Ratepayers face record debt levels

By WAYNE THOMPSON

Ten of the 11 biggest councils in the upper North Island face mounting debts this year as they borrow for projects to cater for 40 per cent of the country's people.

Record debt levels loom for some councils whose populations have swelled by up to a third in a decade.

On average, the councils' indebtedness is expected to increase from $75.4 million each to $95 million during 2002-2003.

Their average debt per citizen is likely to go from $607 to $760.

The debt has reignited debate over whether the costs of long-term projects should be spread over generations of ratepayers.

In response, some councils aim to wean themselves off loans and bump up repayments.

Tauranga will have the highest debt per head at $1600, despite its effort last year to clear loans by selling its trading companies.

The council finance manager, Fraser Smith, said the district's growing pains demanded further borrowing for improvements to its overloaded roading network and water supply.

Although debt was expected to reach $148 million in a year, Mr Smith said it was still within guidelines for prudent management, including a $2200 ceiling on debt per head.

Waitakere has the second highest debt per head at $1124. Its borrowing is expected to reach $196 million by June next year.

The city's chief executive, Harry O'Rourke, said the most equitable way to provide facilities was by loan "so that people who get use of new assets pay for them over the period of time in which they will be using them".

Auckland mayor John Banks said future generations could not be burdened with a "mountain of debt."

The city plans to whittle the current $154 million debt down to $60 million by selling assets, stopping new borrowing and repaying debt as it falls due.

"It doesn't make sense for the council to have large debts like a business, because it is investing in community assets that don't produce a rate of return," said the city's director of finance, David Rankin.

"Debt is a cost on rates: the more you put up debt, the more you use up rates on repayments."

Nationally, councils have a combined debt of $2.2 billion.

The chief executive of Local Government New Zealand, Peter Winder, said that was conservative in relation to the councils' revenue and assets.

The councils averaged $13 of assets for every $1 debt - compared with a ratio of $2 in the private sector and $1.50 in central government.

A survey of last year's debt rates showed Dunedin was the lowest, with $7 of assets for every dollar in debt.

Rotorua had assets of $8, Waitakere $8.50, Auckland $9.50, Tauranga $11.30, Hamilton $12, Rodney $16.80, Whangarei $19.70, North Shore $22, Manukau $25, Franklin $35 and Papakura $38.