limited funding for insurance or hedging

The NZTA will only provide funding assistance for the cost of insuring or hedging against inflation, damage or disruption to transport activities, operations or facilities when it is most likely that long-term costs to the NLTP will be reduced.

The NZTA will not also directly fund remedies or costs arising from events covered by the hedging or insurance.

Apportioning of risk

The NZTA will only bear the cost of risk in proportion to its funding for an activity, subject to risks having been appropriately apportioned.

The NZTA expects that, unless otherwise agreed at the time of funding approval:

• risks will be apportioned between contractors and approved organisations as described in the NZTA’s Procurement manual, which in summary, requires that risk is placed with the party best able to manage it
• the NZTA will only bear the cost of risk of an activity in the same proportion that NZTA’s funding is to the total funding of that activity from all sources.

National benefits

When the NZTA funds the development and use of nationally applicable systems or processes in order to deliver national benefits, it expects that these systems and processes will be used unless specifically agreed otherwise.

The NZTA has funded, and has agreed to fund, the development of a number of standard systems including for road assessment, traffic control, toll systems, back office processes, and integrated smartcard ticketing. Generally this is done to maximise national benefits (even though on a marginal basis regional benefits may be negative). The NZTA expects to realise the national benefits by having the core systems used nationally. The NZTA will not normally fund competing systems without sound and specific case-by-case reasons.