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December 5, 2012 4:30pm by David Farrar

Parliament Today

Bill talks on the Green Party photocopier!

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Comment16

NZ Politics
Bill English
Parliament

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scrubone

Meh.

Watched half. Hardly edifying.
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December 5, 2012 4:54pm
campit

Perhaps Bill is planning on using a photocopier to pay for Transmission Gully? He got shown up by Julie Anne Genter later on.

8. JULIE ANNE GENTER (Green) to the Minister of Finance: Does he stand by his statement that “there is no suggestion of the Government borrowing billions of dollars for motorways”?

Hon BILL ENGLISH (Minister of Finance) : Yes, I stand by my full statement, which was: “There is no suggestion of the Government borrowing millions of dollars for motorways. The motorway investment is largely funded … from the dedicated road-user charges and excise tax that go into the road-user fund.” Between 2009 and 2012 the National Land Transport Fund spent around $4.8 billion on State highways and around $1.9 billion for its share of spending on local roads. Over the same period fuel excise duties and road-user charges raised about $7.5 billion.

Julie Anne Genter: How does he reconcile that answer with this letter addressed to the Minister of Finance from the New Zealand Transport Agency, dated 2 October 2012, which states that the planned public-private partnership will “allow the NZTA to borrow”— that is, enter into a long-term repayment obligation—“for the Transmission Gully project”?

Hon BILL ENGLISH: That is the nature of the public-private partnership financing method, but all the costs of that financing comes from the National Land Transport Fund, funded by the users of the roads, through road-user charges. We do not go to the bond market to raise that money, but we do account for it as if it is debt of the Government.

Julie Anne Genter: What is the total projected cost of the loan that the Government will be taking out for the Transmission Gully public-private partnership?

Hon BILL ENGLISH: I do not have that detail here.

Julie Anne Genter: I seek leave to table this calculation done by the Parliamentary Library that shows that the payments would total $3 billion over the life of the public-private partnership.

…

Julie Anne Genter: Is it not the case that the availability payment model that the New Zealand Transport Agency is looking at for the Transmission Gully public-private partnership actually transfers the demand risk to the Government, because it would not be able to get private investors to invest in such a poor project; thus, will it not be future taxpayers who are carrying the risk of this $3 billion loan well into the future?

Hon BILL ENGLISH: The Government carries so-called demand risk on every road in New Zealand at the moment because we have not transferred that demand risk to anyone else, in any example that I can recall right now. Actually, I thought the Greens would be pleased about those projects failing, because if they failed, it was because fewer cars showed up, and given that the Greens and Labour Opposition are opposed to cars, they should think that is a good thing.

It is ridiculous that a PPP is being considered that carries no risk for the private partner. That’s the whole point of a PPP – to spread risk in return for paying a higher amount for the capital investment.
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December 5, 2012 5:36pm
thedavincimode

It is ridiculous that a PPP is being considered that carries no risk for the private partner. That’s the whole point of a PPP – to spread risk in return for paying a higher amount for the capital investment.

Is it really? So one size fits all then.
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December 5, 2012 6:31pm
Manolo

Less theatricals and more work, Mr Double Dipton.
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December 5, 2012 6:33pm
UpandComer

Haha Manolo you win the prize for most fuckwit meritless comment ever.
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December 5, 2012 7:12pm
UpandComer

Campit I think Bill made the answer pretty clear – the funds aren’t coming from the bond market, or your party’s magical photocopier, or Labour’s pixies who can build 100000 houses for under 300000 ea – it’s coming from a New Zealand sourced fund.
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December 5, 2012 7:14pm
thedavincimode

Haha Manolo you win the prize for most fuckwit meritless comment ever.

You’re too modest.
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December 5, 2012 7:24pm
Key is our man

UpandComer – Labour’s Kiwibuild will funded by you – by the way of heavy income and other taxes the Labour-Green government will be imposing on anything that moves. You will be safe only if you are a beneficiary.
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December 5, 2012 7:58pm
bhudson

That’s the whole point of a PPP – to spread risk in return for paying a higher amount for the capital investment.

Actually campit, the whole point is to make funding cheaper by having another party pay for some of it.

In exchange that private party gets a return on their investment. The govt taking on demand-risk would provide the private party some confidence that they will receive a return in exchange for their capital (and therefore reduced govt capital spend.)
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December 5, 2012 8:04pm
campit

@bhudson – no private entity can borrow money cheaper than the Govt. How can funding be cheaper? Why pay $100m a year for thirty years to fund private borrowing at higher rates of interest?
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December 5, 2012 8:53pm
bhudson

@campit,

Try not to think of the private party like a bank, or lender. A loan would simply be repayed at around 5% interest according to a table of payments.

The private party here is an investor. While at the lower point of usage they might only break even, higher utilisation than forecast allows them to make a greater amount of money – significantly more than the interest and opportunity cost factor of a comparable table loan.

So the private party can do a great deal better than a bank loan even though the cost of their borrowing might not be as low as the govt’s. That allows them to take greater risk (in the sense that the low point is a miserable rate of return, but the potential upside is very, very good.)

From the govt’s side, they get to keep half of the cost off their balance sheet – they don’t have to account for that and they don’t have to stump up with interest payments on that. That means that they can potentially retain a greater window to their debt threshold.

That means they retain the wherewithal to borrow to fund other asset investment if they wish to, without breaching the debt threshold – i.e. they get to build more assets – schools, hospitals, roads, broadband, etc.

It is a win-win approach
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December 5, 2012 9:33pm
campit

While at the lower point of usage they might only break even, higher utilisation than forecast allows them to make a greater amount of money

Except NZTA will be paying the same amount to the private partner for access to the road, regardless of traffic volumes. Where is the risk in that?

Seems to me that the Government and NZTA are falling over themselves to pay for lawyers, banks and corporate profits that aren’t present in the current tendering arrangements.

From the govt’s side, they get to keep half of the cost off their balance sheet….

But as Mr English says, “we do account for it as if it is debt of the Government.”

This is far from win-win.
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December 5, 2012 9:46pm
bhudson

Where is the risk in that?

I would say the risk is the level of return. We don’t have insight into the demand-risk that NZTA is taking on (nor should we, it will be commercially sensitive), but I would expect that to relate to a low return to the private partner (in fact, a level where they would be unhappy with the return, but just agree to because of the potential upside.)
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December 5, 2012 9:55pm
simonway

He used your joke about “a trade minister who opposes trade”, dpf. Just further proof that you’re the real power behind the throne.
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December 6, 2012 5:20am
Falafulu Fisi

The Greens need to pay attention because their solution of printing money is economic suicidal. An excellent presentation by Peter Schiff here.

There are much bigger threats than the “fiscal cliff”
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December 6, 2012 8:07am
pq

I see The greens as very scary indeed. I have primed many of my friends to be aware that if a Green Labour Government came about they should have assets and money overseas before that time. The very idea that Russell Norman, or Norman Russell could think of himself in a financial role warns us clearly.
The $NZ is fragile and susceptible. It remains to be seen whether currency and assets should got to Canada or Australia.
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December 6, 2012 6:44pm

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