Local Govt | National News Video | Parliament Headlines | Politics Headlines | Search

 

KCDC gambles and loses on speculative interest rate swaps


Kāpiti Coast mayoral candidate Gwynn Compton says that Kāpiti Coast District Council has gambled and lost with an $8 million drop in the value of its speculative interest rate swaps as detailed in the 2018/19 Annual Report, taking the net unrealised loss on interest rate swaps to approximately $18.5 million over the past five years, and seeing Kāpiti paying higher interest rates than are necessary on the district's huge debt.

The loss highlights how unsustainably high debt has driven the Council to use speculative financial instruments that could potentially see ratepayers on the hook for ongoing multi-million dollar losses. Council is also running the very significant risk of being locked into paying unnecessarily high interest rates that could cost ratepayers hundreds of thousands of dollars more each year, especially if interest rates continue to fall as has been suggested is likely with economic growth slowing.

“Interest rate swaps were sold to ratepayers as a non-speculative tool to reduce interest costs on Council’s high debt. Managed well by a suitably large organisation, such as central government or a multinational company, and in an increasing interest rate environment, they can do that. But the reality is they are speculative tools and they do carry significant risks, especially for small and highly indebted councils like KCDC,” says Mr Compton.

“What’s more, if talk of interest rates falling further pans out, as looks likely with the Reserve Bank trying to stimulate slowing economic growth, then this will only further exacerbate an already bad situation for KCDC’s interest rate swaps, with ratepayers being left to pick up a growing bill.”

Gwynn Compton says that Mayor K Gurunathan also needs to front up and explain himself to ratepayers about his position on Council speculating on financial markets, with the Mayor having been a staunch defender of interest rate swaps in the past, as well as the Council’s now abandoned scheme to borrow $30 million to gamble on the share market.

“When Mayor K Gurunathan was defending the Council’s nonsensical scheme to borrow $30 million to gamble on the share market, the Mayor also defended the Council’s practice of using interest rate swaps as not being speculative. The Mayor was forced to backpedal on the risky nature of borrowing $30 million for the investment fund following the Auditor-General’s intervention and community outcry, and now it looks like the Mayor has been caught out again over the true speculative nature of interest rate swaps.

“If I'm elected as Mayor, I’ll ensure Council takes a sensible and responsible approach to managing its finances. When we have nearly $10,000 worth of debt for every household in Kāpiti, we need to take a cautious and prudent approach to reducing it, rather than taking unnecessary and unaffordable risks as is currently the case.”

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Campbell on: the local body election result in Wellington

For obvious reasons, politics is more of a big deal in the capital city than anywhere else in the country. Even so, fewer than four in ten eligible voters bothered to vote in Saturday’s local body elections in Wellington (turnout 39.66%).

Even less was felt to be at stake this time around than in 2016, when 45% of the electorate voted Justin Lester into the mayoralty.

To put it mildly, the Lester-led Council failed to live up to expectations. Lester will be remembered mainly for the fact that somehow, he managed to lose this election. . More>>

 
 

Could Do Better: Post-Sroubek Review Of Deportation Info

Ms Tremain acknowledges that the review highlighted some aspects of the process that can be improved and makes five main recommendations to strengthen the existing processes for preparing files for decision-makers. Those recommendations are: More>>

ALSO:

Gordon Campbell: On A New Book On The Leaky Homes Scandal

We all know that journalism is short of cash and under pressure from the speed, brevity and clickbait pressures of the 24/7 news cycle… but hey, given the right subject and a sufficiently stubborn journalist, it can still surpass most of the works of the academic historians... More>>

Regulation: Review Finds NZTA Road Safety Failings

The independent review, carried out by consultant agency MartinJenkins, lists at least 10 reasons for the failures including the agency being focused on customer service at the expense of its policing functions. More>>

ALSO:

Rod Carr: Climate Change Commission Chair-Designate Announced

Climate Change Minister James Shaw has today announced the appointment of Dr Rod Carr as Chair-designate for the Climate Change Commission. More>>

ALSO:

Compliance Complaints: 'Putting Right' Holidays Act Underpayment In Health

The Government is putting right a decade’s worth of underpayment to nurses, doctors and other health workers, says Health Minister Dr David Clark. More>>

ALSO:

IPCA: Disasterous Police Pursuit, Excessive Use Of Dogs

At no stage did Police follow the correct procedure for the commencement of a pursuit... A Police dog handler used his dog to help with the arrest of two of the young people. One suffered injuries resulting in his hospitalisation, and the Authority found that the use of the dog was an excessive use of force. More>>

ALSO:

‘Hard Place To Be Happy’: Report On Youth Residential Care

Children’s Commissioner Andrew Becroft says the report, A Hard Place to be Happy, contains important challenges from children and young people, aged 9 to 17, about their experiences in care and protection residences. “I found this report extremely difficult to read, and I think most New Zealanders would too.” More>>

Africa And Middle East Refugees: 'Family Link' Restriction Removed

The founder of the Double the Quota campaign has applauded the coalition government for Friday’s announcement that a discriminatory policy would be removed. More>>

ALSO:

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels