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News Worthy: Investing in councils

News Worthy

28 March 2008 - No. 241

Investing in councils

Some of us are old enough to remember a time when Councils issued local government stock.

That day is to come again with the passage of a change to the Securities Act.

At a time when the Blue Chip Group has collapsed and the fortunes of finance companies in New Zealand continue to tumble, local authority paper is likely to be well received by retail investors.

Local Government faces a real challenge in managing the current bulge of infrastructure development, whilst maintaining local authority finances on a reasonable footing.

It is a fact that local government has embarked on the most significant programme of capital works undertaken since the post-war boom in the development of the roading network.

If we look at local authorities’ long-term plans we see that local authorities are undertaking approximately $30.8 billion in capital works in the 10 years to June 2016. Virtually all of this expenditure is to fund either network infrastructure—roads, sewage disposal, and water schemes—or community infrastructure, which includes things like libraries, sports grounds, and stadia. That is more than double the level of capital expenditure in the period from 1995 to 2004.

There is a significant degree of front-loading in the capital works programme, such that about 50 percent of the funding needs will be required between now and 2009.

Infrastructure assets have long lives. Borrowing helps to spread the cost of this infrastructure over the life of the asset so that today’s ratepayers are not subsidising future ratepayers.

In 1998 changes were made to the law which made it more difficult for Councils to issue debt securities. Only Auckland City Council issued debt securities to the public—$120 million in March 1999 and $68.2 million in February 2001.

That will now change and the opportunity has been given for investors to gain access to quality debt.

No to Act

John Key has made it clear that National would not be able to work with Act if the Party pursued the philosophies of Sir Roger Douglas. John has said

"If ACT are hell bent on following a radical right-wing agenda and won't fit in with a moderate pragmatic agenda then we can’t work with them. They’re ruling themselves out if that's what they are doing".

Policing the gangs

Street youth gangs are on the rise and are threatening the streets and communities of New Zealand with increasingly random and sadistic violence, leaving communities fearing for their safety.

Street gangs and youth violence were responsible for ten homicides from October 2005, and a recent spate of violent inter-gang brawls and random attacks on innocent bystanders has authorities concerned.

National crime figures released by the Justice Ministry in August 2007 show a 39% increase in the number of youth apprehensions for violent offences over the past decade. The only other category of crime to show a similar increase is property damage, which along with violence offences may be inextricably linked to the surge in youth gangs.

January statics released by UMR research indicate that one in every five New Zealanders are more concerned about crime than anything else, including the economy.

The glamorisation of hip-hop culture, open access to violent video games and weak family structures are behind the rise in street/youth gangs.

Political Quote of the Week

"Treat people as if they were what they ought to be, and you help them to become what they are capable of being." Goethe - German Writer (1749-1832)

Dr Richard Worth
National Party MP


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