Councils financially prudent, says funder

Council assets include 90 per cent of New Zealand's road network. Photo / Brett Phibbs

New Zealand territorial authorities have assets of $117.4 billion yet extremely low debt levels of only $10.8 billion, says a financial chief.

Craig Stobo, chairman of council funder the Local Government Funding Agency which finances many councils, revealed the numbers at a briefing yesterday, saying those ratios proved councils were extremely financially cautious.

"Councils in New Zealand are conservatively geared. That indicates they're prudent financial managers and their communities should be grateful," Stobo said.

However, Jordan Williams, executive director of the New Zealand Taxpayers' Union, said councils were too often profligate, irresponsible and wasteful of money from ratepayers.

"Councils need to trim the fat, live within their means and focus on delivering value for money to ratepayers before they pursue the types of new taxes being promoted by the Local Government New Zealand lobby group," Williams said.

"Auckland Council now owes $16,000 per household. That's even more than the Christchurch City Council's debt, and before any of Mayor Len Brown's big infrastructure projects have started," he said.

"Last week, we learned that Wellington City Council spends more on recreation and sport than transport and roading. In Auckland, the council's transport arm now has more staff than the New Zealand Transport Agency, which runs the national network.

"The fact that rates have tracked at twice inflation over the last 20 years points to a local government sector that is bloated and inefficient. The need for infrastructure reinvestment and renewal haven't changed. Why is it now costing 50 per cent more?"

Mark Butcher, agency chief executive, said his organisation funded 43 of New Zealand's 78 territorial authorities and councils were operating with caution.

But he said the sector was facing big challenges, including fast growth in many areas like Auckland, changing demographics, immigration, big demands on infrastructure and funding issues.

Lawrence Yule, Local Government New Zealand president, said the growing numbers of New Zealanders on fixed incomes would mean council funding issues must be addressed in the near future.

Stobo said low interest rates had resulted in many councils refinancing shorter term debt rather than borrowing more and he said the agency was now New Zealand's largest issuer of New Zealand debt securities, second only to the government.

Stobo said of the $10.8 billion councils have borrowed, $4.5 billion comes from his agency. The rest was from other funders, including major trading banks, he said.

In the December quarter, the agency issued new debt of $295 million, compared to its quarterly average which was much higher at $379 million.

Butcher said 20 councils had credit ratings from the three major agencies and 14 councils have zero gross debt.

He is a member of the working group for the local government funding review, announced last April, examining future models of funding local infrastructure and services. Local Government NZ says the review recognises that New Zealand councils rely heavily on property taxes, highly unusual by international standards.

The final report from the group is due to be released in June.

Butcher said communities faced economic and demographic pressures which called into question how to fund and maintain infrastructure and deliver services.

Council assets include 90 per cent of New Zealand's road network, the bulk of the country's water and waste water networks and libraries, recreation and community facilities. Council expenditure is about $8.5 billion annually, about 4 per cent of GDP, Local Government NZ said.

Local government

• 78 territorial authorities.

• Assets of $117.4 billion.

• Debt of $10.8 billion.

• Of that, $4.5 billion from LGFA.

Source: Local Government Funding Agency