Funding Assistance Policy and Rates for the 2015-18 NLTP

Introduction

The Transport Agency's funding assistance system was reviewed during 2012-14, revising the methodology for determining Approved Organisations' normal funding assistance rates (FARs) and changing the funding assistance policy. The revised policy applies from 1 July 2015. The background, engagement documents, submissions and decisions to the FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. review can be accessed at the Transport Agency's FAR Review site.

This section sets out the Transport Agency's funding asssistance policy and describes the methodology for determing Approved Organisations' normal FARs. It also sets out arrangements to transition Approved Organisations from their starting point FARs to target normal FARs by 2023/24, and describes variations to normal FARs and their application.

In addition to this content, the following links provide related information:

• 2015-18 NLTP - Normal Funding Assistance Rates (table)
• 2015-18 NLTP - Other Funding Assistance Rates (tables)
• Operational Policy for the application of Targeted Enhanced Rates

The funding assistance policy and rates applicable prior to the 2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied can be accessed at the following link:

• Funding Policy and Assistance Rates prior to the 2015-18 NLTP

Role of funding assistance rates

FARs, in conjunction with other land transport investment tools and interventions, exist to:

• assist Approved Organisations and the Transport Agency to co-invest to achieve:
  • optimal national land transport outcomes within the combined financial resources
  • an integrated and appropriately consistent land transport network throughout the country
• appropriately share the costs of the land transport network between land transport system users and local communities, recognising that the national and local benefits that are derived from investment in the network.

Funding assistance rate principles

The seven principles that underlie the Transport Agency's funding assistance framework are:

1. Support optimal national land transport outcomes being achieved in the right way, at the the right time and for the right cost.
2. Help provide users with an integrated and appropriately consistent network throughout the country.
3. Appropriately share the costs of the land transport network between system users and local communities, recognising that each of these groups affects the network and gains benefits from it.
4. Provide Approved Organisations and the Transport Agency with as much investment certainty as practicable.
5. Be efficient to apply.
6. Be based on readily accessible and reliable evidence and data.
7. Ensure that any variations are identified and applied transparently.

Funding assistance rate framework

Methodology for determining normal FARs

Following engagement with Approved Organisations and interested transport sector groups, the Transport Agency developed its methodology for determining normal FARs, which take into account factors materially affecting delivery and that are robust, repeatable, stable and independent.

Inputs for each council

• centreline kilometres divided by net equalised capital value - provides a measure for the core transport task faced by a council relative to a measure of the asset base from which local authorities raise local share
• inverse of rating units - identifies local authorities that have the smallest number of ratepayers from which to source local share
• index of deprivation - a demographic index published by the University of Otago and used by the Ministry of Health that provides a measure of the relative wealth of communities
• total cost of all activities for a recent period - the actual total costs incurred by Approved Organisations for the last three to five years (the 2009-13 four year period was used to determine normal FARs to apply from 2015/16)

Parameters & definitions

• overall co-investment rate - set at 53%, which reflects the overall effective FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. from 2009 to 2013
• end of transition normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. - the normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. that an Approved Organisation will receive for its activities, other than the variations described below, by the end of the transition period, i.e. by or before 2023/24
• maximum normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. - set at 75% for mainland New Zealand Approved Organisations and 85% for off-mainland islands (Chatham Islands Council) to reflect the higher costs associated with delivering land transport activities - the rate reflects the co-investment nature of land transport funding and the sharing of costs and risks in the investment
• minimum normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. - set at 51% - while set as high as possible, it needs to ensure a reasonable spread of the impacts of the revised methodology, relative to previous FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. system settings, amongst local authority Any territorial authority or regional council within the meaning of the Local Government Act 2002. groups (metros, provincials, regionals & rurals)
• taking factors materially affecting delivery into account - the funds available to do this in the model are provided from the difference between the minimum normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. (51%) and the overall co-investment rate (53%) and are distributed to those Approved Organisations that would have difficulty raising local share

Steps

1. Gather, collate and calculate inputs - employing latest available data
2. Standardise each of the inputs to a comparable scale based on the mean and standard deviation
3. Add the standardised inputs together to establish a score for each Approved Organisation
4. Multiply each Approved Organisation's score by a common factor to determine an interim FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities.
5. Starting from the highest interim FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. , allocate the NLTF The fund established under section 10 of the LTMA contribution to Approved Organisations' projected NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied programmes and progress down, taking into account the maximum and minimum normal FARs
6. Iteratively fine tune the multiplying factor until the programme in total is balanced to a weighted average 53% overall co-investment rate
7. The resulting FARs are the end of transition normal FARs for Approved Organisations

The flow diagram below provides a visual representation of the steps involved in determining the FARs.

Model

The model used by the Transport Agency to determine normal FARs can be accessed at this link.

FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. methodology flow diagram

Review of normal FARs prior to start of each NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied

A year prior to the start of each NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied , the inputs will be updated with the latest available information and the normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. for each Approved Organisation recalculated. The changes in FARs, if any, will reflect movements in centreline kilometres, capital values, rating units and the index of deprivation. The next review will occur a year prior to the start of the 2018-21 NLTP.

Transition from starting point to target normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities.

