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No doubt there will be a lot of pressure from this governent to amalgamate the Wellington region's councils and to spread the debt load.
This must be rigorously opposed as much for moving us away from what is most needed – relocalisation as anything.
Borrowing our future?
Debt mountain blots super city vision
by Simon Edwards
by Simon Edwards
17 April, 2012
Those peddling a vision for a Wellington super city will have to persuade Hutt Valley 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.
Lower Hutt has challenges too, including earthquake strengthening its civic building and halls, but its debt is in a minor league compared to the city across the harbour.
Hutt City Council is right now consulting with citizens on three options that would see its debt sit at $40m, $45m or $50m by 2015.
The council has said it prefers the middle figure.
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.
Though 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.
It 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.
"[Debt] is a valid concern for some ratepayers - that comfort level with their own district debt versus what it could be with a super city," Mr Woltman says. "But I think they'll be more interested in the impact on their own rates as a result, rather than what is the debt of the councils.
"At the end of the day, it's the invoice they get through their letterbox they'll be more interested in."
Wellington City could retort, with some justification, that while it has a large debt it also has a larger ability to pay.
Its operating revenue this year is a massive $355m against Hutt City's $130m.
And while the percentage of revenue Wellington pays on loan interest is 6.73 per cent - double the 3.33 per cent Hutt ratepayers shell out - it's still well below the 10 per cent that some commentators describe as "prudent".
Tauranga spends nearly 17 per cent of its income on loan interest.
Hutt Mayor Ray Wallace says there might be nothing in legislation preventing current debt being left a charge on pre-amalgamation districts, "but the likelihood of that happening long term is pretty remote.
"Auckland [super city] one year in is looking at merging all their costs into one set of coffers.
"That's going to have substantial impacts on some part of Auckland; there is talk of rates increases of about 10 per cent."
Mr Wallace believes Hutt people will be as much concerned about debt and potential rates bills as the loss of local democracy with a super city.
He says for the last 10 years Lower Hutt has doggedly pursued a strategy that limits rates rises to inflation plus 1 per cent.
"While we have a good level of service, we've cut back on our 'wish list' and pretty much stuck to core services."
He has not seen the same discipline from Wellington.
At a Probus Club meeting of 70 retired businesswomen he addressed last week, "first up at question time was a woman who asked me if I knew what Wellington's debt was".
He sees Lower Hutt's leaky homes liability of around $1 million as a serious issue, "But Wellington's problem in that area is just huge".
DEBT BREAK DOWN
The Better Local Government document released by the Government last month included these figures:
* Debt increase 2002 to 2010: Carterton 4 per cent; Horowhenua 581 per cent; Hutt City -11 per cent; Kapiti Coast 33 per cent; Masterton 179 per cent; Porirua 32 per cent; South Wairarapa 2117 per cent; Upper Hutt 72 per cent; Wellington 200 per cent.
* Rates per capita (2010): Carterton $874; Horowhenua $702; Hutt City $787; Kapiti Coast $806; Masterton $776; Porirua $766; South Wairarapa $1014; Upper Hutt $644; Wellington $1081.
