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The Department of Internal Affairs
Te Tari Taiwhenua
Purpose
1.
This briefing seeks your agreement to:
1.1
merge two complementary Budget initiatives into a joint ‘local government
flood resilience co-investment fund’ (the Fund), and
1.2
the high-level design features of the Fund, that wil be refined throughout the
Budget process.
2.
We also seek your feedback on a draft submission letter to the Minister of Finance and
on the technical documentation officials submit to the Treasury.
Executive summary
3.
Climate change will induce more frequent and severe weather events or ‘climate
hazards’ (such as extreme rainfall, wildfires, and drought) which can have devastating
impacts on social and economic wellbeing.
4.
While all parties have a role to play, councils have primary responsibility for identifying
and mitigating natural hazard risk (for example, through funding flood protection
schemes and regulating development in high-risk areas). Councils are therefore on the
‘front-line’ of adaptation.
We recommend aligning two related budget initiatives…
5.
The Minister of Local Government and the Minister for Economic and Regional
Development have been invited to submit two complementary climate resilience and
flood protection proposals into Budget 23’s Climate Emergency Response Fund.
6.
Ministry of Business, Innovation & Employment and Department of Internal Affairs
officials recommend these bids are combined to ensure alignment in how government
supports councils in matters of climate adaptation, and to reduce overheads and
transaction costs.
…to create a ‘local government flood resilience co-investment fund’
7.
The Fund needs to account for existing funding settings for climate adaptation and
flood protection in order to avoid moral hazard and displacing planned local
investment. It must also consider alignment with ongoing work that will set enduring
policy settings for climate adaptation, including future cost-sharing arrangements.
8.
The impact of these reforms will not be felt for up to a decade, while domestic
evidence suggests urgent action is required for effective adaptation during this
transition. This is largely the responsibility of councils, but they face several barriers in
doing so.
The Fund should target barriers to investment by Councils and remedy equity issues
9.
These barriers include local government affordability constraints and conflicting
incentives which, if left unchecked, could delay investment to reduce the adverse
effects of climate change. This wil create new, and exacerbate existing, inequities. The
Fund can support councils to overcome these barriers as a transitional measure
pending the implementation of broader reforms. To support a just transition, we
recommend that the Fund is used as a mechanism to overcome these barriers and
mitigate inequities. To do so, the Fund wil prioritise support to those most affected
and least able to adapt.
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10. While it is general y accepted that there is a significant ‘climate finance gap’ for
councils in New Zealand, estimating the scale, nature, and distribution of the
affordability challenge for councils is difficult and uncertain which poses some risks
(including displacement of local investment and moral hazard effects).
11. Nevertheless, Ministers may wish to take a precautionary ‘low-regrets’ approach to
supporting councils because there are a range of benefits in doing so (including strong
evidence that investing in risk reduction wil provide a high return on investment). The
downside of this approach is the risk of displacing planned investment from councils
and being perceived to reward those councils who have not proactively pursued
climate adaptation.
We recommend the Fund focus on supporting integrated investments to reduce flood risk
12. To ensure the scope of the Fund is manageable, we suggest its priority investment area
be managing the risks posed by extreme rainfall and flooding due to its prevalence,
adverse impacts on wel being, cost to the Crown for repair and rebuild, the risk of
insurer withdrawal, and its amenability to cost-effective intervention.
13. The Fund’s overall objectives and goals would be derived from the National Adaptation
Plan. Eligible
investments
would include planning, awareness and capacity building,
and flood protection infrastructure development (including nature-based solutions).
Applications for funding should demonstrate an integration of activities fol owing the
Protect/Avoid/Retreat or Relocate/Accommodate (PARA) model of risk management
to ensure effective long-run adaptation and minimise the risk of moral hazard (such as
intensification in high-risk areas).
14. We lack robust data to calculate the optimal size of the Fund. Based on the available
but partial evidence, the budget bid puts forward two potential options:
14.1 Preferred option: $350 million allocated over three years (3 fiscal periods).
14.2 Scaled option: $250 million allocated over three years (3 fiscal periods).
Implementation and administration of the Fund
15. Effective administration of the Fund wil be important to ensure it is implementation-
ready and to reduce overheads and compliance costs for councils. Kānoa – Regional
Economic Development & Investment Unit (Kānoa – RDU) has the existing capability in
delivering climate resilience and flood protection projects, established investment
disciplines, and regional relationships required to ensure the Fund can be stood up
quickly.
16. It currently manages the Climate Resilience and Flood Protection Programme as part of
the COVID-19 Response and Recovery – Infrastructure Reference Group Funding.1 The
Programme has successfully approved approximately $212 million2 of funding for 55
projects across 14 regions with al projects expected to be completed by 2024.
