Appendix 2: About the Provincial Growth Fund reset
On 4 May 2020, Cabinet decided to reset the Provincial Growth Fund (PGF) so that funding could be reallocated to support the regions and address the expected economic impact of the Covid-19 pandemic.5 Under the PGF reset, $640 million of funding was made available for new investment. This came from the PGF and the Regional Investment Opportunities fund.
The decision to reset the PGF was announced by the then Minister for Regional Economic Development on 24 May 2020.6 The Minister said that the PGF would play a vital role in New Zealand’s economic recovery from the Covid-19 pandemic, with “at least $600 million” refocused on projects that would provide more immediate economic benefits.
The Cabinet paper Provincial Growth Fund: Covid-19 Response: Redeployment and Acceleration set out the design of the PGF reset. The paper outlined key changes resulting from the decision to reset the PGF and set expectations for how Kānoa – Regional Economic Development and Investment Unit (Kānoa-RDU) was to manage its implementation.
The PGF’s existing operating processes and procedures and objectives were to be used for making decisions about which projects would receive funding under the PGF reset. The original objectives of the PGF were to:
- create jobs, leading to sustainable economic growth;
- increase social inclusion and participation;
- enable Māori to realise aspirations in all aspects of the economy;
- encourage environmental sustainability and help New Zealand meet climate change commitments alongside productive use of land, water, and other resources; and
- improve resilience, particularly of critical infrastructure, and diversifying our economy.
Three additional objectives were created for the PGF reset. The new objectives acted as decision-making criteria to prioritise projects that had:
- an increased focus on immediate job creation and income growth;
- construction activity that was to be underway within the following six months; and
- a high degree of visibility to the community to give the public confidence that renewed economic activity was underway.
Nine investment principles were also established to help prioritise new projects for the PGF reset to fund. These principles stated that new investments should be consistent with the PGF’s underlying objectives. The principles also stated that investments for short-term support should prioritise projects that provide benefits for the longer-term rebuild of the economy.
The PGF reset used three “tiers” to categorise broad areas of funding. These tiers were regional and skills programmes, sector investment, and enabling infrastructure. Specific areas of investment in the tiers were refreshed for the PGF reset and are described below.
Provincial Growth Fund reset tiers
Values used in this table have been provided by Kānoa-RDU as at 5 May 2023, and add up to $615.7 million. Kānoa-RDU told us that some approved projects withdrew.
Tier 1: Regional and skills programmes
| Investment programme | Specific objectives and projects for investment | Current funds approved |
|---|---|---|
| Immediate worker redeployment and job support | Road and rail redeployment. | $60.0 million |
| Fencing of waterways, riparian planting, and stock reticulation. | $40.9 million | |
| Renovation of town halls, war memorials, marae, and Pasifika churches. | $99.5 million | |
| Jobs through businesses and infrastructure projects funded by the PGF reset (opportunities for jobs funded by tier 2 and 3 projects – see below). | Nil | |
| Human capital and social capital investments | Work readiness programmes for young people Not in Employment, Education or Training (NEET). | $26.1 million |
| Apprenticeships. | $27.2 million | |
| Social capital projects for example, addressing methamphetamine harm in regional communities. | $19.7 million |
Tier 2: Sector investments
| Investment programme | Specific objectives and projects for investment | Current funds approved |
|---|---|---|
| Immediate capital investments | To provide job creation in the short term through projects in the pipeline that are “shovel ready”. | $146.4 million |
| Sector investments | Joint venture investments with large firms. | Nil |
| Māori and Pasifika business investments | Projects anticipated in the farming, forestry, agriculture, horticulture, and construction sectors. | $54.8 million |
Tier 3: Enabling infrastructure
| Investment programme | Specific objectives and projects for investment | Current funds approved |
|---|---|---|
| Small-scale infrastructure | Local council and community projects under $20 million and in the PGF pipeline. This could include roading, rail, municipal water infrastructure, flood water management, earthquake strengthening, energy, or climate adaptation. | $72.2 million |
| Water storage | Small-scale sustainable water storage and distribution projects – shifting to sustainable land uses, address disparities in Māori access to water for land development, micro to medium-scale water storage projects, land use that does not impact or reverses negative impacts on water quality, maintains and improves health of waterways. | $68.9 million |
Roles and responsibilities
Kānoa-RDU largely used existing roles and responsibilities to administer the PGF reset. Financial delegations for funding decisions were:
- Cabinet, which was delegated responsibility for applications that required $20 million of funding or more.
- Regional Economic Development Ministers, who were delegated responsibility for applications that required between $1 million and $20 million of funding, in consultation with relevant portfolio Ministers.
- Senior Regional Officials, who were delegated responsibility for applications that required less than $1 million of funding.7
- The Head of Kānoa-RDU, who was delegated responsibility for declining applications that did not meet funding criteria (before Kānoa-RDU provided advice to Regional Economic Development Ministers, Cabinet, or Senior Regional Officials).
Timeline
Figure 1 shows the key events that took place during the design and repurposing of funds for the PGF reset.
