Correspondents have recently commented on Whangarei District Council debt, preaching austerity and debt reduction.
It has been suggested that council has recklessly and carelessly increased debt. Nothing is further from the truth.
The previous council set a public debt level of $130 million and the present council has set thisat $161.5 million, with this level being maintained for the full 10-year term of the Long Term Plan.
Additional to the public or external debt, council has and always has had internal borrowings.
The Community Development Reserve is about $9.3 million and is used for funding community projects. The property Reinvestment Reserve is currently about $10.5 million.
Council can hold term deposits to match these reserves or it can use those funds as internal borrowing, allowing the other $1.6 billion of council assets to cover those reserves. To leave it in cash means you lose money from borrowing at a higher rate than you will receive from term deposits.
This internal borrowing has been reported for some time in the council's monthly publicly available financial accounts.
The council debt level has risen because it has spent the funds on needed infrastructure development, particularly in roading and sewerage.
While important projects have nudged debt higher, this council has been very responsible in deferring $20 million of capital expenditure until next year so our self-imposed public debt limit will not be exceeded.
Once the planned property sales proceed, we will have external debt of $161.5 million and internal borrowings of about $40 million. The Long Term Plan has provided for repayment of internal borrowings in 2017-22 of $28 million with the purchasing of freehold investment properties.
As a growing district, our debt level is very sustainable. It is logical and normal practice to fund projects through debt so the users of these assets in the future pay their fair share for them. The alternative is to raise cash for projects through very high rates, and that is not acceptable to this council or to our community.
Warwick Syers is the WDC finance committee chairman.