17. Additional resourcing would be required by Kānoa – RDU to administer the Fund
However, by utilising Kānoa – RDU’s existing systems, processes and relationships, we
would be able to administer the fund for approximately $7 million over three fiscal
1 The COVID-19 Response and Recovery Fund Infrastructure Reference Group (IRG) was established in 2020 to
seek out shovel-ready infrastructure projects to fund in order to reduce the economic impact of the COVID-19
pandemic
2 95% of approved funding has been contracted, and 50% paid out.
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periods. Minor funding is also sought for DIA to implement the scheme through its role
with councils and conduct an evaluation.
18. Further work is required to determine the appropriate governance and decision-
making arrangements, which would need to include involvement of local government.
Next steps
19. We have attached a draft Budget 23 submission letter for you to send to the Minister
of Finance and a draft of the technical budget documentation officials are required to
submit to Treasury. We will revise these based on your feedback, before submitting
them to the Treasury by the deadline of 16 December 2022.
20. If the Fund progresses through the Budget process, we wil provide further advice on
the Fund’s detailed design (such as governance and decision-making) before you take a
paper to Cabinet around March 2023.
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Context and key concepts
What is climate risk, climate adaptation, and resilience?
21. Anthropogenic climate change is interacting with natural variability of New Zealand’s
climate and weather to induce more frequent and severe weather and climate events,
such as extreme rainfall, drought, and wildfire (refer to Annex One).
Figure 1 shows
how climate risk arises from three elements:
21.1
climate hazards (which can be physical events or trends such as sea-level rise
or extreme rainfall);
21.2
exposure of the things we value (e.g. people, assets, taonga) to climate hazards
(which are increasing over time through intensification and growth); and
21.3 their
vulnerability to its effects.
Figure 1: what is a climate risk?
22. Adaptation is the process of adjusting to actual or expected adverse impacts of climate
risk to reduce harm to communities and their assets (e.g. by protecting communities
through flood protection). Resilience is a measure of the ability of a community to
respond to the adverse impacts of a climate risk in a timely and efficient manner by
restoring essential basic structures and functions (e.g. housing, electricity and
telecommunications networks, and three waters infrastructure).
Who is responsible for climate adaptation and risk management?
23. Current policy settings are split across multiple regulatory systems and are complex. In
summary, responsibility for climate adaptation generally falls on:
23.1
households and firms, who are responsible for understanding and managing
risks to assets they own, including by transferring risk to insurance markets;
23.2
central government, who sets policy direction and bears most of the costs of
response and recovery for major events, including repairing damaged local
government infrastructure (the 60/40 programme). Other support includes
Mayoral Relief Funds, Temporary Accommodation Services, and a range of
other supports through the welfare, tax, and primary industries systems; and
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23.3
local authorities, who have statutory functions to avoid and control natural
hazard risk through investment in risk reduction infrastructure, land use
planning, building consenting, and emergency management.
How is climate risk managed?
24. Given these responsibilities, local authorities must adapt to a changing climate.
Effective climate risk management requires understanding risk and balancing:
24.1
protecting assets through structural protection works such flood protection
schemes, sea walls, or nature-based solutions;
24.2
avoiding risk by reducing or eliminating exposure to a hazard by controlling
land use and development;
24.3
retreat and relocating existing and future assets and infrastructure in extreme
cases where the risk to life or property becomes intolerable over time; and
24.4
accommodating risk by, for example, setting bylaws relating to floor heights of
flood-prone buildings or temporary flood-moveable flood barriers; and
25. This is known as the PARA approach to climate risk management. Other key activities
include:
25.1
transferring risk to another party (via financial markets or between layers of
government); and
25.2
accepting remaining risk and having emergency management plans to respond
after a disaster occurs (which can be considered as accommodating risk).
26. Annex One provides a more detailed analysis of current roles, their statutory basis, and
the rationale behind regulatory/government intervention under the status quo.
Who pays for building community resilience and managing climate risk?
27. Local authorities mostly recover the costs of managing climate risk (such as flood
protection) from the community via rates and charges. This approach can generally be
expected to drive:
27.1
effective outcomes as local communities are best placed to understand and
manage local risks (commonly referred to as the subsidiarity principle); and
27.2
efficient outcomes as it aligns with the common cost allocation principle that
beneficiaries of a government action should pay (or alternatively, those who
create the risk should pay). In this case, asset owners and occupiers – mostly
local households and firms – benefit from effective local risk management. In
some cases, the Crown as owner of schools, hospitals, roads, and other assets
also benefits.
28. These funding principles are formalised in the National Civil Defence Emergency
Management Plan Order 2015 (a piece of secondary legislation made under the Civil
Defence Emergency Management Act 2002).
