Local government debt soars

and Those peddling a vision for a Wellington super-city will have to persuade the region’s citizens to look past the capital’s piles of debt.

Wellington City Council’s current debt is $358 million and with liabilities for leaky homes, building earthquake strengthening and other big ticket items, it is forecast to rise considerably.

Last month WCC published papers that suggested trying to stick to a borrowing target of $500m by 2021 and a borrowing limit of $700m.

Wellington, population just over 200,000, has a bigger current debt ($ 358m) than Porirua, Upper Hutt, Lower Hutt, Kapiti Coast ( total population 241,000) combined – $241m.

However, it’s not as if the wider region doesn’t resort to lenders also.

The debt in Kapiti Coast, for example, is forecast to climb to $148m by 2015 and higher after that before falling to $77m by 2032.

Former Minister of Local Government Nick Smith cited local government debt as a major reason why the Government will introduce new fiscal responsibility requirements for all councils in New Zealand.

Local government debt has quadrupled over the past decade from $2 billion to $8 billion.

Porirua mayor Nick Leggett says Wellington’s debt is a worry for other councils but the outlook is not entirely gloomy.

‘‘I think that’s absolutely an issue, Wellington has high debt, but it has also got a significant chance to service and pay off that debt because it’s got a very large rating base,’’ he says.

‘‘We also lack some of the exciting community facilities that Wellington has.’’

Wellington City’s operating revenue this year is a massive $355m against Porirua’s $70m.

The region’s mayors have not discussed the implications of merging greater Wellington’s account books, because discussions could not progress beyond disagreement about the merits of a super-city, Mr Leggett says.

‘‘The real truth is we’ve never got to that level of detail,’’ he says. ‘‘The debate has been whether to have a debate. It’s disappointing.’’

A Greater Wellington Regional Council- initiated panel researching amalgamation should study options for balancing rates and debt, he says.

Porirua’s rates should not rise with amalgamation, because they are already comparatively high in the region, Mr Leggett says.

This wouldn’t be the first time locally that debt was raised as an amalgamation barrier.

One of the reasons Eastbourne, Petone and Wainuiomata resented the forced amalgamation in 1989 was that their ratepayers didn’t want to shoulder a share of Lower Hutt’s debt.

The Local Authority Loans Act and sinking funds system of that time meant that the debts of Lower Hutt and the former boroughs were kept separate for a while.

But a couple of years later, this was slammed as a ‘‘ jam jar’’ approach to accounting and all finances were amalgamated.

Hutt City Council’s chief financial officer David Woltman says though that legislation has been superseded, a super- city council could decide existing debt at the time of amalgamation remains a charge on properties in the old cities, to be paid off over time by those ratepayers.

But equally there’s nothing to stop the new council, which could be elected as early as October 2013, from deciding all debts should also be merged.