City Council approves plans for bond investment
Auckland City Council
10 December 2008
Auckland City Council approves plans for retail bond investment
Auckland City Council has approved plans to offer a retail bond issue to investors.
A retail bond issue will give ratepayers and other investors the opportunity to participate in Auckland city’s future development and growth by investing in a portion of Auckland City Council’s debt, and receiving a competitive rate of interest. For the council, it is an effective and efficient way of raising debt funding.
Auckland City Council is considering a retail bond offer of up to $200 million, for a term of seven years.
Councillor Douglas Armstrong, chairperson of the Finance and Strategy Committee says, “This is all about being financially prudent during a difficult time to ensure we are handling the city’s finances in a responsible and careful manner. Operating efficiently and effectively are key focuses. We consider many funding options before borrowing money and committing future rates money.
“Debt, when well managed, is a fair way to fund capital projects in the city, as the cost of large projects is spread across current ratepayers as well as those who will benefit in the future.
“Bonds are an effective method for any organisation to raise funds and borrow money. The retail bond issue will be used to increase funding certainty by refinancing existing short-term debt and covering the remainder of the current financial year’s borrowing requirements.
“The council’s high long-term credit rating of AA and the security of the council’s rates revenue are compelling attractions for investors.”
Market conditions and demand point to a retail bond issue as having the greatest likelihood of achieving the projected funding required by the council at this stage at an appropriate cost.
Earlier this year, the Securities (Local Authority Exemption) Amendment Act was passed with the intention of encouraging local authorities to return to the retail debt market.