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37.1 the Productivity Commission’s review of local government funding and finance
concluded the Government should create a local government resilience fund;
37.2 the Future for Local Government interim report recommends that central
government develop an intergenerational fund for climate change;
37.3 after reviewing the draft National Adaptation Plan, the Climate Commission
wrote to the Minister of Climate Change cal ing for transitional measures to be
urgently put in place to support local government to start the adaptation
process now (rather than wait for broader reform to come into effect);
37.4 research from Te Uru Kahika (the collective body of regional councils and
unitary authorities) estimates an additional $150 million of capital expenditure
was required annual y over the next decade beyond what was forecast in
Councils’ long-term plans to make flood protection infrastructure resilient to
climate change.
38. However, this evidence lacks granularity as to the size, nature and distribution of any
unmet need arising from affordability constraints. In the time available, we have not
been able to independently explore these affordability issues in detail. An assessment
of relative affordability will require a comparative analysis across all New Zealand’s
councils comprising:
38.1 first, a local risk assessment, design of appropriate risk management activities,
and the estimated implementation costs;
38.2 second, a synthesis of metrics to estimate the relevant council’s fiscal health
(e.g. debt levels, ability to borrow and relative rates burden), past and planned
infrastructure investment, and other upcoming expenditure priorities; and
38.3 third, understanding the socioeconomic characteristics of constituents and
ratepayers, which determine the capacity to raise revenue and the political
economic factors arising from raising revenue or debt (i.e. such as rate rises).
39. DIA is currently developing a consistent framework for assessing the affordability of
particular investments for councils that wil answer the second and third questions.
Other work by DIA has identified 44 communities exposed and vulnerable to flooding
in New Zealand where proxy measures indicate the relevant local authorities may have
limited fiscal capacity to fund appropriate risk management activities.
Barrier two: Uncertainty and conflicting incentives
40. The reforms described in
Table 1 are creating uncertainty which may delay proactive
investment in climate risk management by councils. Uncertainty has a well-established
negative impact on investment decisions as described by economic literature –
particularly long-lived infrastructure or planning decisions. As such, councils may
rationally be deferring investment in climate adaptation in the hope for more
favourable policy settings in the future. Officials have heard anecdotal suggestions
from local government stakeholders this is the case, particularly where managed
retreat is under consideration.
41. Furthermore, there are several long-standing issues within the design of the current
system that (all else equal) could be generally expected to undermine the ability of
councils to proactively invest to reduce risks. Not all beneficiaries of council
investment are able to be charged, reducing available revenue although the scale of
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this issue is unquantified. In particular, council investment to manage natural hazard
risk provides benefits to:
41.1 specific Crown assets (such as hospitals and schools) which are non-rateable;
and
41.2 national policy goals that are properly the responsibility of the Crown such as
maintaining New Zealand’s economic security by protecting critical national
infrastructure and critical supply chains.
42. In addition, councils’ ability to avoid natural hazard risk through land-use planning and
consenting decisions has been constrained due to weak regulatory settings and strong
rent-seeking behaviour from affected parties through legal challenges.4 While the
Crown is addressing this issue through resource management reform, it has resulted in
legacy development in high-risk areas that increases the scale of the climate challenges
facing councils.
These barriers wil combine with the uneven distribution of climate risk to create inequities
43. These barriers will interact with the distributional impacts of climate change to create
new and exacerbate existing inequities facing some communities. To support a just
transition, we recommend that the Fund is used as a mechanism to overcome the
barriers councils face in proactively managing climate risk. To manage these inequities,
the Fund wil prioritise support to those most affected and least able to adapt.
44. No two communities will experience climate change in the same way and climate risk
is not spread evenly across the county. Inequity can arise through multiple domains,
including income, housing, employment and accessibility. Climate change can also
increase existing inequities. For example, some groups are more susceptible to harm
due to where they live (such as coastal communities). Others may be
disproportionately affected by financial impacts or lack the resources to adapt (such as
low-income and beneficiary households) or have specific adaptation needs (such as
older people and disabled people).
45. Māori as tangata whenua and Treaty partners with the Crown are particularly sensitive
to climate impacts on the natural environment for social, economic, cultural and
spiritual reasons. Climate hazards, particularly flood and rising sea-levels, pose a
significant threat to cultural assets. For example, 80% of the 800 marae in New Zealand
are based in high-risk coastal areas or flood plains.
46. Many Māori also depend on primary industries for their livelihoods. In some places,
climate change may alter patterns of use of mahinga kai (food-gathering sites) or
rongoā crops (medicinal plants). The detailed design of the Fund wil ensure councils
undertake appropriate engagement with Māori, and encourage joint proposals, when
developing funding applications.
