Northland's smallest territorial authority will transfer the bulk of its loan with two commercial banks to the Local Government Funding Agency in a bid to reduce costs.

Kaipara District Council decided on the move after its application to join the Local Government Funding Agency (LGFA) - set up in 2011 and owned by the government and 30 councils throughout the country - was accepted.

The Kaipara council is now able to borrow from the agency at lower and more competitive rates.

Council chairman of commissioners John Robertson said more than half the $74 million debt would be shifted to the agency, resulting in substantial savings for ratepayers.


Mr Robertson said most of the $74 million debt included $58 million borrowed by the last elected council to fund the Mangawhai sewerage scheme.

"We're doing up the details of the transfer now and I'd expect we'd engage with the agency in April/May. The shift will reduce our costs substantially because their rates are more competitive than those offered by the banks," he said.

The agency had earlier viewed the council's situation, especially with the legal actions it has been dealing with, as a lending risk to its members, he said.

"We are delighted the agency has accepted our application to join. It is a real vote of confidence that Kaipara District Council is on a sound financial footing with a strong organisation fit for the future.

"It is also good news for ratepayers because it means lower borrowing costs, which provides the council with room to move when considering options for future infrastructure investment and rating levels."

The decision to shift its debt to the LGFA will be binding for the incoming council following October's local government election.

"We are now preparing our Annual Plan which will be updated for this decision. After the October elections the new council will also review the financial strategy which will lead into the new Long Term Plan," he said.