‘Spiralling debt’ is pure speculation
There has been speculation recently in the news about Horowhenua District Council’s debt “spiralling” by $22m to $99m in the last year and that this was “horrendous”, as it was similar to the debt level at Palmerston North Council.
There has also been a call in some quarters for a complete forensic investigation into our accounts of the last few years.
I am not sure what motivated this speculation, but ratepayers need to be aware of the facts so they can continue to have confidence in the financial management of Council.
Our net debt at June 30 2018 was $75m and our gross debt was $80m, as we carry $5m cash in the bank for an emergency. Since the new financial year started on July 1st we have increased our net debt to $85m to pay for capital projects completed near the end of the financial year. We have also added $9m to our cash liquidity to pre-fund debt repayment due in March 2019. Cash liquidity enables us to borrow at a lower wholesale rate and then invest money at a retail rate so we gain revenue.
In comparison the net debt at Palmerston North is $108m, but it is expected to rise to $367m over 10 years to fund major wastewater infrastructure projects. Ka¯ piti District Council predicts a debt level close to $200m in the next 10 years. The debt we have incurred is a result of the Annual Plan and Long Term Plan process that is robustly debated and analysed by all elected members. This has enabled us to manage the growth we are experiencing and add to the future wellbeing of the District.
As for the call for a forensic accounting investigation, no evidence has been provided to substantiate the claims around our accounts that warrants an investigation. It would be an extreme waste of money and resource, and it is disappointing that those making this request will not accept the opinions of Audit NZ, who have given Horowhenua District Council unmodified audits for years, nor of Standard & Poor’s, which has rated us A+ since 2015. It is also a baseless and unsubstantiated attack on the integrity and competence of your finance team.
Councillors are aware of the need to be prudent and careful financial managers and recognise the need to ensure all current and future ratepayers benefit from our decisions.
We all need to acknowledge that debt provides ratepayers with essential infrastructure projects that enable them to enjoy the levels of service they need and expect.