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

Gordon Campbell: On The Rationing Of PPE Gear, Masks And Everything Else

From the outset, the perceived need to ration our scarce resources seems to have driven the response to Covid-19. Rationing still appears to be limiting the ability of nurses and other frontline workers to access and routinely wear the PPE gear they need to do their job safely. Initially at least, we were also rationing the public’s access to Covid-19 testing. We also continue to pick and choose among the scientific evidence to justify advising the public against the need for them to wear masks…. If it hasn’t done so already, this trend will end up eroding public confidence in the Ministry of Heath assurances that hey don’t worry people, we have enough PPE gear, testing kits and masks to go around. Counter factual : if we’re rationing it, we haven’t got enough... More>>


 
 

Gordon Campbell: On The Ethics (and Some Of The Economics) Of Lifting The Lockdown

As New Zealand passes the half-way mark towards moving out of Level Four lockdown, the trade-offs involved in life-after-lockdown are starting to come into view. All very well for National’s finance spokesperson Paul Goldsmith to claim that “The number one priority we have is to get out of the lockdown as soon as we can”…Yet as PM Jacinda Ardern pointed out a few days ago, any crude trade-off between public health and economic well-being would be a false choice... More>>

ALSO:


Police Commissioner: Christchurch Terrorist Pleads Guilty

Police acknowledge the guilty pleas in the Christchurch Mosque attacks prosecution that were entered in the Christchurch High Court today. The guilty pleas to 51 charges of murder, 40 charges of attempted murder and one charge of engaging in a terrorist ... More>>

ALSO:

Transport: $54 billion Investment In Draft GPS 2021

The Draft Government Policy Statement (GPS) 2021 on land transport confirms that the Government will invest a record $54 billion in its balanced transport policy over the next decade. More>>

ALSO:

Gordon Campbell: On The Loss Of Abortion Safe Zones

No doubt, last night’s defeat of abortion law reform provisions that would have created safe zones around abortion clinics will be portrayed, by some, as a victory for free speech. It isn’t. It was a victory for bigotry and intimidation directed ... More>>

ALSO:

Gordon Campbell: On National's Regulation Crusade

Lets step back in time now, to simpler days and to simple-minded solutions. So…. if National gets elected, landlords will once again be able to evict tenants at will, raise rents anytime they like, and ignore the need to install a healthy standard of heating in the homes they put out to rent. This promised ‘bonfire of regulations’ is being done in the name of cutting red tape... More>>

ALSO:

SMC - Expert Reaction: PF2050 Strategy

DOC has released a strategy to reach Predator Free 2050, along with an action plan through to 2025. The predator-free goal focuses on three groups of mammals: possums, three species of rats, plus stoats, ferrets and weasels... More>>

ALSO:

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 


 

InfoPages News Channels