Author: Vaughn Crowther

The call has gone out to councils to get some shovel-ready projects, well… actually ready to get on the shovel.

Over the last few days, I’ve had calls with clients wanting help with getting to ‘go’ stage, so I thought it would be useful to share my experience and thoughts on writing a business case.

I’ve done a few business cases – I’ve even done the training and have the badge. Go me. To be honest, I also ballsed a couple up in the early days too. However, I learnt from that and went on to do some awesome ones. Go me again.

In my opinion, and with the benefit of having lived through a few of them, the business case approach has become one of the most misunderstood and poorly applied processes in the history of everness! It’s the second biggest bureaucratic constraint to infrastructure investment, beaten only by the Resource Management Act.

The irony is that it’s actually a very good, common-sense tool for understanding investments. The five-case model simply mimics the five questions you would get from any investor.

Unfortunately, it’s been hijacked by consultants and bureaucrats who just love to hit that complicator button (and I know that’s something I’ve been guilty of in the past!)

Following the business case template is easy, so don’t worry too much about the actual writing. 80% of your effort needs to go into making sure the right people are filling in the gaps and that they know their sh*t inside out. Many business cases have got over the line with some slick talking and cool graphics only to fall at the first hurdle of implementation.

Right now, for the business case approach to really work, we must be bold enough to simplify it. We need to fast track the process, without losing the integrity of its decisions, and get our construction workers employed.

So, here’s my go at simplifying things:

OK! Let’s get straight into it.

An effective proposal will be able to complete the sentences below. Any further information will simply be there to reduce investment uncertainty for your funders.

Case 1 (Strategic): 

“What do you need and why?“
Our community needs……
To address a problem with……
It is caused by……
As evidenced by……
I heard you are into this sort of thing because your business plans and strategies say this……

“…And what will your community get from it?“
By fixing ….., the community will benefit by……
The risks to the community of not fixing it are……
And, we will know we have achieved our goal when……
And we will report it back to using the following evidence……

Case 2 (Economic): 

“Why is your proposal the best option?“
Our proposal best delivers our community needs by……
And addresses the problem by……
We considered the following option(s) of……
But decided against it because……..
(Include if you can’t procure it, or manage it, or afford it too)

Case 3 (Commercial): 

“How are you gonna build it?“
We propose to procure construction from the market by……
Sh*t can happen, and if ……… happens, we may not be able to deliver it.
So, we have factored……… in to avoid……… happening.

“….. And how will it be operated once it’s built?“
We will ensure the ongoing delivery of benefits by……

Case 5 (Management):

“Who is going to manage this project?“
We will oversee construction and delivery by……
We will report back to you like this……
Sh*t can happen, and if ……… happens, we may not be able to deliver it.
So, we have factored ……… in to avoid ……… happening.

Case 4 (Financial):

“How do you propose to pay for it?“
We will need this much $…… for construction
And, this much $…… for its operation.
We can pay for this much $…… from these sources……
So, we need you to pay this much $……
We will pay you back by…… or cut you in on the deal by……
And if these things turn to sh*t……, we may not be able to get your money back.
So we will change our plans a bit to avoid it happening……

You keen?

If you’re curious about this article or want to discuss it further, leave a comment or get in touch with Vaughn.

Delivering immediate rate relief to ratepayers with little risk.

The enormity of the COVID-19 crisis is hitting home hard. Jobs will be lost and businesses will go under. Local economies will take several months to re-build. Councils across the country are under immediate pressure to demonstrate economic empathy. 

Councils that practise good infrastructure asset management could provide immediate rates relief by leaning into their circa $116 billion infrastructure asset base. I’m talking about depreciation – the concept of which is not up for debate here, but rather the timing and amount of depreciation being funded each year.

A bit of background

According to the Department of Internal Affairs, in 2018 approximately 20% of all council expenditure ($2.1 billion) went to the funding of asset depreciation.

Being a non-cash expense means that upward of 20% of rates are in theory, cash surpluses. These surpluses are typically committed to funding debt (internal or external), asset renewal, or are placed into reserves for future renewals.

The balanced budget requirements of Sections 100 and 101 of the Local Government Act 2002 mean that local councils cannot shelter communities with cash deficits, like their central government counterparts are doing.  However, councils do have the unique power to use funding sources they ‘determine to be appropriate’ for the needs of their community (see below).

It’s important to recognise here that many councils did not begin funding their depreciation until after the 1989 reforms, let alone 2002. Many feel they are in a state of ‘catch up’ following decades of under-funding. That is a different story…

Let’s look into some options…

Option 1: A Depreciation Holiday on New Long-Life Assets

A topical example is why councils fund depreciation on brand new infrastructure.

Typically, the cost of new or upgraded infrastructure is funded through debt. Using debt spreads the cost over long periods and also reduces the immediate impact on rates. This is fair and reasonable, but often once these new assets are capitalised onto a council’s balance sheet, their depreciation expense begins. So, you have an instance where the current generation are paying for both the construction of this long-life asset through the loan and its future replacement through depreciation. 

Is it fair that one generation pays for an assets construction and its eventual replacement, at the same time?

