New Zealand's spending on tourism infrastructure needs to increase and it isn't realistic to expect ratepayers to foot the bill, especially in smaller towns reliant on tourists such as Franz Josef, says Lawrence Yule, president of Local Government NZ and Hastings mayor.

At a quarterly Local Government New Zealand briefing in Wellington, Mr Yule pointed to a report last month from Air New Zealand, Auckland International Airport, Christchurch International Airport and Tourism Holdings as a way forward. That report called for the creation of a National Tourism Infrastructure Levy, with industry and central government contributions, raising $130 million a year to fund local tourism infrastructure needs.

"There's an underinvestment going on and if we wish to maximise our tourism opportunity we need to look at doing things very differently," Mr Yule said. "I think everybody gets that we need to change the system."

The report last month proposed that the tourism industry should raise $65 million in new revenues from the bed tax and a $5 increase in the current border clearance levy of about $20 per person, and that central government should match that funding dollar-for-dollar to produce $130 million a year "to develop mixed local use tourism infrastructure." The levy proposal would help small communities swamped by the international tourism boom to provide sufficient basic infrastructure, including public toilets, car parks, and footpaths. In 20 local council areas about $100 million of immediate investment is required, it said.

Meanwhile, Local Government Funding Agency chief executive Mark Butcher said at the briefing that debt issued by the agency became more liquid in the past quarter. The agency has lent $203 million to 17 councils in short-term arrangements for between three and 12 months, which Mr Butcher said was all refinancing of previous bank borrowings and had saved local councils millions of dollars.

"We're working on improving liquidity in turnover. We want to be the most highly traded fixed income instrument after government bonds," Mr Butcher said.

Market activity increased in the month, with turnover in LGFA bonds exceeding $30 million in November. Domestic institutional investors hold 37% of LGFA bonds, which Butcher said was driven by "good strong demand" from KiwiSaver funds such as AMP Capital and Fisher Funds.

The LGFA is considering offering a longer-term bond after requests from investors, chairman Craig Stobo said. The agency currently offers bonds that mature in 2019, 2023 and 2027.

(BusinessDesk)