November 23, 2024 • 9 mins
The Local Government Funding Authority has allowed "high-growth" councils to borrow more.
The move is in hopes that councils will be able to deliver projects more efficiently.
Auckland, Tauranga, and Hamilton are just a few of the councils thought to be eligible for the increase.
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Speaker 1 (00:05):
You're listening to the Weekend Collective podcast from News Talks be.
Speaker 2 (00:10):
The Local Government Funding Authority has allowed high growth counsels
I put high growth and quotation marks to borrow more
the movies and hopes that council will be able the
councilors will be able to deliver projects more efficiently spread
the cost. Auckland, Tyrang and Hamilton are just a few
of the councils thought to be eligible for the increase
and newly minted I'm not sure we can still say
(00:30):
that newly minted tyrag Amya Mahi Drysdale is with me now, Mahi, good, good.
Speaker 3 (00:35):
Afternoon, good after knowing, good to talk to you.
Speaker 2 (00:38):
Yes, actually we first spoke when you just won the
election and you were about to be the new mayor.
How's how's it going getting your feet under the table?
Speaker 3 (00:47):
Oh pretty good. Yeah, we've had a lot to deal
with and yeah, a few few sort of challenges as
we've started, but no, it's it's going well and got
a good team around the table and starting to make
some make some good decisions, you know, really really trying
to look up to the finances, which is a challenge
for all the councils.
Speaker 2 (01:08):
Any surprises for you when you got on, like, oh,
didn't realize this was going to happen or whatever.
Speaker 3 (01:14):
Not really, I guess, yeah, it's just trying to get
up to speed. I think you're a bit more reactionary
than i'd like to be. And that's sort of where
we're getting to now that we're starting to be a
bit more proactive and making future decisions rather than dealing
with the past.
Speaker 2 (01:31):
So right, let's get onto this announcement of increased borrowing
capacity for high growth councils. I guess the first thing is,
are you a high growth counsel.
Speaker 3 (01:40):
Yes we are. We've been one of the fastest growing
regions in the country the last twenty years, so yeah,
we're certainly feeling the effects of that and welcome the
announcement of higher higher debt limits.
Speaker 2 (01:55):
What was the problem that needed addressing from your angle?
Speaker 3 (02:00):
So basically, you know, there's this arbitrary figure that they've
put on. As you know, I guess times your revenue,
So at the moment, it's too eighty five about to
drop down to too eighty And what this does is
it says it's up to three fifty So what.
Speaker 2 (02:17):
Three fifty three fifty one per.
Speaker 3 (02:19):
Sorry, it's three fifty times your income. So if you
if you think about we've we've heard a lot about
debt to income ratios and the reserve banks talking you
know six to seven which is six hundred to seven
hundred percent, and councils are limited to to eighty and
now the High Growth Council is up to three fifty.
(02:41):
So it's three fifty percent of your income.
Speaker 2 (02:44):
Oh good. Sorry for a minute there, I thought you
meant three hundred and fifty dollars for every dollar, which
would have been that was righten the horses a bit, hey,
So what does it change for you?
Speaker 3 (02:55):
It just gives us a bit more headroom. And you know,
I guess what I found is going into local politics
is is you know there's there's just ways around that.
And you know, there's this thing called the i f F,
which is the Infrastructure Financing and Funding Act, which has
(03:16):
has a way of borrowing which doesn't count on your
balance sheet, but it's more expensive and you know, really
you'd be better to have, you know, us to be
able to borrow through ol GFA, which is the Local
Government Funding Agency, which is cheaper debt. It's on your
balance sheet. It's visible to everyone. But you know, so
(03:37):
they sort of put this arbitrary figure in the place
and then they give you ways around it, and this
just just brings it much more transparent to everyone can
see what's happening.
Speaker 2 (03:46):
So, is there something that is on your horizon that
you're going to be able to fund that you might
have been under in doubt now that you're going to
be able to get the sextra funding?
Speaker 3 (03:57):
Not really, Like, we want to be prudent with our spending,
so we're going to try to stay inside our limit.
But what this gives us is it gives us some flexibility.
And you know, we are able to not watch every
single dollar. You know, at the moment, every single dollar
we spend we have to to take out somewhere else.
(04:20):
And this just gives us a little bit more flexibility.
