The $63million debt of Route K will be removed from Tauranga City Council's books when the road is transferred to NZ Transport Agency in mid-2015.

TCC and NZTA made the joint announcement today saying all but $1m of the $63m debt associated with the bypass would be removed from the city's books.

NZTA's Waikato Bay of Plenty Regional Director, Harry Wilson, says the decision meant Tauranga ratepayers would not be burdened with the Route K debt and NZTA would be able to commit to electronically tolling both Route K and the Tauranga Eastern Link together.

'Route K is a strategic link and bringing it into the state highway network will ensure that it is used in a way that will provide the greatest benefit to the entire region.”

As part of the agreement, NZTA will compensate council with a one-off payment that will remove all but $1million of the Route K debt at the date of transfer.

Mr Wilson said the payment would be made from existing Transport Agency funds, and would be recovered from future tolling revenue.

'This arrangement means the Transport Agency avoids taking on debt and there will no impact on any other Bay of Plenty roading projects.”

The payment recognises the council's loss of future tolling revenue due to the change of ownership. The remaining $1million recognises the reduction in council's financial costs due to the payment.

Mr Wilson said the two parties had formed a partnership to change the status of Route K to a state highway many years ago.

'The initial plan was for the Route K debt to stay with TCC and be repaid through tolling after the Transport Agency took over the road, however recent legal advice has made it clear that was not possible,” he said.

'So we went back to the drawing board and worked together to find a solution that would work for both Tauranga ratepayers and road users,” he said.

'Timing was crucial; the decision had to be made before September so the Agency could commit to timelines for the opening of the TEL in 2015.

'This agreement means the Transport Agency is now able to commit to electronically tolling Route K and the TEL together, which provides a savings of $750,000 for road users.”

Mayor Stuart Crosby said the transfer of Route K assets to the NZ Transport Agency was a win-win situation for all involved.

'The NZ Transport Agency gets to fill a gap in its strategic roading network and has the ability to collect tolls, while Tauranga City Council is eased of the burden of ownership,” he said.

'This is a great day for the ratepayers of Tauranga, the motoring public and sub-regional economic development.”

Mayor Crosby said the decision to construct and open Route K in 2003 required foresight and courage but was the right decision for the city.

'This was about the long term benefits for a growing city. Route K opened up an alternative route across the city and particularly to the Port of Tauranga. Council's long-term plan was always for ownership of Route K to switch to the NZ Transport Agency, it was just a matter of when and how.

Today's decision, which is subject to statutory approvals, is the culmination of a series of conversations between the Transport Agency and TCC.

Mayor Crosby said the Western Bay of Plenty's collaborative approach to strategic roading had provided tangible benefits to local communities and this would continue into the future.

How will TCC get the funding?

TCC will apply to the Regional Transport Committee to include the arrangement in the Regional Land Transport Programme (RLTP).

Funding will be provided by theNational Land Transport Programme's New and Improved Infrastructure for Local Roads Activity Class. The Programme is the government investment in transport, with funds coming from fuel excise duty and road user charges.

How is the Transport Agency funding the arrangement?

The Transport Agency will make the payment through its cash-flow management and does not require a debt facility. The Transport Agency will retain the tolling revenue from the road to cover all its costs. The tolls will be paid back into the National Land Transport Programmes' Fund.

What is unique about Route K?

Route K is a part of the nationally important transport journey that includes State Highway 29 as an inter-regional link between the Bay of Plenty and the rest of the upper North Island for the movement of people and freight.