All but one council in Hawke's Bay has seen its debt steadily climb in 2024. Photo / Paul Taylor
All but one council in Hawke's Bay has seen its debt steadily climb in 2024. Photo / Paul Taylor
Debt levels are steadily climbing for all but one council in Hawke’s Bay, as the region’s five councils now have combined debt of more than $600 million.
The major drivers of debt continue to be Cyclone Gabrielle recovery costs and improving water infrastructure.
Hastings District Council (HDC) owesthe most, with $413m in external debt at the beginning of this month.
Wairoa District Council, one of the region’s smallest councils, has the least debt, at just over $11m. It is also the only one to have reduced its debt over the past year.
The vast majority of external debt for the councils has been borrowed from the Local Government Funding Agency (LGFA).
The spokeswoman said the money had gone toward roading repairs and “spending through the voluntary buy-out scheme” for Category 3 properties.
Hastings district was the hardest hit by the cyclone – in terms of damage – of any council in the region.
Further debt funding has also gone toward drinking, wastewater and stormwater infrastructure.
The HDC is paying more than $20m each year in interest alone to service its debt, with an average interest rate of 5.25%.
Despite its relatively high debt level, the council still has wriggle room and is within the borrowing cap set by the LGFA of 285% of a council’s annual revenue.
HDC is forecasting it will reach $700m in debt by 2030, according to its Long Term Plan.
Hawke’s Bay Regional Council – $108m external debt
Hawke’s Bay Regional Council’s (HBRC) external debt increased about $8m over the past year to $108m.
The council cited Cyclone Gabrielle recovery costs as the main driver.
An HBRC spokeswoman said “there continues to be growing concern” about the affordability of any further future debt for ratepayers.
“While HBRC does have allowable headroom currently against the LGFA borrowing limits, there is ongoing concern from council officers and councillors as to the future likely infrastructure rebuilds, coastal hazards and future flood resilience work that is needed for Hawke’s Bay.
“This could be hundreds of millions of dollars.”
HBRC also currently has over $16m in internal debt and gross debt of $125m.
Central Hawke’s Bay District Council – $48m external debt
Central Hawke’s Bay District Council (CHBDC) says it is “comfortable” with its debt level, which increased about $5m over the past year to $48m.
“The majority of these increases are related to three-waters infrastructure [including] adding drinking water resilience, improving wastewater treatment/discharges, [and] replacing water mains and upsizing to allow for growth,“ CHBDC chief financial officer Brent Chamberlain said.
“The council’s three-year plan outlines a 10-year debt forecast setting out a proposed increase in borrowing, largely to cover water costs, in the next decade.”
CHBDC also currently has $12m in internal debt and gross debt of $60m.
Napier City Council – $40m external debt
Napier City Council (NCC), which just a few years ago had no external debt, reached $40m in external debt as at mid-November.
That was a rise of about $30m over the past year.
Napier city has relatively low external debt but plans to borrow hundreds of millions of dollars in the coming years. Photo / NZME
The council cited water infrastructure upgrades and Cyclone Gabrielle costs as the main drivers.
Meanwhile, the council’s three-year plan projects the council will have $343m in external debt in 2034.
“We’ve developed a 10-year plan of capital projects that prioritises what must happen and cuts the excess where possible,” Napier Mayor Kirsten Wise said.
“Even then, our projects programme is expected to cost us $1.1 billion over the 10 years. It’s just not reasonable to fund all of that work through rates increases alone, so we will manage our debt as carefully as possible.”
She said budgets would stay within the LGFA’s debt caps.
While NCC has relatively low external debt, it also currently has the most internal debt – by far – of any council in Hawke’s Bay ($109m) which needs to be recovered for the likes of future projects. Its gross debt is $149m.
Wairoa District Council – $11m external debt
Wairoa District Council (WDC) managed to reduce its debt level over the past year, the only council in the region to do so.
A WDC spokeswoman said that was due to borrowing more than $8m in mid-2023 after Cyclone Gabrielle, to help fund the recovery, and then being able to repay much of that this year, due to securing funding from the likes of NZ Transport Agency, the Silt and Debris Fund and other sources.
“Council believes it has used debt prudently, and has sought to keep within affordability parameters,” the spokeswoman said.
Wairoa has almost $23m in internal debt and a gross debt of almost $34m.
External versus internal debt
External debt is money borrowed from outside an organisation, such as from a bank or lending agency (like the LGFA).
External debt includes interest repayments, similar to a mortgage.
Internal debt means rather than borrowing money from a bank or lending agency (and paying high interest rates), a council reshuffles existing funds put aside for future projects or in reserve and borrows from itself.
That process is known as internal borrowing.
Gross debt is external debt and internal debt added together.
Gary Hamilton-Irvine is a Hawke’s Bay-based reporter who covers a range of news topics including business, councils, breaking news and cyclone recovery. He formerly worked at News Corp Australia.