You know, if we had a disaster, it would give
us some headroom. Right now, we've got about twenty five
million dollars that we can borrow, so obviously, as a counsel,
you know that's that's not a lot of a lot
of headroom if if something goes wrong.
Speaker 2 (04:39):
What do you say to for people who want reassurance
Obviously with central government, there's always arguments about how much
indebtedness we've got. Would there be some you can understand
there be some ratepayers who be nervous about the license
for some counsels to borrow more. What would you say
to those rate payers?
Speaker 3 (04:55):
Absolutely, we have to be prudent with spending. And you know,
I think it's it's about what this does and if
you use it for the right things, I think there's
going to be some govenance on on that money that
it's it's being spent on the right things, and you know,
that's that sort of growth and things like that. And
what debt does is it spreads the the assets that
(05:18):
you're purchasing or you know, creating over the lifetime that
they're used. So it's sort of it's much fairer way
to to then make the rate payers of today pay
for all the infrastructure, et cetera that you're building today.
So that's that's what debt does, and you know, it
just just makes it a lot fairer. So so that's
(05:39):
very much. I guess what we're trying to do is
be prudent. But if we are building for the future,
that will be spread on the on the rate payer
of the next thirty odd years.
Speaker 2 (05:49):
What about rates? Will it have any effect on pushing
the rates up?
Speaker 3 (05:55):
Obviously, if you if you borrow, you have to service
that debt. It's like a mortgage, you know, the more
you borrow, the bigger the interest bill. So that's why
I say it's it's got to You've got to be
careful where you spend that. And you know, you don't
want to be borrowing for your everyday living. You want
to be borrowing for creating something, you know, and obviously
with growth, you know the the idea of that, if
(06:18):
you're building infrastructure for growth, you're going to have more
people to pay in the future, and so so that
sort of spreads that burden. So yes, you do have
to be very careful because the more you borrow, the
more you have to pay, so you have to ensure
that that is enabling more people to help pay in future.
Speaker 2 (06:36):
It's a little bit of talk from time to time
about capping rights. What's your response to that.
Speaker 3 (06:40):
I think it's a terrible idea. You know, we've heard,
we've heard the you know how it works in Australia
and all it does is both basically drive councils into
the ground. It doesn't, it doesn't help anyone. You're much
better to elect people that are financially savvy and and
(07:03):
you know, don't don't spend your money willy nilly, make
good financial decisions. That's that's a much better way than
than capping rates. I think you'll all you'll see is
counsels effectively go bust if they do it.
Speaker 2 (07:17):
How soon is it's going to make a difference to
those councils who are desperate to get more funding.
Speaker 3 (07:23):
Well, for us, it's it's huge. But again, you know,
we've we've got to assess every single dollar we spend,
you know, to to ensure that we're getting good value
for money and that you know, it's making sense to
to our rate payers. So you know, we're not We're
not going to go on a spending spree, I can
tell you that much.
Speaker 2 (07:41):
Sorry, I mean how soon, how soonders are all kick and.
Speaker 3 (07:43):
Well how soon? I think, yeah, Like so basically we're
we're just waiting now on the covenants and and figuring
out what that what we can spend it on. But
I would expect that this is sort of in play
in the next next couple of.
Speaker 2 (07:58):
Months just just on other I don't know how much
you talk to other mayors and other counsels, but they're
probably the big thing is demonstrate your high growth council.
Are the sort of records around council's growth rates and
all that? Is it going to be accurate? Are there
going to be some councils who deserve it who might
miss out any Have you got any insight into that?
Speaker 1 (08:17):
Not?
Speaker 3 (08:18):
Yeah, again, haven't seen the detail, but it's it's pretty
clear you know who is growing and who is not.
Yet all those figures are available. I think you know
people like Selwyn and Queenstown and Hamilton and Auckland and
towering Are and Wiper you know that those are the
there's there's a whole lot more, but you know that's
(08:38):
that's the sort of the highest highest growth councils. And
it'll be interesting to see where they where they cap that,
and you know there might be you've got to you've
got to show an x amount of growth rate or
whether it's historic. I'm not sure what they'll they'll do
for that, but yeah, I suspect it will be on
on what you're actually using them. The extra money for
is where the covenants will come in.
Speaker 2 (08:59):
Yeah, good stuff. Hey Mahia, I really appreciate your time
this afternoon.