Let’s use an example:

• A new drinking water reservoir is built and capitalised as an asset worth $1.0 million.  
• It is paid for with a 25-year loan (for simplicity, let’s assume no interest costs nor income is incurred and price inflation is ignored i.e. nominal values).
• The asset is also depreciated over its expected useful life of 80 years using a straight-line method.

The charts below (excuse the pencil drawings) show the differences between what typically happens on the left, and what is being proposed on the right.

After 25 years, the community on the left side have paid off the loan of $1.0 million and have also contributed $310k (31%) of the asset’s future replacement (nominal prices only and excludes interest on debt).

However, after 25 years the community on the right side have paid off the $1.0 million only, with the future community left to fund the remaining $1.0 million over 55 years.  

The $2.0 million total represents both the cost of paying for the new asset and saving for its eventual replacement in 80 years.

Option 2: Extending the Total Useful Life of Long-Life Assets

A second and slightly more simple option is to extend, where appropriate, the total useful life of your known long-life assets. WARNING: You must be careful to not simply change the total useful life without having good evidence to do so. 

For example, many reinforced concrete structures, plastic pipes and road pavements nominally have lives of >80 years. These lives can be even greater in dry environments.

Prepare for more pencil stylings…

Any increase in total useful life has a direct and proportionate decrease in annual depreciation.

Depreciation = Gross Replacement Cost ÷ Useful Life

So, in the instance of our example, by demonstrating through regular asset assessments and having good maintenance planning, the total useful life is extended by 20 years to 100 years. The resulting reduction in annual depreciation and rates would be 25%, from $12.5k p.a. to $10.0k p.a.

Option 3: Depreciation Holiday on Long-Life Assets

This is a more progressive variant on Option 2 whereby all depreciation on long-life assets is deferred for 1 to 3 years, providing direct rates relief. This would be best applied to assets that have remaining lives greater than 60% and/or 60 years. In other words, long-life assets where there is a significant period remaining in which to recover deferred depreciation once economic conditions improve.  

Brace yourself…

Option 4: Outsource the Renewals Risk – A More Innovative Option For Debate!

Asset managers have posed this solution amongst themselves as long as I can remember. Essentially, this model mimics an insurance policy or annuity approach. A council would outsource the funding and timing risk of asset renewals to a third-party, perhaps to a CCO owned by many councils or an agency such as the Local Government Funding Agency. 

We may see an immediate improvement to asset management also. The third-party would have to undertake accurate and frequent condition assessments to manage replacement costs and predicting remaining life. They would also work to influence maintenance regimes to smooth out renewals spikes. Like insurance premiums, the third party would pool and invest these premiums to maintain liquidity amidst the coming renewals bow wave.

My final piece of pencil art below demonstrates the vast difference in annual depreciation for our example, based on varying returns on investment of depreciation reserves/premiums each year.

Theoretically, this option would see the biggest councils benefit from a vast reduction in annual depreciation due to the benefits of their annual depreciation being invested and risk out-sourced. However, such a model would take several months to implement.

Arguably, this model is what already happens now to some degree. Many council depreciation reserves are either invested for a return or used for internal loans. All capital incurs an opportunity cost.

Therefore, the real question is…

Is the accumulated depreciation figure for your council’s assets reconciled with the actual amount of depreciation within its reserve accounts?

If not, this implies that depreciation is potentially being over-collected compared to what the value of the future liability is, and thus being used to subsidise other council expenditure.  Sure, this would keep rates down, but it breaches the LGA. This also means that future generations somewhere, sometime will be paying a very big renewals bill.

I must emphasise that all of these options are only possible if a council is maintaining a reliable asset data register and is practising good asset management. This includes having a strong linkage between the asset management and finance functions of council. This is often a weak linkage and prohibits the direct financial benefits of good asset management.

If you’re curious about this article or want to discuss it further, leave a comment or get in touch with Vaughn.

The Tragedy of the Commons

We’re all familiar with the role of local government – why it works and how it works. In the photo above from 1900, an Auckland City Council employee throws inflammable fluid onto solid waste at the council’s ‘destructor’ (public incinerator). Rubbish was burned to prevent the spreading of diseases.
Source: Auckland City Libraries – Tāmaki Pātaka Kōrero, Sir George Grey Special Collections.

But, have you ever given much thought to local government’s ultimate purpose?

If we boil it right down to the essentials, it’s to save our collective self from our own individual impulses. Put another way, local government is a means to manage the public good against the private good. Or, in other words, to avoid what British economist William Forster Lloyd described in the 1860s as ‘the tragedy of the commons’.  

Lloyd maintained that within a shared and finite resource system, individuals will act to maximise resource use for their own self-interest, which in turn depletes the shared resource available for everyone else. Think panic buying (private good) vs rationing (public good). Ultimately, the depleted resource system impacts more negatively on the individual’s ability to pursue prosperity.  

This video does a great job of explaining the concept:

“When the tragedy of the commons applies…what is good for all of us, is good for each of us.”

Managing Public Good

This paradoxical behaviour highlights two things: Firstly, our intellectual limitation as a species! But more topically, the need for the democratic governance of common resources. The benefits and liabilities from the use of common resources is also termed, the public good.

