Capital’s debt set to surge past $1b
Wellington’s desire for a movie museum, a pricey indoor arena, and its need for resilience will bump the city’s debt to more than $1 billion for the first time.
Wellington City Council’s debt level is set to rise from $507 million to $1.16b over the next 10 years to pay for investments such as water reservoirs, earthquake strengthening the Town Hall, Let’s Get Wellington Moving, cycleway infrastructure and the arts.
Councillor Andy Foster was concerned the council was proposing to more than double the amount it borrowed and was warning ratepayers it would cost them in interest payments.
The spending is within the council’s financial guidelines but Foster, who holds the finance portfolio, estimated the council would go from paying $1m every two weeks in interest to more than $1m every five days.
‘‘It’s debt heavy. The proposed increase and the costs of debt servicing is a concern ... I want to know if ratepayers are comfortable with that or rather we trimmed the costs. I would struggle to put my hand up and vote for the current budget.’’
Economic adviser for the Taxpayers’ Union Garrick Wright McNaughton said having a lower debt-to-income ratio than most councils did not give the city free rein to borrow through the roof.
‘‘Ultimately, it is ratepayers who pick up the tab.
‘‘By doubling its borrowing over the next 10 years, the council will essentially hand every resident a credit card with $5477 of borrowing already loaded onto it. Currently, the council spends $342 per residential ratepayer, per year.’’
Wellington Mayor Justin Lester said he was comfortable with the proposed investments over the next decade. Some of the budgeted investments were not only warranted but necessary, he said.
‘‘Our debt-to-income ratio is significantly lower than Auckland, Christchurch and Tauranga and we also hold investments exceeding $400 min Wellington Airport and our commercial ground lease holdings. To put this in residential context, we’ll have a house worth $600,000 with a mortgage of $160,000.’’
The council had the highest credit rating of councils across New Zealand and would be ranked higher than central government, if it was technically possible, Lester said.
Council chief executive Kevin Lavery said the proposed level of debt was prudent and affordable and significantly lower than the average mortgage level for New Zealand households.
The council had a strong balance sheet, which meant it could borrow now and spread the costs of the major projects over the lifetime of the assets, he said.
‘‘Simply, it means we can propose keeping rate increases to less than 4 per cent.’’
The current ratio was about 100 per cent and the council was proposing to increase it over 10 years to 160 per cent, which was significantly lower than many other New Zealand metro councils that would exceed 250 per cent, he said.
Local Government Funding Agency chief executive Mark Butcher said the funding body had no concerns and the council would retain its top, AA+, credit rating.
‘‘We think it has the capacity on its balance sheet to do that level of spending – it’s just a question of the quality of infrastructure investments.
‘‘In general, we like to see councils borrowing for housing growth, water and roading.’’