Speaker 1 (09:04):
For more from the Weekend Collective, listen live to News
Talk ZEDB weekends from three pm, or follow the podcast
on iHeartRadio
You're listening to the Weekend Collective podcast from News Talks be.
Speaker 2 (00:10):
The Local Government Funding Authority has allowed high growth counsels
I put high growth and quotation marks to borrow more
the movies and hopes that council will be able the
councilors will be able to deliver projects more efficiently spread
the cost. Auckland, Tyrang and Hamilton are just a few
of the councils thought to be eligible for the increase
and newly minted I'm not sure we can still say
(00:30):
that newly minted tyrag Amya Mahi Drysdale is with me now, Mahi, good, good.
Speaker 3 (00:35):
Afternoon, good after knowing, good to talk to you.
Speaker 2 (00:38):
Yes, actually we first spoke when you just won the
election and you were about to be the new mayor.
How's how's it going getting your feet under the table?
Speaker 3 (00:47):
Oh pretty good. Yeah, we've had a lot to deal
with and yeah, a few few sort of challenges as
we've started, but no, it's it's going well and got
a good team around the table and starting to make
some make some good decisions, you know, really really trying
to look up to the finances, which is a challenge
for all the councils.
Speaker 2 (01:08):
Any surprises for you when you got on, like, oh,
didn't realize this was going to happen or whatever.
Speaker 3 (01:14):
Not really, I guess, yeah, it's just trying to get
up to speed. I think you're a bit more reactionary
than i'd like to be. And that's sort of where
we're getting to now that we're starting to be a
bit more proactive and making future decisions rather than dealing
with the past.
Speaker 2 (01:31):
So right, let's get onto this announcement of increased borrowing
capacity for high growth councils. I guess the first thing is,
are you a high growth counsel.
Speaker 3 (01:40):
Yes we are. We've been one of the fastest growing
regions in the country the last twenty years, so yeah,
we're certainly feeling the effects of that and welcome the
announcement of higher higher debt limits.
Speaker 2 (01:55):
What was the problem that needed addressing from your angle?
Speaker 3 (02:00):
So basically, you know, there's this arbitrary figure that they've
put on. As you know, I guess times your revenue,
So at the moment, it's too eighty five about to
drop down to too eighty And what this does is
it says it's up to three fifty So what.
Speaker 2 (02:17):
Three fifty three fifty one per.
Speaker 3 (02:19):
Sorry, it's three fifty times your income. So if you
if you think about we've we've heard a lot about
debt to income ratios and the reserve banks talking you
know six to seven which is six hundred to seven
hundred percent, and councils are limited to to eighty and
now the High Growth Council is up to three fifty.
(02:41):
So it's three fifty percent of your income.
Speaker 2 (02:44):
Oh good. Sorry for a minute there, I thought you
meant three hundred and fifty dollars for every dollar, which
would have been that was righten the horses a bit, hey,
So what does it change for you?
Speaker 3 (02:55):
It just gives us a bit more headroom. And you know,
I guess what I found is going into local politics
is is you know there's there's just ways around that.
And you know, there's this thing called the i f F,
which is the Infrastructure Financing and Funding Act, which has
(03:16):
has a way of borrowing which doesn't count on your
balance sheet, but it's more expensive and you know, really
you'd be better to have, you know, us to be
able to borrow through ol GFA, which is the Local
Government Funding Agency, which is cheaper debt. It's on your
balance sheet. It's visible to everyone. But you know, so
(03:37):
they sort of put this arbitrary figure in the place
and then they give you ways around it, and this
just just brings it much more transparent to everyone can
see what's happening.
Speaker 2 (03:46):
So, is there something that is on your horizon that
you're going to be able to fund that you might
have been under in doubt now that you're going to
be able to get the sextra funding?
Speaker 3 (03:57):
Not really, Like, we want to be prudent with our spending,
so we're going to try to stay inside our limit.
But what this gives us is it gives us some flexibility.
And you know, we are able to not watch every
single dollar. You know, at the moment, every single dollar
we spend we have to to take out somewhere else.
(04:20):
And this just gives us a little bit more flexibility.
You know, if we had a disaster, it would give
us some headroom. Right now, we've got about twenty five
million dollars that we can borrow, so obviously, as a counsel,
you know that's that's not a lot of a lot
of headroom if if something goes wrong.