Early Māori understood the importance of managing the public good, particularly around public sanitation. Evidence found in early settlement sites gives a glimpse of arrangements for rubbish disposal areas, purpose-built latrines, raised and sealed food storage as well as purpose-built separate facilities for giving birth and dying. They also had numerous tracks and trails creating a vast network for moving throughout the country.

Look after your own petty details…

In 1840, around ten months after the treaty of Waitangi was signed, New Zealand’s first Governor William Hobson was tasked with establishing “municipal and district governments for the conduct of all local affairs” and to “relieve the public treasury of wasteful expenditure and petty details”. In other words, the message from Britain was that the newly formed colony was henceforth to deal with its own sh*t.

This was early recognition that enabling people to manage their own ‘commons’ was an important step in building a prosperous nation. 

Skip forward 180 years and local government plays an even greater role in the strength and prosperity of our people. 

What does the future hold?

Local government is still relied upon to be the steward of the public good, but in contrast to 1840, it seems the ability for local government to manage itself has completely flipped. 

According to the LGA website, local government in New Zealand consists of 78 local, regional and unitary councils. The elected members of these councils are chosen every three years by voters in their communities to represent them. The elected members employ a Chief Executive to run the everyday business of the council.

But, much of an council’s ability to plan, build and fund significant infrastructure remains at the mercy of the cycles of central government and partisan politics. To put that into perspective, there have been 8 different ministers of local government in the past 12 years, each trying to save us from our collective selves with their own individual ideas of what is needed… This may explain the explosion in regulations, processes and national policy statements imposed on councils.

From my perspective as an engineer, I think there is now (ironically) way too much money being spent on processes aimed at ensuring we don’t squander public money! Meanwhile, the public good diminishes…

It seems that letting communities manage their own sh*t, no longer applies. What a tragedy.

If you’re curious about this article or want to discuss it further, leave a comment or get in touch with Vaughn.

The tragic death of 29 coal miners in the Pike River Mine triggered significant reform to our health and safety laws. The deaths of 185 people in the Christchurch earthquake triggered huge political focus on the resilience of our buildings and infrastructure. Water service delivery is about to be stripped from local government after 5,500 people fell ill from the Havelock North water contamination crisis.

Since 1921, New Zealand’s road system has claimed more than 39,000 lives. That’s 400+ people per year on average. Annual roads deaths have also risen for the sixth consecutive year. So, what are we doing about it?

In April I attended the Local Government Road Safety Summit. Reforming our existing approach to road safety was overwhelmingly endorsed by the mayors, elected members and transport officials in attendance.

Vision Zero was introduced as a more ethical approach to mobility by targeting zero deaths on our roads. Instead of trading off mobility for safety, the intent of Vision Zero is to empower our engineers to create a better road system. Since then however, Vision Zero seems to have been consumed into New Zealand’s transport decision-making process, as just another thing to deliver. Similarly the ‘any number is too many’ campaign from Southland and Otago gained significant public momentum, but now seems to have been caught within the wheels of bureaucracy.

Although targeting zero deaths seems ambitious, it isn’t a new idea for engineers. We design airplane cockpits, nuclear systems, operating rooms and treadmills with enough redundancy so that when someone makes a mistake, no one gets hurt. Yet the entrenched method of managing road safety is to only respond once a crash has occurred.

In August of this year, I read that a family had lost a loved one at the intersection of State Highway 8 and the Mt Cook Road (SH80), near Twizel. The community, including the district’s mayor, had repeatedly raised their fears about this intersection. So, with yet another crash, the local community took over ownership of the problem and erected their own warning signage.

This crash stirs internal conflict for me as a public works engineer. Two years prior, I was involved in a project that identified that very same intersection as high-risk and requiring intervention. The intersection was included within a broader plan of other initiatives needed for that corridor. I had followed the ‘process’ and at the time I believed my job was done. Thinking about this crash still stirs an emotional response in me and raises existential questions about my duty of care as a public works engineer.

Whether it is fear of making a bad decision or just a result of too much bureaucracy, it seems that so much of how we deliver transport in New Zealand has become about following a process. Processes are incredibly powerful methods of delivery but have come at the expense of simply doing the right thing.

Engineering is about solving a problem within a set of constraints. The Twizel example shows that life-saving improvements do not necessarily require huge levels of extra investment. Targeting zero deaths on our roads, whilst increasing the rate of human mobility, is nothing less than the greatest engineering challenge of the 21st Century.

First posted on the IPWEA Australasia blog: https://www.ipwea.org/blogs/intouch/2018/12/12/the-greatest-engineering-challenge-of-the-21st-cen

If you’re curious about this article or want to discuss it further, leave a comment or get in touch with Vaughn.

The Case for Investing in Tourism Infrastructure in New Zealand

You realise your life has become too busy when a moment spent reflecting feels like a guilty indulgence. This realisation leads some of us to question what we are doing with our time. There’s a Talking Heads song (Once In a Lifetime) that always gives me pause for thought:

“And you may ask yourself, Well, how did I get here?”