47. These equity issues wil interact with the barriers to investment described above. For
example, rural communities or low-lying coastal communities are often sparsely
populated, thus reducing the economic case for new or improved protective
structures. In these cases, costs will generally be recovered by a much smaller pool of
beneficiaries, making them less viable compared to an investment that protects more
densely populated urban areas.
4 Refer to the Productivity Commission’s report on Local Government Funding and Financing that discusses this
problem.
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Protect
• Systems and engineering solutions designed to keep flood water away from assets
and infrastructure (stopbanks, culverts, drainage)
• Nature-based solutions such as wetland restoration, native afforestation,
rehabilitation and restoration of rivers and flood plains
• Green infrastructure (including the use of green roofs, porous pavements, and urban
parks)
• Bespoke engineering solutions for particularly important assets such as wāhi tapu,
critical national infrastructure, and lifeline utilities
Avoid
• Support to develop and implement regulatory and planning intervention
• Restricting further development or particular uses of land through planning rules –
for example, zoning – can prevent further exposure to risk. This approach can also
signal that an area may not be viable for development in the longer term.
Relocate or
• Support for planning and other interventions to foster long-term growth and
retreat
development outside high-risk areas
• Community engagement on long-term futures of areas at risk and potential options
and trigger points
Accommodate
• Building Civil Defence and Emergency Management capacity (early warning systems,
real-time monitoring, strategies to manage extreme events, awareness raising, and
building community preparedness)
• Support to develop and implement standards through rules and consent conditions,
including minimum floor heights and flood-proofing requirements
• Water-saving or retention technologies, including water harvesting
• Support to develop stronger building standards for flood-prone homes
• Incentives for flood proofing homes (elevation, ingress protection)
• Flood storage areas
• Temporary moveable flood barrier
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Kānoa – RDU has significant experience in delivering climate resilience and flood protection
projects
65. Kānoa – RDU is a business unit within MBIE that works with other government
organisations and industry, communities, iwi and local government to manage and
deliver funds tailored to build New Zealands regional economies. Kānoa – RDU
oversees a $4.3 bil ion investment portfolio.
66. It currently manages the Climate Resilience and Flood Protection Programme as part of
the COVID-19 Response and Recovery – Infrastructure Reference Group Funding.5 The
Programme has successfully approved approximately $212 million6 of funding for 55
projects across 14 regions with al projects expected to be completed by 2024. The
Climate Resilience and Flood Protection Programme is closed to new applications.
67. Through this programme, Kānoa – RDU has the capabilities needed to administer the
Fund ‘in-house’, which will ensure the Fund can be stood up quickly. Alternative
administration arrangements options were considered, but not progressed further as
Kānoa – RDU had the most relevant pre-existing roles and functions, namely:
67.1 regional staff that hold critical relationships with communities, local
government, industry, and iwi, hapū and Māori;
67.2 experience developing strategic investment criteria to meet government
priorities, e.g. the PRISM framework which supports regional economies to
become more productive, resilient, inclusive, sustainable and Māori-enabling;
67.3 proven capability in supporting individuals, groups, businesses and local
government to develop bids for Kānoa – RDU funding; and
67.4 a mature operational unit which includes regional, investment, and strategy,
performance and planning arms.
Administration costs
68. Kānoa – RDU has Regions and Investment teams based across New Zealand that hold
key relationships with local authorities, industry and whanau, hapu and iwi Māori. The
initiative would utilise and build upon these existing relationships. Additional ful -time
equivalents (FTE) would be required for Kānoa – RDU to support the administration of
the Fund, as the unit is currently at full capacity managing its existing work
programme.
69. It is the experience of Kānoa - RDU that the departmental cost to administer a new
fund (initiate, evaluate, develop, approve and deliver projects aligned with the Fund's
purpose) is approximately two per cent of the value of the Fund. Therefore, in this
case, the marginal operating cost to MBIE to administer this new Fund would be $7
million (under the preferred option of a $350 million fund) or $5 million using the
scaled option ($250 million).
70. DIA anticipates one to two FTEs wil be required to support the delivery of the Fund.
Funding is also sought for evaluation of the iniative to inform broader climate policy
developments.
5 The COVID-19 Response and Recovery Fund Infrastructure Reference Group (IRG) was established in 2020 to
seek out shovel-ready infrastructure projects to fund in order to reduce the economic impact of the COVID-19
pandemic
6 95% of approved funding has been contracted, and 50% paid out.
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Next steps in the Budget process
71. This Fund wil be considered by Budget Ministers through the Budget process. We have
attached a draft submission letter for you to sign and submit to the Minister of Finance
(Annex Three). A draft of the technical budget documentation we are required to
submit to Treasury is also attached (Annex Four).
