Auckland Council debt weighs heavily on city plan

Auckland Council debt will reach $12,000 per ratepayer by 2021/2022 or $5378 per capita if the present trend continues, the Employers and Manufacturers Association advised the Council hearings on its draft Annual Plan today.

"The projected Council debt of $12.6 billion in 10 years is far too high to sustain," EMA's chief executive Kim Campbell said.

"At present Auckland ranks 11th in New Zealand for council debt per capita at $2134, or $5 billion in all, but the projected rise of it over the term of the Long Term Plan is a real concern," Mr Campbell said.

"While we support the judicious use of debt for the development of long life assets as fair and reasonable to achieve intergenerational equity, the statement of the Council's prospective income (p 110 of the Plan) shows the cost of financing the additional debt is rising rapidly.

"We have some sympathy for the Council because part of the debt burden was inherited from past decisions and practices of our legacy councils. Some of them borrowed to fund operational costs and used depreciation to make up the difference. The result is the Auckland Council is now borrowing to fund some of the replacement capital.

"The risk is that the vast majority of Council borrowings are secured only by revenue from rates, not Council assets since these are unable to be sold, or unlikely to be sold to repay debt.

"The bottom line is future lenders could become cautious about continuing to roll-over and extend loans to Council at favourable rates.

"We know the Council is aware of this risk but at some point it could face a financial crisis.

"We reiterate that projected debt levels are too high and reducing them will require the Council to lower its operating costs and reduce its capital investment."

Other issues EMA raised at the hearings included transport, population projections for Auckland, the low level of the Uniform Annual Charge, the unacceptable business differential, the review of the CCOs and PPPs.
A link to EMA's submission is here.<https://www.ema.co.nz/resources/EMA%20Reports%20and%20Documents/Advocacy/Submissions/2014/EMA%20Submission%20to%20the%20Auckland%20Council%20Draft%20Annual%20Plan%202014-2015.pdf>

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