12 May 2016

Auckland Council forced to use ‘rainy day’ funds to avoid credit rating drop.

“Put CRL on hold to avoid rainy day.”

Auckland Council is within a hairsbreadth of having its credit rating re-assessed which could lead to higher interest costs and greater rates increases for Auckland ratepayers.

Officer reports to the Council’s Finance Committee show that, unless cuts are made in capital expenditure, the level of debt by the council will exceed the levels set by credit agencies such as Standard & Poors and Moodys.

Officers are recommending that the council sell on some $335 million of commercial, non-strategic assets to avoid the need for more borrowings and the possibility of a credit downgrade’

These assets have been held as a reserve fund to provide liquidity to the Council in the event of a ”rainy day”

And that rainy day is getting closer as the Council’s net debt to revenue ratio of 265% is reached in the budget currently being finanlised

Current planned spending will push that figure to 267% and bring in the credit agencies.

NoMoreRates founder said today “Part of the pressure on debt limits must be attributed to meeting the councils share of the cost of an earlier start to construction of the Central Rail Link (CRL). At this stage the Governments contribution has not been finalised, but if it is less than 50% the Council will need to borrow more

“If the CRL project was deferred to its original start date of 2020 the ‘rainy day’ would be averted”

The Council will decide tomorrow if the “rainy day” has arrived.

Ends

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