Recently it was blasting through the speakers as my wife and I, and our good friends Jayne and Tim, crested the Haast Pass on a ROOOOAD TRIIIIP! The journey was one that we had been looking forward to for some time – driving a campervan from Queenstown to Christchurch and back over three days. We planned to go up the west coast of the South Island and back down the east coast. We stocked up on food, the chilly bin was full, we had tickets to see Bruce Springsteen, and the kids were at home with Nana and Grandad. All the ingredients for a legendary road trip!

Having the capacity for introspection is a distinctly human trait; having the time to indulge it is a benefit of our modern society. It is the cheap and reliable access to potable water, food and shelter that allows us time to focus our daily efforts away from the maintenance of a hand-to-mouth existence. More people than ever are increasingly free to undertake their own pursuit of self-actualisation. We have the audacious engineers of the past to thank for this; those who challenged the status quo and chose to pursue a higher standard of living. It is our infrastructure that provides us a consistent quality of life far beyond that of our predecessors.

So, as public works engineers, how often do we re-visit this purpose? Do we need to see ourselves as providing society the time and capacity to pursue a higher order of need as described by Maslow? 

And what has the pursuit of self-actualisation got to do with touring around the South Island in a campervan? It’s a big shift in perspective but at that moment, all of my physiological and psychological needs (and a few more luxuries), were within that campervan and it was highly mobile. I was free to be spontaneous in thought and in action.

But when you are trying to find a place to stop for the night, have no mobile phone reception and are regularly being told in words and actions that you are not welcome, your existence is once again taken up with meeting the basic needs of life.

Over three days, I became increasingly disappointed at how poorly we are supplying the basic needs of our tourists. Compared to those audacious engineers of the past, our efforts seem suddenly focused on removing or ignoring the problem rather than seeking innovative solutions to make the most of the opportunities at hand. As tourist numbers increase at a record pace, it seems we are experiencing a paradigm paralysis in our service delivery.

What is paradigm paralysis? A paradigm is a set of shared assumptions or way of thinking that defines how we perceive the world[1]. Paradigms are very helpful for engineers, because they enable us to collectively understand how the world works and what needs to be done.  But when issues fall outside our set of assumptions, and until a paradigm shift occurs, we are in a state of paradigm paralysis.  A famous example was the fast-held belief that Cholera was spread through ‘miasma’ (the odour of human waste). It took a civil engineer, Sir Joseph William Bazalgette, many years to convince politicians and the medical fraternity that it was contaminated drinking water causing the spread of Cholera. The ensuing sewerage system he built eventually eliminated Cholera from London and saved tens of thousands of lives. 

During my trip, I came to appreciate that many free and independent tourists travelling through New Zealand in campervans (self-contained or not) are simply on their own pursuit of self-actualisation. It is the promise of having a truly individual and unique experience that draws them to New Zealand. They do not come here to deliberately make a mess of the pristine environment, nor do they come here to be killed or kill others on the road. They are operating within their own paradigm of reality, and I’m sure it comes as a shock when their paradigm and those of residents rub against each other creating tension and conflict.

Unless addressed in a way that appeases both sets of assumptions of the world, we will forever be seen to be failing in each other’s eyes.

On our road trip, my whanau and I had plenty of free time between sandfly attacks to ponder these concepts. We were tourists in a campervan yet brought our overarching New Zealand perspective along for the ride. So we had the benefit of operating within both paradigms  at the same time. We could see both sides quite clearly.

Being a pragmatic bunch, we even came up with some simple ideas to address the problems from the perspective of the customer:

1. Define a simple and consistent level of service for campervan facilities throughout NZ. We drove through over eleven different council boundaries and we noticed a variance in facilities and attitudes towards campervans. For instance, in Christchurch whilst attempting to find a park for the concert, we experienced parking lots manned by security guards, sending us on our way in fear we were going to camp there overnight. We had no intention of staying the night in Christchurch after the concert so found it very annoying to be treated as a public nuisance. In contrast, whilst in Lumsden, we encountered a lovely local man whom directed us to the freedom camping facilities that the locals had built in response to the influx of visitors.
2. Lift the quality and number of rest areas along key routes and actively market them through better mobile reception. For a campervan tourist, the road is not just functional, it is the destination. 
3. Sell an ‘all you can use’ monthly access pass to these tourist facilities. There is nothing more annoying than forking out money for questionable facilities, let alone at a price that seems absurd. Sell the pass at the point of major outlay, i.e. when purchasing airline tickets or booking/collecting a campervan. Much like when you purchased that European rail pass on your OE – the feeling of travelling for ‘free’ represented good value when all you had was a backpack.
4. Use this new revenue to create a contestable fund for communities to invest in tourist infrastructure. If it is allocated on the volume of campervans for instance, then the incentives shift to one of welcoming campervans, as opposed to running them out of town.

The key message I want to get across is not a focus on the suggestions above, but the way in which we came up with them. We don’t need government approval, nor a centralised body to do these things for our own regions. As public works engineers, there are no barriers, other than those we have created ourselves, for us to be pursuing solutions for our communities. It is up to us to follow in the footsteps of our country’s pioneering engineers and push the next paradigm shift.

