Local government carrying 'relatively low' debt levels, English says

Wednesday 13th June 2012

New Zealand's 78 local authorities are carrying a relatively low level of debt, Finance Minister Bill English has conceded when asked how councils could contribute to the nation’s spending on infrastructure.

The local authorities manage some $100 billion of assets while carrying debt of some $5 billion. The Local Government Funding Agency, which was created to borrow on behalf of councils and achieve lower interest costs, estimates the debt will rise to about $11 billion in the next decade.

English was asked by New Zealand First MP Andrew Williams at the finance and expenditure select committee today why councils weren’t being prodded to take a bigger role in infrastructure spending rather than criticised for taking on debt.

“Primarily that’s a matter for rate payers,” English said. “Local councils do have relatively low levels of debt and that’s rising quickly.”

Legislative restrictions on local government spending, which currently runs at about $7.5 billion a year, moved a step closer this week as the Local Government Act 2002 Amendment Bill passed its first reading by 61 votes to 59.

Local Government Minister David Carter says the amendments “introduce financial prudence requirements for local authorities, strengthen council governance provisions and streamline council reorganisation procedures.” Labour has said the law change would limit councils’ ability to spend and erode kiwis’ democratic rights.

Carter this month announced an eight-member independent taskforce, made up of council executives and elected members, to target greater efficiency in local government.

Prime Minister John Key has suggested councils sell assets to help fund spending plans, singling out the rebuilding demands of Christchurch, whose city council investment include the airport and a stake in Lyttelton Port.

The government has been forced to step in this year to bail out a debt-ridden local authority. Kaipara District Council in Northland sought help with debt that had spiralled to more than $80 million after rate payers threatened to revolt at rate hikes averaging 31 percent.

BusinessDesk.co.nz

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