Hamilton City Council has won a big Government loan to kick start the long-proposed new southern Hamilton suburb of Peacocke, but now comes the real challenge – figuring out how to pay it back without starving growth elsewhere in the city.
Under immense pressure to deliver land for new housing – both from Government housing policy and city population growth – and with the rolling farmland of Peacocke long zoned and ready to go, the council made a strong case for a hand-up.
While some developers say Peacocke won’t be enough and ignores the chronic problem of city boundaries to the north constraining rampant demand, city leaders are keen to get on with a development that’s been repeatedly pushed back for years.
They’ve won an offer of an interest-free $182 million chunk of the Government’s $1 billion Housing Infrastructure Fund plus a $90 million subsidy from the New Zealand Transport Agency to build Peacocke infrastructure – water, pipes and roads – ready for housing developers.
Hamilton Mayor Andrew King says unlocking Peacocke is essential for Hamilton’s future.
“We are one step closer to delivering a promise we made to Hamiltonians a long time ago to develop Peacocke. It means we can fast-track significant and expensive infrastructure development to within the next five years.”
Peacocke would provide 3700 new houses over the next 10 years and 8100 within 30 years. Without the Government loan, the council says Peacocke will stay on the drawing board for another decade or more because the money cupboard is bare.
With the 10 year loan offer secured, now the council has to make a detailed business case for approval by councillors and the Government. The public will get a say on it. Developers will be asked to sign agreements confirming their funding contributions towards the cost of the required new bridge over the Waikato River between Hillcrest and Peacocke, roads and waste water projects, hopefully all in place within five years.
This then is the stage of the Peacocke proposal where the rubber meets the road.
Peacocke promoters and politicians (it is election year after all) were cockahoop about Hamilton’s success. But the money is just that – a loan. It will need to be repaid.
Given recent headlines about the council’s revenue shortfall, how it plans to do that will be closely scrutinised. Just two days after the Government announcement, a PricewaterhouseCoopers report commissioned by the council revealed a $12 million rates hole is looming and that councillors face tough decisions on how to fill it.
The timing of developing Peacocke runs parallel to councillors’ unenviable task of nutting out the next 10 year financial plan for the city, from 2018 to 2028. That job starts soon. While Peacocke promoters may counsel against confusing new housing initiatives with a need for rates increases, the fact is the city’s explosive growth has caught its leaders by surprise and how to finance it is proving tricky.
On the bright side, the total loan doesn’t have to be repaid for 10 years after the final agreement is signed. Councillor Geoff Taylor, who campaigned for election last year on progressing Peacocke, says the 10 year clock starts ticking on a project-by-project completion basis. Geoff doesn’t forsee the need for rates increases to repay the loan. He suggests developer contributions will be an important repayment funding source. However he also makes no bones about how tight Peacocke will stretch the council’s purse strings. There may be nothing left for community projects elsewhere, he says.
Also positive for the council’s books is the way the total $272 million loan would be structured. All that landing on the debt side of the ledger would be a very bad look. But the proposed subsidy arrangement with NZTA means the roading portion will be off the books.
There are plenty of other positives about kicking off Peacocke, according to council literature and business commentators.
The Waikato economy will get a big boost, starting with increased construction activity. The council cites a study which estimates that $1 invested in construction activity generates $3 in economic activity down through wider sectors. Jobs and increased labour productivity are by-products of the multiplier effect. Peacocke will provide for major employment bases such as Waikato University and Waikato Hospital and the future Tainui inland port.
The council says Peacocke’s transport infrastructure will benefit the whole region, driving national and regional economic development and supporting new development in the south of the city. It will complement and enhance key infrastructure and economic projects such as the Waikato Expressway, the Ruakura inland port and logistics hubs, spur the advance of the Southern Links roading project, and underscore complementary roading and transport planning opportunities with Tauranga and Auckland.
New housing schemes such as Peacocke create business, says the council in a report on its bid for the Government loan. Studies commissioned by the council indicated that the retail area for Peacocke would serve an estimated long-term population of 27,000 people. The district plan provides for a suburban retail centre. A study had indicated that similar-sized suburban centres would generate an estimated $75-78 million in retail spend per centre by 2021 and up to $117 million by 2041.
Councillors and council staff are strongly suggesting Peacocke will regenerate and revitalise the city business district. But that could be drawing the bow too long.
Waikato Chamber of Commerce chief executive William Durning is enthusiastic about the Peacocke initiative, saying it will further showcase the region’s strengths, and provide a “well-balanced” city with the south already home to the region’s airport and a growing business community. He notes Peacocke would complement a proposed new medical school near Waikato Hospital.
However echoing a major developer, William says it will take more than Peacocke to recharge the CBD. That will take high density housing and more offices.
The business case for Peacocke is due to be finished this year. Whether its findings determine Peacocke is financially viable or not, councillors face huge pressure to get to grips with Hamilton’s growth explosion and demand for new housing.
With land supply fast shrinking in the north and north east and demand for sections unabating, developers say Peacocke will be just a punctuation mark in the Hamilton future growth story. They’re calling on the city council to start working now with Waikato District Council and the Government to shift and expand the city’s northern boundaries.
Andrea Fox is a business journalist. A former Waikato Times business editor and Fairfax business bureau senior staffer. Contact email email@example.com.