72. We wil revise the letter and technical documentation based on your decisions on this
paper and your feedback, before submitting it to the Treasury by the deadline of 16
December 2022.
Detailed design decisions wil be sought fol owing agency consultation
73. The decisions sought above wil set the strategic case for investment needed to submit
the technical documentation to the Treasury. If the Fund continues to progress
through the Budget process, we suggest you take a paper to Cabinet around March
2023 that wil (subject to the success of the bid) seek agreement to the detailed design
of the Fund.
74. This Cabinet paper wil need to cover:
74.1 options for the governance arrangements over the Fund, including how to
ensure appropriate cross-agency and local government input into the
evaluation of funding applications;
74.2 entry criteria for the Fund, including the level of co-investment that wil be
required and how it wil be targeted to the level of risk and need;
74.3 how decisions wil be made on applications to the Fund, such as the relative
role of Ministers and officials;
74.4 the development of an investment strategy to guide the evaluation and
prioritisation of applications to the Fund; and
74.5 how to ensure a streamlined and fair process for smaller councils that may lack
the expertise in house to develop robust proposals.
75. We plan to work in close consultation with interested agencies in developing the policy
advice to underpin this Cabinet paper. We also recommend that you submit the
proposed Government response to the Buller Flood resilience business case for policy
approval at this time.
76. The Cabinet paper wil use South Dunedin and Tairāwhiti as case-studies to see how
the Fund might be utilised for those communities as requested by the Minister of
Finance in his invitation letter to you.
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Recommendations
77. We recommend that you:
a)
agree to progress a ‘local government flood resilience co-
Yes/No
investment fund’ (the Fund) through Budget 23 by combining the
flood protection initiative (under the Regional Economic
Development portfolio) with the local government resilience fund
(under the Local Government portfolio);
b)
agree that the rationale underpinning the Fund is to overcome
Yes/No
barriers (such as affordability) to proactive adaptation by councils
that would otherwise create or exacerbate inequities;
c)
agree that to mitigate these inequities and support an equitable,
fair and inclusive transition, the Fund wil prioritise support to those
most affected and least able to adapt;
d)
agree to the fol owing design decisions for the Fund:
Yes/No
i.
its purpose is to enable councils to prepare for and adapt to
the impacts of climate change while upholding the principles
of Te Tiriti o Waitangi;
ii.
the outcomes sought are to reduce the impact of climate-
exacerbated natural hazards on communities, and the burden
(cost and time) of recovery in communities fol owing potential
climate-exacerbated extreme events or disasters;
iii. the priority investment area is to manage the adverse impacts
of extreme rainfall and flood risk due to its prevalence,
adverse impacts on wel being, cost to the Crown for repair
and rebuild, the risk of insurer withdrawal, and its amenability
to cost-effective intervention;
iv. eligible investments include planning, awareness and capacity
building, and infrastructure development;
v.
applications should demonstrate an integration of activities
fol owing the PARA model of risk management
(protect/avoid/retreat or relocate/accommodate);
e)
agree that Kānoa – RDU administers the Fund building on its
Yes/No
existing capability, processes, and systems;
f)
note these decisions are preliminary and if the Fund progresses
through the Budget process, we wil provide advice on more
detailed design decisions (in consultation with agencies);
g)
provide feedback on the draft submission letter for Ministers to
Yes/No
submit to the Minister of Finance and a draft of the technical
budget documentation we are required to submit to Treasury; and
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h)
authorise officials to revise the technical documentation in
Yes/No
accordance with your feedback and to make any minor, technical, or
editorial changes necessary before lodging it with the Treasury on
16 December 2022.
Paul Barker
Isabel Poulson
Partnerships Director
General Manager – Strategy, Planning &
Local Government – DIA
Performance
Kānoa – RDU, MBIE
8/12/2022
8/12/2022
Hon Nanaia Mahuta
Hon Stuart Nash
Minister of Local Government
Minister for Economic and Regional
Development
___/____/____
___/____/___
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Annex Two: evidence of how climate change wil impact New Zealand.
New Zealand’s climate is warming, sea levels are rising, and extreme weather events are becoming
more frequent and severe. The National Institute of Water and Atmospheric Research (NIWA)
developed the climate change projections used for New Zealand’s National Climate Change Risk
Assessment after the release of
IPCC Fifth Assessment Report. They include the fol owing trends:8
•
In the last 100 years, our climate has warmed by 1°C. If global emissions remain high,
temperatures will increase by a further 1.0°C by 2040 and 3.0°C by 2090.
•
In the last 60 years, sea levels have risen by 2.44 mm per year. If global emissions remain high,
sea levels will increase by a further 0.21 m by 2040 and 0.67 m by 2090.