Let us imagine…

Following on from my previous article on co-operatives, imagine if the Aspiring Region (Queenstown, Wanaka, Cromwell, and Central Otago) had the opportunity to structure its laws, planning and regulatory framework in a way that truly unleashed it’s economic potential. An economic zone perhaps?  

To explore this idea, I have created a hypothetical news article set twenty years from now. The Queenstown Lakes District and Central Otago District are now a joint entity called Aspiring. In exchange for greater autonomy, the Crown are expecting vast improvements in tourism productivity and are using a well-being framework to monitor performance.

There is no political motive here, nor is this an ideological manifesto… Rather, a desire for us to think a bit deeper on our challenges as a region. ‘Cos I’m sick of sitting in Queenstown traffic.

9th November 2038

Today marks the twenty-year anniversary of the Aspiring Economic Zone. Aspiring was formed as a legal entity to deliver greater overall performance from the tourism sector. Despite lifting the overall standards of living, Aspiring is still under pressure to deliver on its social and environmental expectations. 

Economic policy breakers and makers

• Aspiring’s positive economic results are underpinned by continued growth in tourism revenues, up 6% to $22.49bn.  
• This a tenfold increase since Aspiring’s formation in 2018, where MBIE reported $2.29bn in tourism spend.  
• Total passenger arrivals across all three airports increased 4% to 10.2 million.
• Median household incomes are following in step with another annual rise from $202,000 to $212,000 this financial year, the second highest in the country behind Auckland.

But it’s Aspiring’s burgeoning research sector that holds the future for the region, with over $4bn in export earnings in the year to October, up 9%.  With its generous tax breaks and immense conservation estate, Aspiring’s knowledge exports are at the forefront of Regenerative Economic policies.  

Many regenerative economic policies would not be possible without the world leading research taking place in Aspiring’s conservation estate. Their research has enabled economic tools such as the, Assessed Value of Natural Capital (AVNC), Carbon Credits and Transferable Water Rights to become mainstream.  Capitalism is now being unleashed as a powerful force for good.   

The research sector is also generating synergistic value for the tourism industry. Many visitors are willing to pay higher prices to partake in regenerative research projects throughout the region.  Despite continued calls for a cap on visitor numbers (largely from nostalgic locals), the region has increased income per visitor, to $22,500, up nearly ten-fold since 2018. 

Environmental stewardship remains misunderstood

The state of the environment, as measured by AVNC delivered yet another flat line result for Aspiring.  Despite their regenerative efforts, the value of the region’s landscape and ecosystem assets remained at $48.55 trillion with an increase in annual consumption (depreciation) to $33.6bn. The result will raise the ire of Wellington, where the predominant view of their economic performance is simply a result of ‘mortgaging mother nature’.  

Shadow Minister for the Environment Lila Rose, expressed her frustration at the result;

“Aspiring region continues to consume natural capital faster than it can be replenished. They continue to bury themselves in natural debt. Its incredibly hypocritical, given what they are selling to tourists as being the heart of the regenerative economy.  We all know that Fonterra was dissolved for the very same reasons. Aspiring needs to quickly replenish its natural capital if it’s to continue to receive its special treatment from the State.”

Despite becoming the wealthiest region in the South Island, it seems that the traditional capitalist model of growth and consumption still dominates much of Aspiring’s economic activity. Some tough decisions will need to be made by the elected and appointed stewards of the Aspiring region if they are to shake their reputation as the ‘zero-sum’ economy.  

Efficient housing, happy people

Social well-being is strong with increases in the rates of virtual and spatial interaction (sourced from personal device data).  Aspiring attributes the positive result to huge leaps in housing supply efficiency and transport connectivity, thanks largely to its UDA (Urban Development Authority) and its ability to raise capital for its infrastructure on the open market.

“Our Perpetual Land Supply Accord with the public, combined with automated house construction, now means the painfully slow supply of housing from twenty-years ago no longer underpins high house prices.”

Dominic George, the Director of People and Places for Aspiring has seen a fundamental shift in the function of housing. Mr George says;

“Housing is now largely valued for its utility as a warm and safe place to live. Location still drives a premium, but that reflects proximity to natural recreation as opposed to amenities.  With big data analysis of the housing market, and our digital planning algorithms, we can now plan, consent and print a house within four weeks. Any large distortions in property prices are quickly met with supply.  

All printed houses must legally adhere to the Printed Housing Design Standard, meaning our code of compliance and consenting process are no longer necessary. ”

The region attributes its amazing productivity growth to its ability to keep house prices stable, despite rampant population growth. With house prices now being largely pinned to human utility, housing and land are no longer seen to be the primary vehicle of wealth generation for the middle class.

“Rental incomes are there to make money from, but the incredible efficiency of housing supply means there is just too little promise of capital gains to attract the middle class into housing investment. Instead, much of the capital tied up in housing is from large, institutional investors seeking a steady, low-risk return.”

Mr George believes that affordable and stable house prices is the key reason that the regions social well-being indicators are so strong compared to other parts of New Zealand.  

“The biggest shift we have witnessed is the attitudes towards population growth for instance. There is an acceptance of its inevitability and it’s probably shifted to an attitude of welcoming growth.”

