It is inevitable the Southland District Council [SDC] will have to borrow money to fund future infrastructure plans, its chief financial officer says.
How it does so may be set to change.
A report was presented to councillors at their first meeting of the year yesterday recommending it take part in the Local Government Funding Agency (LGFA).
The LGFA was established in 2011, by a group of New Zealand local authorities and the Crown, to enable local authorities to borrow at a lower interest rate.
There are 71 councils across the country participating, and $11.9billion has been borrowed by the local authority sector since.
Local government in New Zealand consists of 78 local, regional and unitary councils.
LGFA has an estimated market share of 81.8% of total council borrowing for the rolling 12-month period to December 2020 (compared with the LGFA’s historical average since 2012 of 74%.
Chief financial officer Anne Robson said the council had previously indicated it would need to borrow money no matter what but how, was the question.
The council could participate either as a shareholder, guarantor or a non-guaranteeing participator — all of which had different levels of risk and limitations.
Even if it agreed to join the LGFA, the council would not have to borrow from the organisation and would still be able to borrow from elsewhere if it preferred.
The reported stated, as at June 30, 2020, the council had no external debt and $35.3million of internal loans borrowed against its reserve funds.
The 2018-28 long-term plan indicated external loans would peak at $15.8million, while internal loans would stay at $60.7million.
The resulting inwards cash of up to $45million would mean reserves were invested externally rather than used to fund capital projects internally.
When it was time for councillors to decide whether to put the report out for public consultation, Cr Don Byars was the only one who opposed it.
He believed it was too risky.
"We have no real understanding of the risks involved for the sake of saving peanuts."
Cr John Douglas argued it represented an opportunity for the council and for Southland ratepayers.
"We need to be cognisant of that ... it give us access to much cheaper funding."
Cr Ebel Kremer agreed it was important to consult the community otherwise there was no opportunity to "explore it as an option".
Cr Karyn Owen said while the public should have their say, it was a complex document and needed to be made clear so readers did not get "lost" reading it.
Council staff were working to translate it into simpler terms.
The document will go out for public consultation from February 9 to 26.