•
Extreme weather events such as storms, heatwaves and heavy rainfall are likely to be more
frequent and intense. Large increases in extreme rainfal are expected everywhere in the
country, particularly in Northland due to a projected increase in ex-tropical cyclones.
•
The number of frost and snow days are projected to decrease, and dry days to increase for much
of the North Island and for some parts of the South Island.
•
Drought is predicted to increase in frequency and severity, particularly along the eastern side of
the Southern Alps.
•
Increased northeasterly airflows are projected in summer and stronger westerlies in winter, the
latter particularly in the south of the South Island.
•
Wildfire risk is predicted to increase in many areas towards the end of the century, due to higher
temperatures and wind speeds, and decreased rainfall and relative humidity.
8 Ministry for the Environment. 2020.
National Climate Change Risk Assessment for Aotearoa New
Zealand: Main report – Arotakenga Tūraru mō te Huringa Āhuarangi o Āotearoa:
Pūrongo
whakatōpū. Wellington: Ministry for the Environment.
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Annex Three: Draft submission letter to the Minister of Finance
See separate document.
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Annex Four: Draft budget documentation
See separate document.
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Purpose
1.
This briefing seeks your agreement to progress the design of the local government
flood resilience co-investment fund (the fund) in conjunction with policy work
underway on the future of severely affected locations affected by the recent North
Island weather events (NIWEs).
2.
We seek this decision from:
2.1
the Minister of Local Government, Minister for Regional Development, Minister
of Climate Change, and the Minister of Finance/Cyclone Recovery as ministers
authorised by Cabinet to agree to the terms of the fund, including eligibility
criteria (‘joint ministers’), and
2.2
the Associate Minister of Finance (Hon Wood) as a lead minister for policy
design on the future of severely affected locations (FOSAL) work programme.
3.
This recommendation is endorsed by the Treasury, the Department of Prime Minister
and Cabinet’s cyclone recovery unit, Kānoa - Regional Economic Development &
Investment Unit, and the National Emergency Management Agency. Other interested
agencies were consulted.
The fund has been revised and rescoped…
4.
In 2022, the then Ministers of Local Government and Regional Development were
invited to submit a budget initiative titled ‘local government flood resilience co-
investment fund into Budget 2023’s climate emergency response fund track (briefing
LG202201532 refers).
5.
This initiative was designed before the series of NIWEs. As originally submitted, the
fund’s purpose was to enable councils to prepare for and adapt to the impacts of
climate change. The fund would support interventions to proactively reduce flood risk
following the PARA model of risk management (protect/avoid/retreat or
relocate/accommodate).
6.
Importantly, the PARA model is wider than just hard infrastructure solutions such as
stop banks and could also include other measures such as integrated land use planning
to stop intensification in high-risk areas while fostering growth in safer locations. This
approach also includes more proactive measures to manage flood risk through
emergency preparedness, nature-based solutions, and property-level resilience (such
as raising floor heights or moveable temporary flood barriers). This PARA approach
was adopted for the Westport case study in the National Adaptation Plan. PARA-based
interventions are a key way to avoid maladaptation.
7.
The fund was also designed as a two-year initiative to be administered by Kānoa
recognising the time that would be involved in determining, planning, assessing and
delivering proposals. It was to be a transitional policy intervention to manage urgent
risks pending the outcomes of broader policy work on cost-sharing relating to
adaptation (such as the climate adaptation Bill).
8.
During the budget process, the fund was revised and rescoped to establish a
“contestable funding pool for local authorities in areas impacted by the recent NIWEs
to seek Crown co-investment to support the proactive management of climate
exacerbated flood risk.” Cabinet allocated $100 million to the revised initiative, set
aside in a tagged contingency. It was also reduced to just one year, 2023/24. Joint
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Document 2
The Department of Internal Affairs
Te Tari Taiwhenua
ministers were authorised to jointly to agree to the terms of the fund, including
eligibility criteria and to draw down the funding once agreed.
…and should be connected into work on the future of severely affected locations
9.
In light of the changes through the budget process, we have worked across agencies to
revisit the design of the fund. Narrowing the fund’s scope to NIWE regions creates a
significant linkage with work underway on the future of locations severely affected by
the NIWEs (FOSAL). The FOSAL policy work (currently led by the Treasury and the
Ministry for the Environment) is considering, among other things, how central
government will contribute to local measures needed to manage future flood risk in
these areas.
10. The fund provides one potential source of funding for any Crown contributions. Given
this linkage, we recommend that work on developing the fund is progressed in
conjunction with the FOSAL response. This is important for:
10.1
ensuring decisions related to the fund and the FOSAL response are aligned and
therefore any Crown support provided is consistent
10.2
streamlining engagement with affected local authorities who are already at
capacity dealing with the immediate aftermath of the NIWEs while
participating in the central government led FOSAL programme, and
10.3
avoiding duplication of work.