“There is now a much deeper appreciation of the agglomerative benefits from more densely populated urban centres. We still have a lot of ‘NIMBY’ activity going on, but with over 80% of the population having lived here for less than 15 years, that type of behaviour is now treated as social prejudice.“

Big City, Few Worries

In other big news, the town of Cromwell has now hit city status.  Resident population reached the 20,000 mark on the 21st of September, just two weeks off that predicted by Aspiring’s’ growth projection algorithm. The algorithm is projecting Cromwell to hit 30,000 at March 8th, 2047. The city now houses 34% of the region’s workforce thanks to the vast investment in high-speed transport corridors. Cromwell is now only fifteen-minutes from both Wanaka and Queenstown international airports and just another 90 minutes to Dunedin Airport.

Dominic George, believes Cromwell will continue to emerge as the centre for high value commerce as more and more tech firms and research institutes establish themselves in the area.

Cromwell boasts a well settled and very well-educated population. This is a very attractive proposition for companies wanting to establish themselves here. Mr George says it’s more than solid evidence that the Aspiring Economic Zone has been an overwhelming success. 

Interesting fact: The Kawerau Gorge Tunnel Rail Corridor and WCAD Road Corridor (Wanaka-Cromwell-Alexandra-Dunedin) cost $24 billion in combined capital to construct ($5 billon economic, $12bn natural, $7bn social). This has been more than paid for by the $1.2 trillion uplift in land values and social well-being since their opening. 

A seat at the table

Aspiring’s southern counterparts, comprising the populous of Invercargill, Gore, Balclutha, Te-Anau and Stewart Island have signalled that they now want more than just ‘the crumbs off the table’ from Aspiring.  The Southern region are now entering negotiations with the Crown on their own co-governance agreement.  Rather than simply being a carbon copy of Aspiring, the Southland region is much more economically complex. Their strong agricultural and industrial economies are at odds with their natural capital-dependent tourism industry. We can only hope that the Aspiring Canton are more than willing to share their lessons by placing Aotearoa – New Zealand back as their primary focus. 

If you’re curious about this article or want to discuss it further, leave a comment or get in touch with Vaughn.

Tourism is NZ’s largest export earner yet is still not taken seriously enough.

New Zealand’s largest company, Fonterra recently posted its first ever annual loss. $196 million! The anger from the public was not surprising. Over 100 years of strong economic performance is quickly overlooked when you have a poor record of environmental stewardship. Whether you like Fonterra or not, they just want to be awesome for the benefit of kiwis.

The purpose of Fonterra’s formation, and of previous co-operative mergers, has always been to shift the sector away from being an inwardly cannibalistic price taker to a globally competitive price maker. Ergo, more exports dollars, higher incomes and greater prosperity for all! 

For those who don’t know, Fonterra is a dairy co-operative formed 17 years ago. It was the inevitable conclusion to over 100 years of industry growth and factory consolidation (abandoned dairy factories like that in the cover photo are a common sight around Taranaki). To maximise its potential, Fonterra had to receive legal dispensation under the Commerce Act. It’s effectively a monopoly buyer of milk within NZ. So for a small, open economy, that promotes free trade and a pristine environment this was a massive decision! 

So then I got to thinking… the idea of a co-operative structure receiving special legal dispensation in exchange for better economic performance could be applied to the tourism industry. According to MBIE, tourism has overtaken dairy as the largest export earner at $14.5bn p.a.

Yet…

• How do we know if tourism is performing to its full potential? There may be another $20 billion on the table that we aren’t chasing.
• Who is the equivalent body, with the authority and clout to increase our performance? Agriculture have always had MAF (now MPI) and a strong lobby in Federated Farmers. Tourism seems to land in the lap of local government who are not resourced or legislated to manage it (most things that are too complicated for central government seem to end up with local government, but that is another story.)  
• Why is tourism infrastructure spending so focused on who pays? Huge public investments in road, rail and bridge strengthening over the past 100 years now underpins a very efficient collection and processing model for the agricultural industry. Arguably, Fonterra’s balance sheet has also benefited from ratepayers carrying the environmental externalities of intensive land use. Why is it so hard to build some toilets?

A ‘bed-tax’ will improve livability and the visitor experience in Queenstown and boost economic returns. It is no different from Fonterra receiving dispensation from the Commerce Act!

But here is the rub; The Aspiring region (Queenstown, Wanaka and Central Otago) is in the business of selling world class visitor experiences. World Class!!! We are kicking a**! That is a totally different industry to agriculture, of which our governance, infrastructure and planning laws seem to have been built around. 

The calls for a ‘bed-tax’ here in the Aspiring region are aimed at improving livability and the visitor experience. Excessive house prices, congested roads, worker shortages are yet another indicator that the system tourism is forced to do business within is broken. So how is the concept of the tourism sector asking for help any different to Fonterra receiving dispensation from the Commerce Act?

Of greater concern though is the lack of progress amidst a simmering anger towards tourists. Tourists are being blamed for all of these difficulties and, like Fonterra, tourism is now at risk of losing its social license. Many locals here in Queenstown have had enough and are calling for the ‘No Vacancy’ sign to be put up. Wtf?! Have we forgotten who is paying our bills? That’s like a dairy farmer saying ‘The cows are making a mess of my tractor – get rid of the bloody lot!’ 

