Funding mechanisms for disaster recovery: can we afford to build back better?

This paper will present findings from a longitudinal case study of the reconstruction of horizontal infrastructure networks in Christchurch, New Zealand, following the major earthquakes of 2010-2011. This involved exploring the role of governance in recovery and in particular, how funding mechanisms shape decisions for managing disaster risk. National policy on the funding of recovery that was geared towards direct replacement of existing infrastructure had a pivotal role in influencing design standards for infrastructure reconstruction. An outcome of this national policy, combined with constrained local financial resources, is that it was difficult to maximise the opportunity presented by a disaster to resolve the shortcomings of the existing infrastructure systems. This raises critical questions: whether it is appropriate to attempt to improve infrastructure in recovery and how local governments (or asset owners in general) may be better incentivised to invest proactively to reduce future disaster risk.

Special (yet limited) betterment funds were made available for the Christchurch reconstruction and similarly for post-flood reconstruction that was in progress at the same time in Queensland, Australia (which will also be explored in the paper). However, recent recovery funding reviews conducted in New Zealand and Australia have identified a need to investigate incentives to increase proactive investment to limit damage. This paper explores this proposition and presents some of the challenges faced with respect to building back better in Christchurch’s reconstruction and the subsequent lessons for developing future funding mechanisms for disaster recovery. It demonstrates the need for clearer terms of engagement between central government and local government, and how insurance mechanisms could play a more effective role.