Local authorities spent more than they earned in 2011, recording a $500 million overall operating deficit, according to Statistics New Zealand.
Figures just released for the year ended June 2011 showed local authority spending exceeded income by $0.6 billion, compared to a $0.2 billion deficit in the June 2010 year.
The largest deficits in 2011 were from Auckland Council, with an $89.6 million overspend, Christchurch City Council (-$52.4 million), Waitakere City Council (-$55 million), and Manukau City Council (-$38.6 million).
Costs associated with the Canterbury earthquake were one of the main reasons local government spent more than it earned in the 2011 year, said Local Government New Zealand (LGNZ) chief executive Malcolm Alexander.
"The large infrastructure rebuilds associated with this event have affected these figures," Alexander said.
"It's also worth pointing out that more than 90 per cent of council capital expenditure over the next 10 years will be spent delivering core services."
Based on both international standards, and the value of fixed assets, council debt was actually low, he said.
Local authorities as a whole have not reported an operating surplus since 2008.
Alexander attributed this to the global economic crisis' impact on council investment returns and a slowing in development.
While authorities were able to boost their operating income by to $7.27 billion in 2011, this was eaten into by spending on core services of $7.84 billion, Statistics NZ said.
Rates provided the biggest source of income, $4.4 billion, which was 4.9 per cent more than for the year ended June 2010.
Local government statistics manager Peter Gardiner said local authorities' assets grew in value by more than 17 per cent, to $121 billion. Liabilities were $10.5 billion.
Overall, taking transactions such as valuation changes and capital transfers into consideration, local authorities ran a surplus of $3.5 billion, $1.3 billion more than in 2010.
LGNZ would not speculate on what the figures would be for 2012, but said total local authority debt was predicted to reach $11 billion by 2016 and then start declining.