Approved Organisations will transition to normal FARs from their 2014/15 starting points set out in Attachment 2 of the Transport Agency Board The NZ Transport Agency Board. paper of 2nd May 2014, available at the FAR Review site, as follows:

• for most Approved Organisations the transition to normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. will be at 1% per year during the 2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied
• exceptions to this transition are shown in the section below on Variations to normal FARs
• from 2018/19 the transition rate will be the greater of either 1% per year or a level that ensures that end of transition normal FARs are achieved by 2023/24
• examples of transitioning:
  • an Approved Organisation with a 2014/15 starting point of 46% and an end of transition normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. of 51% will transition at +1% per year for 5 years
  • an Approved Organisation with a 2014/15 starting point of 60% and an end of transition normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. of 51% will transition at -1% per year for 9 years
  • an Approved Organisation with a 2014/15 starting point of 55% and an end of transition normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. of 70% will transition at +1% per year for 3 years (2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied ), then +2% for 6 years
• transitioning normal FARs will apply to projects approved from 2015/16 onwards, or approved in 2014/15 but with claims not starting until 2015/16 or later. This may mean a different FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. applies to a project's approved phase or business case for each year until the earlier of either the end of transition normal FAR is reached or the phase is completed, e.g.
  • where an Approved Organisation has transitioning FARs of 53% in 2015/16, 52% in 2016/17 and an end of transition normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. of 51% in 2017/18 and applies for funding of a four year project with claims starting in 2015/16, three FARs will apply to the project, i.e. 53% in the first year, 52% in the second and 51% thereafter
  • if an Approved Organisation applies for funding in 2014/15 and starts claiming in 2014/15, then the 2014/15 FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. will apply for the life of the project, provided that actual expenditure for the project starts in 2014/15.

FARs to apply to approved phase or business case

Funding approvals include the FARs that will apply during each financial year of the activity. They are made in respect of a phase or business case of an improvement project, e.g. funding would be approved for the investigation phase or for the indicative business case, not for the project as a whole.

Variations to normal FARs

The following variations to normal FARs will apply:

1. Special purpose roads and Queenstown Lakes District The district of a territorial authority. In relation to land in respect of which a Minister of the Crown is the Council, that land. Council's Crown Range Road
   The FARs for these roads in the 2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied will remain the same as applied in the 2012-15 NLTP. During the 2015-18 NLTP, affected Approved Organisations and the Transport Agency will engage to sort out appropriate transitioning arrangements to apply from 2018/19, aimed at achieving the Approved Organisation end of transition normal FARs by 2023/24. Indicative FARs have been set up in Transport Investment Online as "place-holders" beyond the 2015-18 NLTP and will be replaced by transition FARs once these have been set.
2. Department of Conservation (DOC) roads
   The FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. for existing, eligible DOC roads in the 2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied will remain at 100%, with the total cost for approval capped across all DOC roads at the 2012-15 NLTP level. During the 2015-18 NLTP, DOC and the Transport Agency will agree the roads in the DOC estate that will be eligible for NLTF The fund established under section 10 of the LTMA funding from 2018/19 onwards. DOC's normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. of 51% will apply from 2018/19 to the total cost of DOC's approved programme, including any additional roads identified during the 2015-18 NLTP as eligible for NLTF funding.
3. Rail level crossing warning devices
   From 2015/16 onwards, maintenance and renewal of rail level crossing warning devices and barrier arms will be funded under work category 131: Rail level crossing warning devices maintenance with co-investment by the Transport Agency at the Approved Organisation's normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. . For the 2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied , the local road component of rail level crossing warning device improvements will be funded under work category 321: New traffic management facilities at a 100% FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. .
   
   From 2018/19 onwards, the local road component of rail level crossing warning device improvements will be co-invested by the Transport Agency at a rate to be determined.
4. Stock effluent facilities
   For the 2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied , the FARs and arrangements will be similar to those applied in the 2012-15 NLTP. Refer to the Transport Agency's stock effluent facility policy for details. From 2018/19 onwards, the Approved Organisation's normal FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. will apply for construction of access roads for facilities located on local roads.
5. Total mobility activities
   For the 2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied , the Transport Agency's FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. policy for total mobility activities remains unchanged from the 2012-15 NLTP. During the first half of the 2015-18 NLTP, the policy will be reviewed, which will include reviewing the FARs that will apply from 2018/19. Refer to the FAR tables for Total mobility FARs that will apply for the 2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied .
6. Emergency works
   The Transport Agency's emergency works policy has been revised as part of the FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. Review. Details of the new policy are set out under work category 141: Emergency works.
7. Targeted enhanced rates
   The Transport Agency has developed policy for the use of targeted enhanced rates that may be applied in exceptional circumstances. Refer to the Operational policy for application of Targeted Enhanced Rates for details.
8. Rail services (Work category 515)
   The Transport Agency Board The NZ Transport Agency Board. approved a "glide path" for the FARs that will apply to Work category 515: Rail services. This will continue to be applied until the FAR The usual contribution in percentage terms, that the NZTA augments funding of an approved organisation, for the delivery of an activity or combination of activities. reaches the end of transition normal FAR for affected Approved Organisations From then, the normal FAR will apply.

Funding assistance rate tables.

Approved Organisation FARs for the 2015-18 NLTP A National Land Transport Programme Interrelated and complementary combination of activities that, when delivered in a coordinated manner, produce synergies – can span more than one work category and more than one activity class, e.g. a programme could include a road improvement and public transport improvement activities. adopted by the NZTA under section 19 of the LTMA, as from time to time amended or varied and target normal FARs are set out in the tables under

• Normal funding assistance rates, and
• Other funding assistance rates.