The message here is this:

Let’s shift the story of tourism to a more positive and future focused one. One about what improvements we need to the current system to unleash our full potential and lift our prosperity to levels we cannot imagine.

The tourism sector just wants a fair chance to be awesome too!

Final thought: Imagine if the Aspiring region was administered and governed by a system aimed at maximising tourism revenues. What would our life be like then? Stay tuned, and I will tell you next week.

If you’re curious about this article or want to discuss it further, leave a comment or get in touch with Vaughn.

The July school holidays have come to an end and sighs of relief can be heard across the Wakatipu. As travellers and holiday makers make their way home, our wonderful town goes back to ‘off peak’ business as usual (which is still busy).

But there’s a lot we can learn from our visitors. Those curious folk that take the time to take it all in, wander the streets, explore our surroundings and balk at the price of our avocados.

They have set aside time to refresh, recharge and reflect. To sleep in, stay up and sit down together for meals. They pull over for every photo opportunity, they saturate themselves in precious moments and surrender themselves to the vast wilderness.

And while they’re relishing in all that makes Queenstown so special, we locals are stuck behind them suffering from severe road rage as we rush to the next meeting. The stress of a busy life a stark contrast to our temporary friends.

So, after a busy week at work you carry what is left of you home to your family, the stress and worry still pervading your mind. It’s a struggle to be truly in the moment, like the tourists we are ultimately in the business of serving.

Queenstown is in demand, more than we have ever experienced. Since I arrived ten years ago, the number of visitors arriving at our airport has tripled to 2.1 million per year. Queenstown airport is undergoing massive expansion so it can cater to more than 5 million arrivals by 2031. That is about the same size as Wellington airport is now, with 6 million arrivals each year.

Despite this sustained demand, for many established local businesses the fear of the inevitable bust or of ‘missing out’ on their share of the pie, still drives sentiment. Because they have experienced the boom and bust cycles before, when work comes in the door they must say ‘yes’ and they must figure out a way to get it done, no matter how crazy the hours become.

Well, the growth is not stopping and I don’t expect demand for infrastructure investment to end anytime soon. This high-pressure workplace culture is not sustainable and I am seeing it more and more in the faces of my clients. Too much work and too little time only leads to crap service, low staff morale, more business risk and eventually, as I have experienced, burnout.

So, in 2017 we decided to do things differently. We decided that the strength of commerce in Queenstown had finally outgrown its fragile stage and it was time for us to mature with it.

We also wanted to re-focus on why we moved here in the first place – to live, raise a family and flourish.

Together with my good friend and business partner Walter, we formed Utility. With a grounding in engineering, infrastructure and finance and a finishing in impact investment, innovation and community mindedness, we have established the Solution Hunters Collective.

• We work on projects that have a positive and tangible impact on our community.
• We aim to stop paralysis by analysis and just do something, fail fast and learn. And be comfortable in the ambiguity.
• We only take on work when we have the time and mental capacity.
• We are brave enough to say ‘no’ when we can’t solve a problem, then hunt down the great minds that can.
• Above all we give our clients a good experience, because people do business with people they like.
• It may sound risky, but I love the simplicity of it.

The challenge:

I recently saw a Ted Talk that explained that the overall productivity of Western nations has been in decline throughout the Western world since the 50’s. Between the 1950’s and 1980’s, productivity grew at around 5% per annum. However, since the 1990’s productivity has declined and is now steady at around 1% per annum.

Productivity is a measure of the output produced from an input. For instance, the amount of carrots produced per hectare of land or the amount of value generated from an hour of work.

‘The level of productivity is the single most important determinant of a country’s standard of living, with faster productivity growth leading to an increasingly better standard of living’ – Economic Policy Unit.

When productivity grows at 3% per annum we double the standards of living every generation. That means our children will most likely be twice as well off as their parents. But when productivity grows at just 1% per annum, as we have now, it takes three generations to double our standards of living.

Our standards of living are arguably the highest they’ve been in the history of human kind, but have we hit a point of diminishing returns? Or have we just not determined where our next leap in productivity will come from?

The solution:

Many organisations with many social creatures working together seem to struggle to produce more for less. Perhaps the need for measurement and accountability above output results in people placing effort in the wrong areas?

Individuals and businesses big and small have clicked onto the idea that a productive team is not necessarily a group of people that work in the same field, but an assortment of folks representing different industries and demographics working toward a common goal. A coworking community allows for cross-field inspiration, collaboration and fresh perspectives.

Around 2.3 million people ditched the traditional method and plugged in at a shared office last year – and GCUC (The Global Coworking Unconference Conference) projects this is to grow to 5.1 million by 2022.

When we formed Utility – The Solution Hunters Collective, we wanted to provide our clients with a breadth and depth of services that would compete with our larger counterparts. But we wanted to do this with fewer people, fewer overheads and more innovation.

So, instead of filling desks with infrastructure and finance consultants or engineers, we decided to open it up to like-minded, passionate individuals. Local talent we could tap into and collaborate with to find better solutions, together. The agglomeration of ideas allows us to find even more solutions than we thought possible.

