The Napier City Council has agreed unanimously to open the door to what is likely to be the biggest borrowing exercise in its near 150 years.

Established as the Napier Borough Council in 1874, the council has had no "external" borrowing and had among the lowest debt levels of local bodies throughout New Zealand.

It thus had no established borrowing mechanism, but with the impact of the Covid-19 crisis the council agreed at a meeting today to put a proposal for the council to join the Local Government Funding Agency to the public for consultation.

It comes amid the possibility it may have to borrow $33 million to meet a funding gap created by the lockdown and ongoing alerts.

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The LGFA has become the equivalent of a bank, with councils able to invest or become shareholders in addition to being what staff say is the cheapest option compared with regular banking institutions or complicated issuing of bonds in the local ratepayer market.

A report from council investment and funding manager Garry Hrustinsky says if $33 million was borrowed there would be a saving of about $260,000 a year based on the next cheapest option.