Infrastructure Funding and Financing Act 2020

The Infrastructure Funding and Financing Act 2020 sets up a funding and financing model for infrastructure needed for urban development. Its purpose is to support the functioning of urban land markets, reduce the impact of local authority financing and funding constraints, support community needs, and allocate infrastructure costs appropriately.

The Act uses urban development in a broad way. It covers housing, including public housing, community housing, affordable housing, homes for first-home buyers and market housing. It also covers development and renewal of urban environments, plus related commercial, industrial, community and other amenities, infrastructure, facilities, services or works.

For a business owner, the practical point is simple. If a project needs major enabling infrastructure, the cost may be funded through a levy on benefited land under this Act instead of relying only on ordinary council funding tools.

This Act matters most to businesses that own, buy, develop, lease or finance land inside a levy area. It also matters to businesses acting in scheme roles such as a responsible SPV, a responsible levy authority, or a responsible infrastructure authority.

If your business operates outside a levy area, the Act will usually not impose direct levy liability on you. Even so, it can still affect transactions in growth areas. Buyers, lenders and developers may need to price in future levy costs if infrastructure funding is part of the project story.

Levy liability is tied to land within a levy scheme. The Act defines a levy as a levy authorised by a levy order, and a levy area as the geographic area or areas of land in which a levy is authorised by that order. You should not assume a levy exists unless there is an actual levy order covering the land.

The Act does not switch on by itself. A levy must be authorised through a formal process that can lead to a levy order made by Order in Council. The Act sets out proposal, assessment, endorsement, recommendation and consultation steps before that happens.

For most businesses, the levy order is the document that matters most. The Act says the levy order contains the framework for the levy, including the levy area, leviable land, and the factors to be used in assessing liability. It can also include additional content required by the Act.

If you are negotiating around land in a proposed or confirmed growth area, ask for the proposed or final levy order early. It is the starting point for understanding whether the land is caught, how liability is assessed and how long the levy period runs.

This Act becomes commercially important at ordinary project and transaction moments. Common trigger points include buying land, selling land, planning a subdivision, pricing a development, negotiating a lease, refinancing a site, or checking whether earlier contributions affect what is still payable.

Changes in ownership and land records also matter. The Act applies parts of the Local Government (Rating) Act 2002 dealing with notification of change of ownership, surrender or termination of lease or licence, transfer or assignment of lease or licence, and change of name. In practice, rating-style record accuracy matters for levy administration too.

The responsible levy authority must assess the levy to be paid by a levypayer in accordance with the levy order. It does that using the annual levy resolution for the levy year and levy-related information in its rating information database, corrected as at the end of the previous levy year.

The levy liability of a rating unit or separate rating area is not affected by a change to a relevant assessment factor during the levy year for which the levy is assessed. That means timing and record status at the relevant point can matter.

The responsible levy authority must give notice of levy liability to the levypayer. That can happen by including the notice in a rates assessment, or by agreement with the responsible SPV, as a separate notice of assessment. A levypayer becomes liable when that notice is delivered.

The authority must also deliver a levy invoice for the period for which payment is due. The invoice may be included in a rates invoice or, by agreement with the responsible SPV, sent separately. If levy appears in a rates invoice, the authority must clearly distinguish levy from rates.

The Act also says that if rating units are treated as one unit under the relevant rating rules, the responsible levy authority must treat them as one unit for assessing levy. That can matter for businesses holding adjoining or related parcels.

The responsible levy authority must include information relating to levy liability in the rates record for each rating unit and separate rating area in the levy area. That makes the rates record an important due diligence document for affected land.

A levypayer may object to levy-related information in a rates record on the ground that it is incorrectly recorded. The objection must first be lodged with the responsible levy authority. If the authority does not uphold it, the levypayer may lodge the objection with the monitor for reconsideration.

When the monitor reconsiders an objection, it must determine whether the assessment was made in accordance with the levy order and the relevant annual levy resolution. It must notify the objector and the responsible levy authority in writing of its decision. If the assessment was not made in accordance with the levy order and the relevant annual levy resolution, it must direct the responsible levy authority to ensure that the assessment is corrected.

The responsible levy authority may also correct errors in levy-related information in the rating information database or a rates record even if no objection has been made. The Act also applies rating law provisions dealing with amended assessments and recovery of additional amounts in certain cases.

The Act applies rating-style collection rules to levies. The responsible levy authority collects the levy. It may also choose not to collect small amounts under the applied rating rules, and if it does, it must inform the responsible SPV of any amounts of levy not collected that way.

Late payment can attract penalties. The amount of the penalty is the amount authorised by the authority for unpaid rates under the Local Government (Rating) Act 2002.

The responsible SPV and the responsible levy authority must take all reasonable steps to agree on a levy remission policy and a levy postponement policy. Those policies may provide for no remission or no postponement. The responsible SPV must give copies to the monitor and the responsible levy authority, and both the monitor and the responsible levy authority must publish them.

The Act also contains specific rules for Māori freehold land. In agreeing policies for rating units or separate rating areas on Māori freehold land, the responsible SPV and responsible levy authority must have regard to the matters and objectives set out in Schedule 11 of the Local Government Act 2002, with necessary modifications. A remission provision from the rating legislation also applies, but the responsible levy authority may remit a levy under that provision only with the consent of the responsible SPV.

If a levy is remitted under the agreed policy, the authority must give notice to the levypayer and record the remitted levy in the required way.

The Act deals with situations where development contributions or financial contributions relating to eligible infrastructure were already received, or required but not yet received, before the levy order came into force. The responsible levy authority must give the responsible SPV a list of those previous contributions as soon as practicable after the levy order comes into force.

The responsible SPV may then direct the authority to transfer the total amount of previous contributions to the SPV and to remit some or all levies on affected rating units or separate rating areas. This can matter in developments where infrastructure costs have already been partly funded through earlier contribution mechanisms.

The Act also deals with excess levy at the end of the levy period. If there is excess levy, it must be paid to the responsible levy authority, and if the total reaches the statutory threshold the authority must credit affected rates records using the same method most recently used to assess levy liability.

There are also provisions dealing with uncollected levy at the end of the levy period, including assignment by the responsible SPV to the responsible levy authority.

Some parts of the Act mainly matter only if your business is acting in a formal scheme role. For example, a responsible SPV sets the annual levy through the statutory annual levy resolution process, must ensure levy collected over the levy period does not exceed the maximum levy revenue, and may apply levy revenue only to pay eligible costs unless the Act says otherwise.

The Act also requires eligible infrastructure to be vested in the responsible infrastructure authority under a vesting agreement. If your business is contracting with an SPV or relying on infrastructure delivery, these controls can affect timing, funding certainty and handover risk.

The monitor also has an active role. It must publish information about levy schemes and can require information and assistance. If it believes a significant problem exists with an SPV, it can inquire into operations, direct remedial action, and recommend appointment of a Crown Manager.

The Act also provides for injunctions, compliance orders, civil liability orders, compensatory orders and offences relating to false statements, failure to give information, and obstruction or non-compliance with directions.

If you are making a property, development or leasing decision, do not stop at the Act itself. The practical answer usually sits in the scheme documents and property records for the specific land.