More than a shared office space, The Coop is a place to share ideas, challenges, solutions and a cold brew after a good day’s work.

Our barn come building is nestled amongst honey dealers, art keepers, natural wonders and the historic Chinese Village – quite the concoction, we know. As well as a collection of great minds, one has access to all of life’s necessities including kitchen, Wi-Fi, coffee and dumplings.

Would you like to co-work with us? Pop in and meet the team.

Coworking statistics source: https://gcuc.co/2018-global-coworking-forecast-30432-spaces-5-1-million-members-2022/

A mixed model of governance? More reliance on CCOs? Or should local body engineers just step up their game? I believe it’s time to have ‘the’ debate.

For anyone who has visited Queenstown in the past three years, their first impression on leaving the airport will be of congestion and construction. Queenstown is scrambling to get ahead of growth. Admittedly, its traffic problems are not on the scale of Auckland’s, but the town’s prosperity depends solely on delivering a world-class visitor experience. And tourists don’t expect to pay a premium for traffic jams and delays.

The new Kawarau Falls Bridge (as shown in NZTA’s photo above) is due to open mid-2018. That’s two years ahead of its original date, but some would say ten years after it was needed. By waiting for traffic problems to arise before fixing them, is Queenstown signalling that its primary export — the visitor experience — is not a priority?

Small towns with big city problems are not exclusive to Queenstown. Many parts of New Zealand must confront problems much larger than themselves.

• Over 10,000 residents of low-lying South Dunedin face the real threat of sea level rise in the next 30 years. The area under threat is ten times larger than the Christchurch earthquake red zone.
• Since last year’s water contamination incident in Havelock North, we have discovered that many of our 1,174 drinking water schemes are not as safe as previously believed (Ministry of Health 2017). Many will require greater treatment or new water sources to be found.
• House prices are well beyond the reach of most New Zealanders. Our inefficient land use consenting process is often cited as the mechanism that keeps supply safely slower than demand.
• Over the next ten years, local and central government, and the private sector will spend over $100 billion of CAPEX on infrastructure (National Infrastructure Unit of NZ, Treasury, 2016).
• Compounding all of this is ageing infrastructure and an ageing workforce of technical experts.

I’m an engineer, and many local government engineers I talk with feel their ability to fix these problems is constrained. I am increasingly being told these problems are beyond the capability of elected representatives and that the participative model of local government simply paralyses decision-making.

There is a growing sentiment that when it comes to infrastructure and land use planning, council officers just need to be delegated the authority to get on with the job.

We can counter-argue that an engineer has a duty to provide expert advice that will lead the public to take the correct course of action. We cannot, after all, prosper from technological advancement without depending on the authority of experts.

There are as many famous examples of failed technocracies as there are ineffective democracies. So perhaps the problem lies with our risk-averse engineers and their inability to be audacious, persuasive and innovative?

The failed technocracy of the old Eastern Bloc countries was knows for its ability to produce ‘what the people needed’.

This debate is career-limiting for politicians and engineers (hopefully not for me!) It shouldn’t be though, because a democracy only gets stronger when it is put under stress. If you don’t adapt ahead of change, change is thrust upon you.

So how else could our system work?

It is time to start asking direct questions and, hopefully, remove stigma from the debate. A mixed model of governance is one idea. It is designed to provide complementary expertise with an elected representative majority.

Environment Canterbury (ECan) currently operates under this model, with seven elected councillors and up to six appointed. The District Health Board model is similar, with seven elected members and up to four appointed. For both models, appointments are made to complement the skills and experience of those elected in order to deliver the organisation;s objectives.

Considering the bow wave of experienced engineers due to retire in the next ten years, I don’t anticipate a shortage of available appointees.

Would an organisation established purely to deliver core services make a difference?

Council Controlled Organisations (CCOs) are already providing core services to councils in our largest cities: think Auckland Transport, Watercare, and Wellington Water.

Councils in smaller regions could form a regional CCO by placing their infrastructure assets in its management (not ownership). Councils could appoint board members who would, in turn, employ people with the technical expertise to deliver core services.

Obvious benefits include economies of scale, of expertise and of resources for each individual council. Technical experts could also get the opportunity to advance their skills by working in a large organisation.

Or do our technical experts simply need to lift their game?

Ultimately, this lies at the heart of the debate. I am increasingly hearing from engineers that the advancement of the public works profession has plateaued.

Cynically, it seems a good pubic works engineer is now judged on their ability to comply with processes and regulations, rather than on their ability to resourcefully solve problems. Ironically, this is a result of regulatory changes focused on ensuring ratepayers get value for money. Yet all this seems to have done is further instil an environment of fear and risk aversion.

When you are not comfortable with risk, you over-insure yourself by throwing more resources at the problem. Welcome to the downward spiral.

So, perhaps the debate is ultimately about trust?

Maybe we should trust in a system that has over 2000 years’ worth of trial and error. Perhaps we should trust that it will eventually work as it is supposed to.

I don’t know how much longer people can wait though. Especially those tourists still stuck in traffic outside Queenstown Airport…

If you’re curious about this article or want to discuss it further, leave a comment or get in touch with Vaughn.