Figure 1. Timeline of events in the design and repurposing stage in 2020
| March | 21 March | Government introduces the alert level system. New Zealand is placed at Alert Level 2. |
| 23 March |
Urgent meeting with Regional Economic Development Ministers, Kānoa-RDU asked to work out what was left of the PGF and how it could support unemployed and displaced workers after lockdown. The Prime Minister announces move to Alert Level 3 immediately and move to Alert Level 4 in 48 hours. |
|
| 25 March | New Zealand moves to Alert Level 4. | |
| April | 7 April | Government announces that Kānoa-RDU is working to repurpose funding from projects funded by the PGF. |
| 27 April | New Zealand moves to Alert Level 3. | |
| May | 4 May | Minister of Regional Economic Development presents proposal to reset the PGF. Regional Economic Development Ministers meet to review projects longlisted for their funding to be repurposed. |
| 13 May | New Zealand moves to Alert Level 2. | |
| 19 May | Repurposing of funding of PGF projects finalised with Ministers. | |
| 24 May | PGF reset announced to the public. |
How money was identified and then made available for the Provincial Growth Fund reset
The $640 million made available for the PGF reset came from existing appropriations:
- $113.133 million of unallocated PGF funding;
- $299.346 million of PGF funds ring-fenced for regions and sectors that had not been formally committed to specific projects;
- $125.613 million identified from approved projects where contracts could be terminated and/or funding could be “repurposed” (that is, made available); and
- $102.300 million of the Regional Investment Opportunities contingency funding (not part of the PGF).8
For the approved funding that was repurposed from projects, significant work was required to plan and implement the approach to determine how much funding could be made available before the decision to reset the PGF.
In early April 2020, the then Minister for Regional Economic Development announced that Kānoa-RDU was carrying out work to review current applications and projects to see where PGF funding could be “repurposed for initiatives deemed more critical to fighting the economic impacts” of the Covid-19 pandemic.9
This work was carried out under some urgency. Kānoa-RDU’s review and analysis resulted in a list of projects that were put under three categories:
- Projects that were approved but not yet contracted by Kānoa-RDU: These were projects that had been approved for PGF funding, but no formal funding agreement had been reached. These projects did not, for example, have a resource consent in place, or could not proceed as originally approved, and/or required changes to approval conditions, all of which would impact on the project’s ability to get under way within PGF reset time frames (that is, within six months).
- Projects that were contracted by Kānoa-RDU: These were all projects that had a formal funding agreement with Kānoa-RDU worth more than $2 million and had less than 20% of funding paid to date. These projects were then assessed on whether funds were likely to be paid out, whether (or how) funding payments could be accelerated within the funding agreement, and whether projects could or should be scaled back.
- Projects that had their funding managed by other government and Crown-owned agencies (including KiwiRail – Rail allocation, MBIE Tourism – Tourism Infrastructure Fund, Department of Conservation, Land Information New Zealand, and Waka Kotahi): These projects were assessed on whether they could go ahead as planned in light of the Covid-19 pandemic.
On 4 May 2020, the Regional Economic Development Minister presented to Cabinet a longlist of projects that could potentially have their funding repurposed. Information presented included criteria for determining the longlist, a description of each project on the longlist, and why funding could be repurposed. Cabinet delegated the Regional Economic Development Ministers responsibility for the final list of projects to have their funding repurposed.10 Decisions made by these Ministers on 4 May 2020 to repurpose funding from 10 projects for the PGF reset are noted in a briefing on 19 May 2020 and, from this, $125.613 million was made available.
How new projects for the Provincial Growth Fund reset were selected and approved
Applications for new projects were open to all individuals, non-government organisations, iwi, charities, and New Zealand companies.11 Application forms were available online on the Grow Regions website on 8 June 2020, and decisions were made from 10 June 2020 to 29 September 2020.
Kānoa-RDU has confirmed to us that all applications came from the online process and through Kānoa-RDU’s regional networks. Some applications received as part of the earlier PGF application process were also assessed and funded by the PGF reset.
Many of the processes and procedures already in place for the PGF were used for the PGF reset. Kānoa-RDU managed the investment process, which involved:
- Expression of interest templates and supporting documents with information about applying for PGF reset funding (including those specifically for marae, war memorial, town hall, and Pasifika church renovations) were available online.
- Regional representatives of Kānoa-RDU and other government agencies involved in the PGF reset provided information about the new funding opportunity to their networks.
- Applications for funding, including proposals and expressions of interest were received, recorded, and processed.
- Applications were to be assessed based on specific inclusion criteria, the PGF reset’s objectives (which included the PGF’s five objectives and the three new objectives), and consideration of the nine investment principles.
- Due diligence and risk assessment on applications would be carried out, including consultation with relevant public organisations.
- Advice, including recommendations for funding decisions, would be prepared for advisory groups (for example, the Independent Advisory Panel, which provided judgements and advice for funding decisions) and decision-making bodies.
- Those with appropriate delegations would make funding decisions and approve or decline projects.
5: Cabinet paper (2020), Provincial Growth Fund: COVID-19 Response: Redeployment and Acceleration (CAB-20-MIN-0197).
6: Media release (2020), “PGF reset helps regional economies”, at beehive.govt.nz.
7: Senior Regional Officials also had an advisory role for projects worth $1 million or more. Although renovation projects were capped at $500,000, and Senior Regional Officials had already made funding decisions for three marae renovation projects, Regional Economic Development Ministers then decided that financial delegation to make decisions about marae renovation projects would shift to them.
8: On 9 December 2019, Cabinet agreed to allocate $300 million for Regional Investment Opportunities capital expenditure projects to be administered alongside the Provincial Growth Fund (see Cabinet paper (2019), Fiscal Strategy for the Budget Policy Statement 2020, CAB-19-MIN-0572). The Minister of Finance and the Minister for Infrastructure/Regional Economic Development established a Tagged Capital Contingency for the new funding and agreed that projects funded from it meet the following criteria:
- support regional economic development;
- not meet all of the Provincial Growth Fund’s criteria;
- be an infrastructure investment that is 100% capital expenditure;
- have a Crown ownership stake; and
- be initiated by August 2020.
9: Media release (2020), Work to repurpose PGF funds begins, at beehive.govt.nz.
10: Cabinet paper (2020), Provincial Growth Fund: COVID-19 Response: Redeployment and Acceleration (CAB-20-MIN-0197).
11: This included foreign-owned companies that would be investing the money in the New Zealand economy.