11. In practice, integrating the fund into FOSAL work would mean that the detailed design
decisions about the fund (including its eligibility and drawdown criteria, and its
administration) would be directly informed by, and sequenced in relation to, FOSAL-
related policy decisions. The next set of key FOSAL decisions are scheduled for
discussion at EWR on 31 May, which are expected to cover the overarching approach
to any central government contribution.
12. The fund’s parameters provide flexibility about where and what types of risk mitigation
measures are prioritised in the NIWE impacted areas. Ministers will have choices as to
the distribution of the fund, including across the categories agreed to by Cabinet
[EWR-23-MIN-0030 refers]. These FOSAL categories are (in general terms):
12.1
Low Risk – Repair to previous state is all that is required to manage future
severe weather event risk. This means that once any flood protection near the
property is repaired, the home can be rebuilt at the same site.
12.2
Managed Risk – Community or property-level interventions will manage future
severe weather event risk. This could include the raising of nearby stop banks,
improving drainage or raising the property.
12.3
High Risk – Areas in the high-risk category are not safe to live in because of the
unacceptable risk of future flooding and loss of life. Homes in these areas
should not be rebuilt on their current sites.
Next steps
13. If you agree with this approach:
13.1
the Treasury and Ministry for the Environment will consider how the fund can
support the FOSAL response in developing the EWR Cabinet Paper for Minister
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Document 2
The Department of Internal Affairs
Te Tari Taiwhenua
Hon Grant Robertson
Minister of Finance
Date
Hon Kiritapu Allan
Minister for Regional Development
Date
Hon Kieran McAnulty
Minister of Local Government
Date
Hon James Shaw
Minister of Climate change
Date
Hon Michael Wood
Associate Minister of Finance
Date
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Document 3
The Department of Internal Affairs
Te Tari Taiwhenua
Purpose
1.
This briefing responds to a request to develop options to accelerate the distribution of
the local government flood resilience co-investment fund (the ‘Resilience Fund’).
Executive summary
2.
Under current decisions made by joint ministers, the Resilience Fund will be designed
and distributed to in accordance with the ‘future of severely affected locations’ work
programme (FOSAL), led by the Associate Minister of Finance (Hon Wood).
3.
Under the FOSAL approach, councils will submit business cases seeking co-investment
in line with the standard Civil Defence and Emergency Management process. The
Government will consider the appropriate cost-sharing arrangements once these have
been received. We understand Hon Wood is consulting you on a draft EWR paper
seeking agreement to this approach. The paper will be considered on 31 May 2023.
4.
You have requested advice on how to accelerate the distribution of the Resilience
Fund. We have identified two main options that would provide councils with some
funding by or around 1 July 2023:
4.1
Option 1: Immediate allocation of the Resilience Fund. This option would see
ministers agree to allocate the fund across affected regions immediately and in
advance of the FOSAL process.
4.2
Option 2: Partial acceleration of the Resilience Fund and stronger signalling of
support. This option would provide ‘seed funding’ to support councils through
the FOSAL process and/or provide a stronger signal of the Crown’s cost-sharing
intentions.
5.
Decisions on a preferred approach will likely need to rest on whether you think
councils have an immediate need to implement flood resilience projects that
outweighs the benefits of taking a slower but consistent and coordinated approach to
flood resilience cost-sharing as determined through FOSAL.
6.
We have little evidence that councils have an immediate need for funding to
implement new flood resilience projects in response to the extreme weather events.
After discussions with agencies, we understand councils are progressing designs for
stop bank repairs and future flood resilience but they won’t be complete for some
time. However, regional recovery ministers are likely to have different sources of
information than officials that may impact this assessment.
7.
In the absence of such evidence available to us, agencies recommend that:
7.1
the proposed approach set out in Hon Wood’s EWR paper is the best vehicle
for decisions on the Resilience Fund, and
7.2
if you wish to accelerate the distribution of the Resilience Fund, Option 2 is
progressed. It meets identified funding needs, provides greater certainty of
future funding (without pre-empting the Government’s broader decisions on
cost-sharing), and allows for funded interventions to integrate with the FOSAL
work programme.
8.
Subject to your decisions on this paper we will provide your office with updated draft
ministerial feedback on Hon Wood’s paper.
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Document 3
The Department of Internal Affairs
Te Tari Taiwhenua
Background
9.
Budget 23 established the local government flood resilience co-investment fund (the
‘Resilience Fund’) to support co-investment with local authorities (‘councils’) affected
by the North Island weather events (‘NIWEs’). The Minister of Local Government,
Minister for Regional Development, Minister of Climate Change, and the Minister of
Finance/Cyclone Recovery (‘joint ministers’) are required to jointly agree to the terms
of the Resilience Fund, including eligibility criteria, before it can be drawn down.
