Council’s new debt ceiling

THE level of Dunedin City Council’s debt could climb appreciably after councillors decided a debt ceiling of $350 million would be far too limiting.

Councillors have given themselves more room to raise a lot more debt to provide them with the power and necessary flexibility to get through the next decade of capital spending.

The council has yet to work out how much might be spent and which projects could be favoured, but councillors signalled yesterday they at least wanted a broad scope of options to consider.

Ahead of development of the 202131 10year plan, they chose to approve a debt limit to be calculated as a percentage of revenue and then opted for that figure to be 250%.

Projected revenue for 202021 is $279 million, which would result in a debt limit of $698 million.

The actual level of debt at the end of June this year was $243 million and had previously been forecast to reach $346 million by 202728, but that was when the planned capital budget for 201828 totalled just $878 million.

Preliminary capital budgets developed for the draft 202131 plan indicated spending of between $1.3 billion and $1.5 billion would be needed across the 10 years.

Sticking with a debt cap of $350 million would have resulted in programme cuts.

About $900 million of the 10year capital programme is considered necessary just for maintaining and fixing infrastructure, rather than new capital projects.

Dunedin Mayor Aaron Hawkins said the city had been out of step with other metropolitan councils and constraining itself with an arbitrary debt limit no longer made sense.

‘‘Giving ourselves as broad a scope as possible is the most sensible option at this point,’’ he said.

Deputy mayor Christine Garey said projects such as replacing the Mosgiel swimming pool and creating a South Dunedin library reflected the aspirations of communities.

Cr Sophie Barker said there had been an underinvestment for many years.

‘‘Debt is not a dirty fourletter word,’’ she said.

‘‘Investment in our future is vital.

‘‘Our aspirations should be high.’’

However, Cr Jules Radich said the community wanted councillors to show restraint.

A conservative mindset on debt had served the city well and changing that risked ‘‘placing ourselves in jeopardy’’.

Cr Lee Vandervis lamented what he described as his colleagues’ failure to understand the situation.

The level of debt the council could look to raise was incredible and the city could struggle to bear such a burden, he said.

Compared with their peers in other metropolitan centres, Dunedin residents had a low disposable income, Cr Vandervis said.

Cr Vandervis, who several times asked Mr Hawkins — the meeting’s chairman — not to interrupt him and Cr Radich were the only councillors to vote against the change in approach on debt.

Chief executive Sandy Graham indicated some work needed to be done to sort out the timing of some projects, which could make it easier to deliver the desired programme.

Councillors will consider preliminary capital budgets in December.