Speaker 2 (04:39):
What do you say to for people who want reassurance
Obviously with central government, there's always arguments about how much
indebtedness we've got. Would there be some you can understand
there be some ratepayers who be nervous about the license
for some counsels to borrow more. What would you say
to those rate payers?
Speaker 3 (04:55):
Absolutely, we have to be prudent with spending. And you know,
I think it's it's about what this does and if
you use it for the right things, I think there's
going to be some govenance on on that money that
it's it's being spent on the right things, and you know,
that's that sort of growth and things like that. And
what debt does is it spreads the the assets that
(05:18):
you're purchasing or you know, creating over the lifetime that
they're used. So it's sort of it's much fairer way
to to then make the rate payers of today pay
for all the infrastructure, et cetera that you're building today.
So that's that's what debt does, and you know, it
just just makes it a lot fairer. So so that's
(05:39):
very much. I guess what we're trying to do is
be prudent. But if we are building for the future,
that will be spread on the on the rate payer
of the next thirty odd years.
Speaker 2 (05:49):
What about rates? Will it have any effect on pushing
the rates up?
Speaker 3 (05:55):
Obviously, if you if you borrow, you have to service
that debt. It's like a mortgage, you know, the more
you borrow, the bigger the interest bill. So that's why
I say it's it's got to You've got to be
careful where you spend that. And you know, you don't
want to be borrowing for your everyday living. You want
to be borrowing for creating something, you know, and obviously
with growth, you know the the idea of that, if
(06:18):
you're building infrastructure for growth, you're going to have more
people to pay in the future, and so so that
sort of spreads that burden. So yes, you do have
to be very careful because the more you borrow, the
more you have to pay, so you have to ensure
that that is enabling more people to help pay in future.
Speaker 2 (06:36):
It's a little bit of talk from time to time
about capping rights. What's your response to that.
Speaker 3 (06:40):
I think it's a terrible idea. You know, we've heard,
we've heard the you know how it works in Australia
and all it does is both basically drive councils into
the ground. It doesn't, it doesn't help anyone. You're much
better to elect people that are financially savvy and and
(07:03):
you know, don't don't spend your money willy nilly, make
good financial decisions. That's that's a much better way than
than capping rates. I think you'll all you'll see is
counsels effectively go bust if they do it.
Speaker 2 (07:17):
How soon is it's going to make a difference to
those councils who are desperate to get more funding.
Speaker 3 (07:23):
Well, for us, it's it's huge. But again, you know,
we've we've got to assess every single dollar we spend,
you know, to to ensure that we're getting good value
for money and that you know, it's making sense to
to our rate payers. So you know, we're not We're
not going to go on a spending spree, I can
tell you that much.
Speaker 2 (07:41):
Sorry, I mean how soon, how soonders are all kick and.
Speaker 3 (07:43):
Well how soon? I think, yeah, Like so basically we're
we're just waiting now on the covenants and and figuring
out what that what we can spend it on. But
I would expect that this is sort of in play
in the next next couple of.
Speaker 2 (07:58):
Months just just on other I don't know how much
you talk to other mayors and other counsels, but they're
probably the big thing is demonstrate your high growth council.
Are the sort of records around council's growth rates and
all that? Is it going to be accurate? Are there
going to be some councils who deserve it who might
miss out any Have you got any insight into that?
Speaker 1 (08:17):
Not?
Speaker 3 (08:18):
Yeah, again, haven't seen the detail, but it's it's pretty
clear you know who is growing and who is not.
Yet all those figures are available. I think you know
people like Selwyn and Queenstown and Hamilton and Auckland and
towering Are and Wiper you know that those are the
there's there's a whole lot more, but you know that's
(08:38):
that's the sort of the highest highest growth councils. And
it'll be interesting to see where they where they cap that,
and you know there might be you've got to you've
got to show an x amount of growth rate or
whether it's historic. I'm not sure what they'll they'll do
for that, but yeah, I suspect it will be on
on what you're actually using them. The extra money for
is where the covenants will come in.
Speaker 2 (08:59):
Yeah, good stuff. Hey Mahia, I really appreciate your time
this afternoon.
Speaker 1 (09:04):
For more from the Weekend Collective, listen live to News
Talk ZEDB weekends from three pm, or follow the podcast
on iHeartRadio
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