10. On 9 May 2023 the Department of Internal Affairs advised joint ministers the design of
the Resilience Fund could be incorporated into the ‘future of severely affected
locations’ work programme (FOSAL), led by the Associate Minister of Finance (Hon
Wood). This was because:
10.1
the FOSAL work is considering how the Government will share the cost of
community- and property-level resilience interventions needed to manage
flood risk in severely affected areas (referred to as ‘Category 2 areas’); and
10.2
the Resilience Fund provides $100 million suited to these interventions and is
aligned with the purpose central government support for category 2 areas
(noting other funding or financing sources may be needed).
11. On 31 May 2023, Hon Wood will seek decisions on the FOSAL work including cost
sharing arrangements with councils and the application of the Resilience Fund. You
have received a copy of this paper for ministerial consultation. We understand Hon
Wood has requested feedback ‘as soon as possible’.
12. In parallel to this, you and the Associate Minister of Cyclone Recovery (Hon Edmonds)
requested the Department of Internal Affairs develop options to accelerate the
distribution of the Resilience Fund.
Approach to the FOSAL work programme
Overall objective of flood resilience investment
13. Hon Wood’s paper sets out a proposed approach to how central government will
support severely affected locations through the rebuild and recovery. From a future
flood resilience perspective, the optimal outcome for the recovery involves councils
identifying and delivering a cost-effective mix of interventions in a timely manner to
adequately manage future flood risk.
14. To achieve such outcomes for category 2 areas (those where flood resilience solutions
are needed), Hon Wood’s paper recommends Cabinet agree that:
14.1
hazard management plans are developed by local authorities to underpin the
local recovery, in consultation with local communities;
14.2
technical support and guidance to develop hazards management plans will be
provided where needed, at the request of local government; and
14.3
the Government will consider supporting local government meet the costs of
betterment and resilience measures and, where necessary, a larger share of
like-for-like repair costs than the 60% prescribed in the Civil Defence
Emergency Management Plan 2015.
15. Treasury advises that most councils are still some way off designing appropriate
resilience interventions. This aligns with our experience from previous events, such as
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Document 3
The Department of Internal Affairs
Te Tari Taiwhenua
Option 1: Immediate allocation of the Resilience Fund
23. In line with your direction, this option would allow councils to immediately implement
flood resilience interventions by allocating the $100m from the Resilience Fund across
affected regions as soon as possible. This option would meet your objective of having
funding confirmed with councils on or about 1 July 2023.
24. To do so, joint ministers would need to:
24.1
decide how to equitably allocate the funding across affected regions;
24.2
confirm what kinds of interventions should be eligible for funding;
24.3
consult with local authorities to confirm they have eligible projects that require
immediate funding and that these projects can be progressed in advance of
other recovery decisions; and
24.4
confirm administrative arrangements for implementation and monitoring, and
whether the funding allocation is provided upfront or upon receipt of proposals
setting out eligible interventions.
25. Our initial advice on these detailed design questions is set out in Annex One. If you
wish to progress Option 1, we would like to discuss these design issues with you before
finalising our advice. This is detailed in the next steps section.
Option 2: Partial acceleration of the Resilience Fund and stronger signalling of support
26. This option is a ‘middle’ option between the approach in the draft EWR paper and
Option 1. Like the EWR paper, it would align decisions on the substantive allocation of
the Resilience Fund with the broader cost-sharing arrangements with councils
determined through the FOSAL programme. It would ensure funded projects are
consistently assessed and integrated into the broader flood resilience planning
underway as part the FOSAL project.
27. This option could go some way to address the issues identified by accelerating other
components on the Resilience Fund, namely:
27.1
‘seed funding’ could be provided upfront to support councils design
interventions and submit hazard management plans into the FOSAL process
(noting that funding will not solve capacity issues in the market); and/or
27.2
the Government could signal in more detail its expectations regarding central
government’s intended level of support – as an illustrative example,
‘Government is willing to contribute up to 50% of betterment and resilience
interventions costs unless there are significant financial constraints facing
councils.’
Options analysis
28. Our analysis of these options is set out in Table 2 below. Your preferred option is likely
to rest on the extent to which you are primarily concerned about ‘speed of funding’
(i.e., how quickly you want to provide a substantive financial contribution to local
authorities) relative to other objectives.
29. In relation to speed of funding, we have not heard that councils have an immediate
need to implement flood resilience projects as a particular response to the extreme
weather events. Temporary and emergency repairs, for example, are covered through
the standard 60:40 process.
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