23 October 2008

Council future proofs credit

Recognition more than a year ago of the potential for national and international credit problems resulted in the Kapiti Coast District Council having the foresight to arrange access to a $45 million line of credit to draw on if required.

This is at fixed margins for a period of three to six years.

The Government guarantee for all banks and finance company deposits excludes local authority investments. Councils which rely on the financial markets to fund their capital works programme as required, rather than making formal arrangements to future proof their liquidity, are finding it harder to obtain credit from banks.

“We recognised the potential for this to happen some time ago and looked at ways to future proof our situation,” Group Manager Finance Warwick Read told a Long Term Council Community Plan workshop yesterday.

Several issues face all local authorities regarding funding of the activities desired by their communities. These are the affordability of rates, the availability of credit and the cost of credit.

The Kapiti Coast District Council has already advised its community of increases in rates in the future as a result of the impacts of capital works being completed this year and the construction of the Western Link Road and the Aquatic and Recreational Centre, expected to start in 2009.

“In Council’s first workshop on the Long Term Council Community Plan (LTCCP) process we made it clear that cost increases are unlikely to be approved to go into the LTCCP for debate by the community unless a clear need and benefit can be identified,” Mayor Jenny Rowan said..

Council’s credit arrangements are at attractive rates and will enable the Council to continue with the capital works programmes scheduled for the next 18 months.

“The prudent management of Council’s funding means this Council is not exposed to the same liquidity problems faced by other local authorities which are more exposed to the financial markets,” Mayor Rowan said.

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