Why and how does the Northland Regional Council contribute to the region’s economic development?
Central government’s economic development policy recognises that regions and regional economic development are key drivers of New Zealand’s overall economic performance. As a regional authority, the Northland Regional Council (NRC) makes a significant contribution to the economic development of the Northland region through infrastructure development and environmental management. The NRC also considers it is in a position to commit to the investment necessary to move the region forward and that the region’s current economic performance is no longer a viable option for Northland. To that end the NRC established the new Northland Regional Council Investment and Growth Reserve in 2010-2011 to reverse the cycle of under investment and lead by example through investing directly in projects that deliver real benefits to current and future generations of Northlanders. The NRC aims to find new ways to bring investment into the region and create rewarding business and employment opportunities.
Economic development is vital for generating the resources needed to address some of the pressing problems affecting Northland such as poor housing, health and education. In times of economic recession there is a greater need to invest in economic development to give confidence to others so they will invest here to reduce socio-economic disparities and stimulate employment growth. The Government’s funding for economic development has been limited severely by the need to divert funds to rebuild Christchurch. Therefore there are very few sources of funding available to achieve a step change in the economy of Northland. The NRC has therefore established the Northland Regional Council Investment and Growth Reserve to provide an additional funding source for worthy projects.
What are the objectives of the Investment and Growth Reserve?
To invest in economic projects/ventures within Northland to increase:
- Jobs in Northland;
- The average weekly household income of Northlanders; and
- The GDP of Northland.
What are to be the types of funding allocations made?
Loan funding or directly invested funds for:
- Capital expenditure for new ventures or expanding of existing businesses.
- Operating expenditure for a finite period of time on condition of sufficient capital expenditure committed to the project and a satisfactory business plan to demonstrate how operating expenditure will be covered after this time.
- Equity investment (that is the Reserve can be used to buy shares/an ownership interest in a company).
What are the principles of the Investment and Growth Reserve?
Loans, direct investments or equity investments that will deliver an appropriate rate of return taking into account the level of risk, revenue flows and anticipated economic development and well-being improvement. (Appropriate return includes percentage return on investment, any potential capital and broader indirect benefits to the community.)
To safeguard the NRC against risk the following guidelines will be adopted:
- All potential recipients of funding will be assessed for credit worthiness.
- All parties with whom the NRC intends to conclude major contracts with will be subject to formal credit approval.
- For equity investments the NRC will set an anticipated distribution expectation for the portion of the return to be transferred back to the Reserve.
How is the Reserve to be managed?
- All projects’ will be assessed for funding eligibility against a business case assessment tool.
- Only projects recommended for funding as above will be considered by the NRC.
- Council resolves the allocation of all funds.
- Northland Inc or another council-controlled trading organisation (on behalf of the NRC), will issue a formal offer setting out the terms and conditions for funding to successful projects. This offer will include milestones and key performance indicators, and who will be responsible for monitoring performance.
- Funding allocations made will be monitored and performance will be reported quarterly to the NRC.
What is to be the assessment criteria?
Projects eligible for funding will meet all of the following criteria:
- The project is located in the Northland region; and
- The project promotes viable, long term economic development (i.e., beyond immediate short-term employment and business activity); and
- Development can be achieved in a way that is consistent with the social, environmental and cultural well-beings.
Projects eligible for funding must also promote viable, long term economic development through meeting one or more of the following:
- Generating ongoing, net economic benefit to the region;
- Ongoing creation of new jobs;
- Alignment with any NRC priority for economic development, as set from time to time and documented in the council-controlled organisation’s (Northland Inc) statement of intent;
- Increasing exports; and
- Being innovation based.
What is the quantum of funding available?
In determining the quantum of funding for any project, the NRC, using the business case evaluation, will consider:
- The extent to which the project promotes sustainable, regional economic development;
- The contribution the project will make to improving the social, economic, environmental and cultural well-beings in the region;
- The extent to which the project aligns with the vision of other organisations in the region;
- The project’s fit with NRC priorities;
- The extent to which the business case demonstrates that the people involved have the capacity and capability to undertake the project;
- Return on investment;
- Opportunity cost;
- Risk and in particular, the extent to which the project is inter-dependent with other projects;
- The amount of investment and type of commitments other parties are making to the project;
- Any security provided to the NRC to secure the funding; and
- The need for Reserve funding.
What is the purpose in evaluating the formal business cases?
- The investment has value and importance;
- The appropriate form of investment is made, i.e. a loan, direct investment or equity investment;
- The project will be properly managed;
- The project partner has the capability to deliver the benefits;
- Public money is not being exposed to risk when private money is available for investment in the project;
- Decision makers have the information they need to decide between the relative merits of alternative proposals; and
- Projects with inter-dependencies are undertaken in the optimum sequence.
What is behind the design of the the business case process?
The business case process will be designed to be:
- Adaptable – tailored to the size and risk of the proposal;
- Consistent – the same basic business issues are addressed by every project;
- Business oriented – concerned with the business capabilities and impact, rather than having a technical focus;
- Comprehensive – includes all factors relevant to a complete evaluation;
- Understandable – the contents are clearly relevant, logical and, although demanding, are simple to complete and evaluate;
- Measurable – key aspects can be quantified so their achievement can be tracked and measured;
- Transparent – key elements can be justified directly;
- Accountable – accountabilities and commitments for the delivery of benefits and management of costs are clear.
- Ministerial Direction to Callaghan Innovation, 4 February 2013:Minister of Science and Innovation
- Allocating and Administering Funding - Systems and Procedures, February 2013 : Callaghan Innovation
- An Investor’s Guide to emerging growth opportunities in NZ f&b exports Report, August 2012: Coriolis
- Explore New Zealand Minerals, June 2012 : NZ Govt
- Investment opportunities in the NZ Honey industry report, May 2012: Coriolis