Council saves on borrowings

By Lawrence Gullery

Twelve new shareholders have joined the New Zealand Local Government Funding Agency, a borrowing scheme for local councils set up in 2011.

Hastings District Council was one of 17 founding local authorities which joined the agency about 18 months ago and it now has 30 participating councils and the Government.

The agency acts as a large-scale borrower and on-lends to councils at a lower rate. Earlier this year the Hastings council took a $15 million, seven year loan with the agency to fund infrastructure and capital work programmes.

The council's chief financial officer, Tony Gray, said the loan was secured at a margin significantly lower than council would have achieved, had it gone to the capital markets "in its own right".

"The loan has been used to refinance existing debt and the margin achieved is close to 100 basis points less than council would have paid had it borrowed the money in its own right at the time.

"We are delighted that 12 new shareholders have now joined the agency, as that will give further strength to the organisation and provide the platform for even greater growth in 2013 and reductions in interest costs."

Mr Gray said the agency was expected to achieve a bond programme of $1 billion at some time during the 2012 calendar year, "but this was achieved after just eight months of operation".

"To now pass the $1.5 billion mark is an outstanding achievement."

Statistics New Zealand reported spending by councils exceeded their income by $91 million, according to its report on the issue for the September 2012 quarter.

But it was an improvement on the deficit of $148 million in the June 2012 quarter, local government statistics manager Peter Gardiner said.

"Spending by local authorities fell significantly in the September quarter, which reduced councils' deficit from the previous quarter by $57 million.

"However, rates increased by $52 million in the same period, the largest quarterly rates rise in five years."

Local authorities spent $184 million less in the September 2012 quarter than in the June quarter, mainly due to reduced spending on goods and services (down $201 million). This was partly offset by a rise in interest payments (up $18 million).

Income for councils fell $128 million in the September 2012 quarter. This was mainly due to reduced returns on councils' investments (down $120 million). This reflects the regular decline in dividend earnings in the September quarter compared with the June quarter each year.

A breakdown of each council's spending figures for 2012 won't be available until mid-2013.

- Hawkes Bay Today

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