Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Dunedin City 'AA' debt rating may be cut by S&P

Dunedin City 'AA' credit rating under threat as S&P sees financial targets in doubt

By Paul McBeth

Nov. 22 (BusinessDesk) - Dunedin City Council, whose investment unit posted a $5.1 million loss in the 2012 financial year, has been put on notice of a rating downgrade over its finances, which may not bounce back as quickly as expected.

Standard & Poor's affirmed Dunedin's AA credit rating and put it on a negative outlook, giving it a one-in-three chance of a downgrade over the next two years. The council forecasts small surpluses over the next three years as it slows down the pace of annual rate hikes, while at the same time facing more capital expenditure and rising interest costs.

"This is based on our view that Dunedin may not achieve its financial targets outlined in its long-term plan, with its after-capital account deficits not improving as quickly as forecast," credit analyst Anthony Walker said.

"If this scenario were to materialise, we consider that Dunedin would have limited budgetary flexibility to improve its financial position without deferring asset renewals, which may lead to future infrastructure backlogs," he said.

The council needs to meet forecast and achieve after-capital account deficits of about 2 percent of its operating revenue from 2014 to get back to a stable outlook.

Dunedin City has faced a handful of setbacks in recent years, having to stump up funds to rescue a cash-strapped Otago Rugby Union from the brink of liquidation while at the same time facing a bigger deficit than expected for its new Forsyth Barr Stadium.

Subsidiary Delta Utility Services is also under investigation by the Auditor-General over decisions to invest in residential property in Queenstown and Wanaka, which have fed into weaker earnings from the investment unit, Dunedin City Holdings.

S&P's Murray said the outcome of that investigation could stress the council's rating further if it raises questions about the management of council-controlled trading organisations.

The rating could also come under pressure if a hard rates cap was introduced or if capital expenditure was increased without an offsetting lift in revenue.

New Zealand's local bodies face a major overhaul with looming central government legislation aimed at focusing councils' role to providing "good quality local infrastructure, public services and regulatory functions at the least possible cost to households and business."

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Genetics: New Heat Tolerant Cow Developed

Hamilton, New Zealand-based Dairy Solutionz Ltd has led an expert genetics team to develop a new dairy cow breed conditioned to thrive in lower elevation tropical climates and achieve high milk production under heat stress. More>>

Fractals: Thousands More Business Cards Needed To Build Giant Sponge

New Zealand is taking part in a global event this weekend to build a Menger Sponge using 15 million business cards but local organisers say they are thousands of business cards short. More>>

Scoop Business: NZ Net Migration Rises To Annual Record In September

New Zealand’s annual net migration rose to a record in September, beating government forecasts, as the inflow was spurred by student arrivals from India and Kiwis returning home from Australia. More>>

ALSO:

Scoop Business: Fletcher To Close Its Christchurch Insulation Plant, Cut 29 Jobs

Fletcher Building, New Zealand’s largest listed company, will close its Christchurch insulation factory, as it consolidates its Tasman Insulations operations in a “highly competitive market”. More>>

ALSO:

Scoop Business: Novartis Adds Nine New Treatments Under Pharmac Deal

Novartis New Zealand, the local unit of the global pharmaceuticals firm, has added nine new treatments in a far-ranging agreement with government drug buying agency, Pharmac. More>>

ALSO:

Crown Accounts: English Wary On Tax Take, Could Threaten Surplus

Finance Minister Bill English is warning the tax take may come in below forecast in the current financial year, as figures released today confirm it was short by nearly $1 billion in the year to June 30 and English warned of the potential impact of slumping receipts from agricultural exports. More>>

ALSO:

Auckland Outage: Power Mostly Restored Overnight

Vector wishes to advise that all but 324 customers have been restored overnight. These customers are spread throughout the network in small pockets. The main St Johns feeder was restored around midnight allowing most of the customers in all affected areas to have power this morning. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand

Mosh Social Media
 
More RSS  RSS
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news