Debt levels at the Rotorua Lakes Council have been a hot topic for the better part of a decade and remain so for this year's election.

Soon after the 2013 election the new council brought in a team of independent financial experts to try and get a better picture of council debt and what could be done about it.

However, in the last few years the council's finances are in much better shape, according to chief financial officer Thomas Colle, who sat down with the Rotorua Daily Post to try and give ratepayers a better idea of how debt is managed at the council and whether the community should be worried about it.

"There is a treasury policy that sets out what we can and can't do with regard to financial limits," Mr Colle said.


"It sets borrowing limits and creates rules about how we structure debt and how we manage our interest rate exposures.

"Ultimately, what we are looking to do is make sure when we do take on any debt going forward it will only be for growth assets and only borrowing for significant improvements to our infrastructure."

He said the council was living within its means and according to the Treasury Department the council was the third best council in New Zealand for its size for cost of borrowing.

Borrowing limits are set at 175 per cent of total council revenue, which is about $100 million a year, and the council can "max out" at $175 million total debt as of this year.

With a good credit rating the council could go over that limit, he said.

As of the end of this financial year, the council had a total of $165.6 million worth of debt on its books, including the airport.

Mr Colle said debt would peak at $205 million by 2020, due to major sewerage schemes at Rotoiti/Rotoma and the $30 million upgrade and redevelopment of the waste water treatment plant, which would need to be funded by debt.

But, with an expectation of revenue increases in future years, debt levels could be higher and targeted rates would be used to pay back expenditure on sewerage schemes.

By 2025 debt is expected to drop back down to $146 million.

He said in the past two years the council had paid back $3 million of debt with $1.9 million paid back this financial year.

"When you look at where we were six years prior to where we are now and the rate at which debt was going up, to slow it down and to bring it back was a pretty good achievement.

"Not only was the council borrowing to fund growth assets like the airport, we were also borrowing to replace and maintain infrastructure like water pipes and roading.

"If we continued the way we were going there would probably be statutory managers in place by now.

"Our debt is sustainable and it is manageable, but we can all agree it's a little bit higher than we would like it, but that's why we are paying it down."

Rotorua's seven mayoral candidates were asked if they were concerned about debt, if more debt should be paid off, and if they had to cut services to pay off debt, what services would they cut.
John Rakei-Clark:

Yes, as a resident I am ashamed of our councils for putting us in so much debt.

It is devaluing my house and is having an effect on me as rate payer.

In my view we are in a position where we will have to pull ourselves out of debt by creating more debt.

But, I will be initiating new business concepts to create new money for council so they can address this debt.

I will not be making cuts to services, my plan is to increase them.

Steve Chadwick:

Council needs to be continuously focused on controlling debt. We inherited a debt that was out of control in 2013, doubling from $75 million in 2007 to $153 million by 2013.

Swift action in 2013, after an independent review of council's financial reporting, resulted in councillors supporting a sustainable financial strategy.

We now have debt under control and won't need to borrow this financial year.

With efficiencies, sustainable rates increases now within local government inflation levels and a reduction in capital spending, we have regained the confidence of Audit NZ and Fitch with our AA- rating which brings additional savings.

A cash reserve enables us to spend on essential capital items to maintain our infrastructure, levels of service and invest in growth.

I make no new promises for spending unless we attract partnership funding.

A new council will review this strategy that has delivered renewed confidence.

Reynold Macpherson

The Rotorua District Residents and Ratepayers has long campaigned for serious debt reduction.

The council's long-term plan was to increase inherited debt of $167.5 million to $205 million in 2020 to pay for sewerage capital expenditure before repayments from rates would bring it down to $145 million by 2025.

We objected. Why should our mokos pay for our profligacy?

We are already wasting nearly $9 million a year in interest charges at historically low rates.

The new credit rating allowed council to raise its revenue-to-debt ratio from 1:1.75 to 1:2.5.

A real debt reduction strategy now needs to restrict spending to core services and infrastructure maintenance, cancel portfolios' wasteful legacy and vanity projects, use asset sales to retire blocks of debt, stop juggling capital expenditure futures to make trivial debt settlements and start compressing council costs.

Rob Kent

We should all be concerned about debt increasing from $62.4 million to $165.7 million in 10 years.

That council is able to borrow more is like saying I haven't used the limit on my credit card.

As your mayor I will implement a debt reduction programme.

This will be challenging with the deferred capital works and unbudgeted expenditure already committed to by the current council.

There is no need to cut services. If council operated within its means we would be saving money that could go to paying off debt.

RangiMarie Kingi:

Yes, I'm concerned that these intellectual adults can spend millions while my Maori people are being imprisoned for $500 crimes.

And, who says it's services that need cutting? It's about accountability!

This is where research investigations is urgent . . .resolve debt using understanding, order and balance for justice.

Mark Gould:

I am very concerned about this council's debt and have advocated for debt reduction for some years.

A huge part of our recent debt relates to the airport and it's time to consider some partnerships that reduce debt there.

In an ideal world we would be paying back debt, but we are not living in ideal times.

Regretfully, the interest and debt repayments are primarily carried by general rates and this becomes an ongoing cost to our community. Debt reduction will enable us to hold rates increases.

I would not like to see any services deferred or cut from the budget.

Private investment and partnerships will help reduce overall debt.

As mayor I will actively pursue Government assistance for community infrastructure.

Vanity and pet projects are not on my priority list and councillors will be discouraged from bringing them to the council table until such times as we can afford them.

Frances Louis:

I am concerned about the debt.

As for council services, I would love to take an axe to all top-line corporate council services.

As for paying off debt, forget it. Our fate has been sealed.

Rotorua Lakes Council debt as at July 1, 2016
Total group debt, including airport: $165.6 million
Projected debt of $205 million peaking in 2020
Debt expected to reduce to $146 million by 2025
Future projects to be funded by debt include the Rotoiti/Rotoma sewerage scheme and the redevelopment of the waste water treatment plant
$1.9 million in debt paid back in last financial year
$3 million in debt paid back in the last two financial years