Burgeoning local government debt in New Zealand

From http://aotearoaawiderperspective.wordpress.com/2012/03/11/greece-has-defaulted-and-that-is-a-good-thing-in-the-long-run/ 


As the news reaches us that as predicted the city councils throughout New Zealand have ratcheted up the highest debts per capita ever Moody has declared Greece in default. This presents a clear case of a default event and while the central banks and other fraudulent finance institutions such the IMF et all. want us to believe that in this case a default isn't a real default therefore it won't trigger an insurance derivatives payout which will lead to the collapse of the five to big to fail banks there is ample indication that big hedge funds and other institutions which have invested heavily in PIIGS bonds will not take this lying down.

The next couple of weeks are going to be seriously intense as the domino's will begin to fall.

NZ: Councils borrowing billions

Local councils have clocked up $1606 in debt for every man, woman and child in New Zealand at a time when the amount they expect people to pay in property taxes is rising steeply.

Stuff,

11 March, 2012

Government figures released to the Sunday Star-Times show local councils are charging, per capita, an average of $951 in rates and that nationally, rates have risen an average of 7 per cent a year for the past decade.

Over the same period council debt has ballooned from $1.8b to $7b.

Local Government Minister Nick Smith is worried councils are stretching themselves too far and has signalled changes to the sector. He is set to deliver policies in the next two months so local government can control costs and keep rate rises in line with the Consumer Price Index (CPI), which has  risen by around 2.2 per cent per annum over the past decade.

Smith cites the Kaipara District Council as an example of a council with an out of control debt problem. 

A third of that council’s rates income is now being used to service debt, which has blown out to $85m because of over-runs in the cost of building a new wastewater scheme.

The Kaipara District Council’s per capita debt, according to Statistics New Zealand’s 2010 figures, stands at $4142 – the highest in the country – but other councils are following close on its heels. The Taupo District Council owes $4048 per capita, the Waitomo District $3939, and Queenstown Lakes District $3563.

New Zealand’s small councils are the most highly indebted and charging the most in rates.

Residents of Thames-Coromandel District pay the highest per capita rates at $2086 for every man, woman and child. Those living in the Queenstown Lakes District pay the second highest per capita rates at $1659. Waitomo comes in third ($1429) and Mackenzie district fourth ($1328). 

In the metropolitan cities, rates per capita range from a low of $698 in Christchurch to a high of $1081 in Wellington. In the Auckland super city, Statistics New Zealand calculates per capita rates at $753.

Taupo District mayor Rick Cooper said his council had had to borrow millions of dollars for new water and waste-water treatment plants in order to comply with government legislation.

It had also had to contribute millions towards the construction of a new bypass because ''the government likes to, wherever it can, shirk its responsibilities''.

''Local government is on a hiding to nothing because of what central government legislates upon us,’’ Cooper said.

Queenstown Lakes District deputy chief executive Stewart Burns said it was not surprising the district had the highest debt per capita and rates per capita of the South Island councils. The district had a small resident population of around 28,000 but had to cater for 2.8 million visitors annually.

He said the increase in debt over the past 10 years reflected the cost of providing infrastructure for a 65 per cent growth in its resident population.

He said most of the councils with high debt per capita were ''growth hot-spots''.

Economist Rod Oram believes Smith’s argument for reforming local government is flawed. He said the size of the rate rises over the past few years showed councils had been scrambling to catch up on inadequate infrastructure spending in the past and to cope with population growth.

Local Government New Zealand also denies there is cause for concern.

It says the fact that property taxes are growing faster than the CPI does not mean councils are exercising poor fiscal control and debt is not the demon it is made out to be.

''Debt is an internationally accepted way of spreading costs over future generations and ensuring the present generation doesn’t pay more than its share,'' said LGNZ principal advisor Dr Michael Reid.

Local government expenditure as a proportion of Gross Domestic Product, and local government expenditure as a proportion of public expenditure, were relatively consistent and clearly indicated that local government spending was firmly under control.

Council debt per capita

Kaipara District $4142

Taupo District $4048

Waitomo District $3939

Queenstown-Lakes District $3563

Tauranga City $2769

South Taranaki District $2755

Western Bay of Plenty District $2699

Tasman District $2451

Buller District $2,227

Hamilton City $2184

Auckland (Sum of former AK area councils) $2134

Ruapehu District $1994

Far North District $1925

Dunedin City $1920

Thames-Coromandel District $1823

Wanganui District $1812

Whangarei District $1800

Palmerston North City $1765

Rotorua District $1686

New Plymouth District $1638

Kaikoura District $1629

Kapiti Coast District $1448

Otorohanga District $1448

Wellington City $1433

Ashburton District $1311

Timaru District $1155

Nelson City $1132

South Wairarapa District $969

Horowhenua District $915

Central Hawke’s Bay District $905

Westland District $888

Porirua City $882

Matamata-Piako District $870

Gore District $869

Lower Hutt City $818

Christchurch City $816

Invercargill City $805

Masterton District $779

Whakatane District $777

Hauraki District $745

Waipa District $678

Hastings District $678

Grey District $660

Selwyn District $631

Waimate District $623

Tararua District $565

Manawatu District $495

Waimakariri District $485

Stratford District $474

Upper Hutt City $453

Gisborne District $417

Opotiki District $361

Waikato District $295

South Waikato District $240

Carterton District $216

Napier City $105

Marlborough District $42

Southland District $21

Kawerau District $3

Clutha District $1

Waitaki District $1

Wairoa District $0

Rangitikei District $0  

Mackenzie District $0  

Hurunui District $0  

Central Otago District $0

Source: Statistics New Zealand