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Report shows councils in sound overall financial position

Media Release - Thursday 12 June 2014

Report shows that councils are in sound overall financial position

A newly-released independent report shows that councils in New Zealand are in a sound overall financial position - including Horowhenua District.

In May this year Local Government New Zealand (LGNZ) commissioned analysts Grant Thornton to review key financial factors for all district, city and regional councils.

The independent report, Local Government: A Financial Snapshot, shows that the vast majority are in good or very good financial health relating to their balance sheets, such as debt levels relative to their asset base, debt levels relative to their population, ability to repay debt and ability to cover interest (finance cost) obligations.

The four councils, which do not include Horowhenua, that narrowly fell below the rating line either have strategies in place in their Long Term Plans for addressing their financial challenges, or are there because of the nature of the methodology which does not take into account income from non-rating sources or financial equity.

Horowhenua District Council chief executive David Clapperton says that the report's findings come as no surprise and sets the record straight about the financial positions of councils.

He says that regarding Horowhenua, recent audits by Audit New Zealand have raised no issues or concerns about the Council's financial performance or debt levels, nor how it will fund services, activities and projects in its Long Term Plan.

Mr Clapperton says that Horowhenua District Council has its own debt covenants set under its borrowing management policy, and also Local Government Funding Agency covenants it must meet.

"Council is well within the limits on all these covenants. We also have a debenture trust deed that appoints a Trustee to oversee the Council's financial performance on behalf of the organisations that lend to Councils," he said.

"The Trustee’s recent benchmarking report on Local Government performance that was reported to Council’s Finance Committee in March 2014, does not highlight any major concerns over debt levels."

Mr Clapperton said that later this year, Council will begin the development of its Long Term Plan 2015-2025 and that debt levels, affordability and what the Council will do regarding these will be reviewed as part of this process.

"I am confident that Council does provide value for money to ratepayers, and will continue to do so in the future," he said.

LGNZ President Lawrence Yule said the report provides conclusive evidence that the overwhelming majority of councils are in good financial health and are using best-practice financial management.

“The local government ratio of debt to assets is at a prudent 9 per cent. This is the equivalent of a $36,000 mortgage on a $400,000 home,” he said.

"Debt per se is not bad. On the contrary it is an appropriate funding tool for intergenerational assets such as roading and water infrastructure."

Mr Yule said that the local government sector continues to have the lowest debt of any sector in New Zealand.

“Overall, New Zealand’s councils are in overwhelmingly sound financial health.”


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