Sam Broughton: Local Government New Zealand President on the Government's decision to lift the debt cap for councils

Councils are celebrating the government's decision to lift the debt cap, allowing them to borrow more money. 

It follows an average 15% rates increase this year across the country. 

Local Government New Zealand President Sam Broughton told Mike Hosking that councils currently have two options - borrow or lift rates. 

He says they have to borrow more because residents can't afford to fund the infrastructure deficit councils are in. 

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
New idea for councils around debt. If you're in a
high growth area, you will be able to borrow more
the local government. New Zealand President Sam Broughton's with us
on the Sam Morning to you.

Speaker 2 (00:08):
Yeah, good morning.

Speaker 1 (00:09):
Make the criteria for high growth. I get it. But
when you're forecasting out a good number of years, is
that watering into the world of guesswork.

Speaker 2 (00:18):
Well, I think it's important to look at what the
government's responding to, and that's the need to address rates,
affordability and think about the infrastructure deficit that New Zealand
currently has. So lifting the threshold to three hundred and
fifty percent will make a material differense for many councils
and as a good news story and we boocom the Yeah, it's.

Speaker 1 (00:37):
A good news story because if you borrow more to
build a bridge or a pipe or whatever, that's brilliant.
But then councils tend not to pay it back and
then they reach their limit and then the next thing
you're doing is talking about increasing the limit, which is
very American, isn't it.

Speaker 2 (00:49):
Well, it does still have to be paid back, and
I think that's a key thing for New Zealanders. To understand.
We want better infrastructure, we are going to have to
pay for it. But this infrastructure lasts, you know, fifty
to one hundred years, and so being able to borrow
over a longer period of time is important rather than
just today's rate payers having to fund infrastructure that's going
on the ground the last a long time.

Speaker 1 (01:07):
Can you hate name me any councils who pay back
their debt.

Speaker 2 (01:10):
Yeah, my council pays back. It's debt. That's part of
part of being the responsible governor is making sure that
we understand your your.

Speaker 1 (01:17):
Counsel that you're one of the hut councils here.

Speaker 2 (01:20):
No, I'm a mayor of Celn District.

Speaker 1 (01:21):
My apologies. So you've paid back how much in terms
of principle as opposed to interest.

Speaker 2 (01:28):
So we take our debt over different profiles of time.
It depends on what we're borrowing for and we pay
that back according to LGFA role. So that means obviously
there's quite a lot of interest in the first parts
of loans and it's similar to bankle ending. But we
make sure that over time we've paid back the debt
and we profile that over our ten year plan.

Speaker 1 (01:47):
Is your debt going down or not.

Speaker 2 (01:50):
It will go down over ten years. But at the
moment we're a high growth council will be borrowing more over.

Speaker 1 (01:55):
So you're not really paying a back, Sam, You're borrowing
more as you pay it back. You borrow more, is
what I'm saying.

Speaker 2 (01:59):
Yeah, yes, well, and in a high growth space purpose
and you're going to have to borrow more to fund
the infrastructure that growth requires.

Speaker 1 (02:06):
My point being, are we not simply getting ourselves as
much as we all agree we need some infrastructure. That's true,
but are we simply not getting into more and more
and more debt and inevitably that's going to bite us
in the bump.

Speaker 2 (02:19):
Yes, we are borrowing more and more debt and we
have to because rate paths currently can't afford to fund
the infrastructure deficit we're in. So at the moment, council's
got to options rate or borrow, and borrowing has been
opened up, so that's good. We're looking for new tools
from the governments to fund local government. Yesterday we launched
twenty five new tools and those would help the rating
impact we could have gest on new builds returns, mineral

(02:43):
extraction royalties returned to local governments, local settings of fees
and charges without legislation, those things would help the rating
impact rather than needing to borrow.

Speaker 1 (02:51):
All right, man, appreciate it very much, Sam Broughton, the LG.
Wonder who's the guy I was thinking of on the
hut then? Who used to be with the local government?
Am I just literally making things up? For more from
the Mic Asking Breakfast, listen live to News Talks at
B from six am weekdays, or follow the podcast on iHeartRadio.