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Introduction

In special circumstances the Transport Agency may decide to enter into funding assistance rate (FAR) adjustment and front loading arrangements with Approved Organisations, for cash-flow management or optimisation purposes. 

Definitions

Definitions for key terms are provided here.

 

  • FAR adjustment

    FAR adjustment

    An arrangement where the Approved Organisation undertakes to deliver an activity at a lower than normal FAR initially and then the Transport Agency funds at a higher FAR later on. The arrangement may be triggered by a shortfall in National Land Transport Fund (NLTF) cash-flow, e.g. due to revenue being lower than forecast, or may arise from an Approved Organisation's desire to deliver an activity at a faster rate than the Transport Agency can fund from the NLTF.

     

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  • Front loading

    Front loading

    An arrangement whereby the Transport Agency funds an activity at a higher than normal FAR initially and then the Approved Organisation accepts a lower than normal FAR later on. The trigger for the arrangement may be the ability of the Approved Organisation to raise sufficient local share in the short term to deliver an activity in a time frame that it and the Transport Agency consider desirable.

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Criteria

A range of criteria are required to be met to enable the Transport Agency to enter into either FAR adjustment or front loading arrangements.

 

  • Criteria for FAR adjustment and front loading

    Criteria for FAR adjustment and front loading

    The following criteria are required to be met to enable the Transport Agency to enter into either FAR adjustment or front loading arrangements:

    • there are benefits to the land transport system from delivering the activity's outcomes in the desired time frame as against delivering them over a longer time frame (evidence should be in the form of an incremental assessment against the Transport Agency's assessment Framework)
    • there is evidence of genuine difficulty in raising local or Transport Agency share in the short term - the reasons for the impairment could include, for instance:
      • significantly lower local or NLTF revenue than forecast requiring a pull back in Approved Organisation or Transport Agency expenditure
      • the relevant organisation is at the limit of its approved policy or ability to raise or draw down debt so cannot fund the activity within the desired time frame, or
      • competing priorities also being delivered by the organisation restrict its ability to fund its share. 
    • there is both a commitment and an ability by the relevant organisation to raise the funds to pay its higher share within an agreed cash-flow plan
    • the arrangement is not to exceed 10 years
    • the impact on FAR is neutral, i.e. it does not constitute a loan and the overall FAR under the arrangement is no different than it would be if delivered without the arrangement
    • a formal agreement is contracted between the parties, including the remedies that may be sought in the event of default by either party. 
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