Len Brown’s out of control borrowing and spending

Policy Parrot says:

A health check of Auckland Council finances by Cameron Brewer should make rate payers develop sweaty palms.

Debt ceilings have risen to 275% and Long Term Plan have seen an increase to forecast debt of another half a billion dollars.

Auckland Council is out of control on spending. As Brewer points out the Coucil debts are going to possibly spiral into a dangerous and unaffordable burden if and when low interest rates increase.

And what of internal debt? Council loans itself money internally on short term interest free loans which it is understood are typically not repaid but perpetually renewed annually to avoid reporting on the balance sheet. Short term loans don’t require Council to report them as debt. The clever trick is to therefore renew these loans each year by recording a repayment and then a new loan.

Smoke and mirror accounting is not just a feature of Ponzi schemes and finance companies! 

Auckland Council is about to recklessly embark on a spending spree on trains and other big projects that could lead to a credit down grade or worse. That credit rating down grade would be aost inevitable if Council had to report to true debt levels including internal debt.

Brewer has reason to be concerned. This Auckland Council debt is massive, growing and a time bomb waiting to explode.

The chances are strong that Council will lose its head and get into trouble over the next 10 years leaving a future government the responsibility of cleaning up the mess.

Or if Chris Tremain was prudent he would legislate to lower Council borrowing caps as well as requiring Council to declare all debt including short term internal debt.

Nothing will happen, though, because Tremain isn’t ballsy enough and is too cosy to Local Government.

  • blokeintakapuna

    Hidden Debt?
    Does that mean the Auckland Council are possibly operating whilst Insolvent?
    If debt can be hidden as easy as mentioned here – can the size of the debt also be hidden?
    Seems it’s time the Authorities extracted finger and shone some brilliant sunlight into all of this.
    Russell should call for an enquiry at the very least!

    • Michael

      Councils can never be insolvent – they quit and get a commissioner, who must increase the rates 20% to cover the debt and make you insolvent.

    • Callum

      There is no hidden debt, you can’t owe yourself money.

  • Pissedoffyouth

    But they need people to come forward to get funding for you being a special little cupcake as soon as possible.

    Oh and free baby sitting at Movies in the Park or various South Auckland pools so that mum and 5 dads can hit the pokies

    • Akl

      That’s a little stereotypical to imply that South auckland parents only gamble. Come on mate be real! most parents in Auckland are excellent parents in all different ways.

      I’m gonna give you back a bit of your pie and take a random guess and say you’re from the North Shore where parents abandon kids while shopping for jimmy choos and mistresses.

      • Hazards001

        I’m sure POY will be happy to respond when he gets back but for now he has made no secret of the fact he is from South Auckland.

        Me on the other hand I’m from the North Shore and I have no fucking idea what a “jimmy choos and mistresses.” is or where to go to find one.
        And I suspect I don’t wanna!

        On the other hand you are correct. Most parents in Auckland and the rest of NZ are great parents. But the truly terrible ones that feature so often in our media do have a tendency to be from areas that are stereotyped by comedians. All be it not always South Auckland.

        • Never in the dark…..

          “jimmy choos and mistresses” = Cockney rhyming slang for “shoes & dresses” ;)

      • Pissedoffyouth

        i was going to reply with something but I see hazards did it for me. I think you watch too much sex and the city if you know what a jimmy choo is, had to Google it myself. plus on the shore the parents can pay for their own pools so your point is?

        • Akl

          I’m just trying to say don’t pin that stereotype on everyone, i’m from South Auckland, and I’ve not once been too the pokies. So saying that is quite offensive.

          • Akl

            and ex Manukau city has always had free pools, even in the wealthier suburbs of Howick/Pakuranga. I don’t think it was a matter of having to pay for the entry but something that the previous city has always offered so people expected.

  • PM of NZ

    Internal loans funded by all those juicy depreciation reserves accumulating since the 1989 local gummint reorganisation, right? Definitely all smoke and mirrors as those reserves will have been spent a million times over.

    • philbest

      That’s exactly the point. The whole purpose local government exists and charges rates, is to provide and maintain infrastructure. That includes renewal. How they fund this is immaterial in a way. Voters and ratepayers understand the simple underlying facts better than they will ever understand smoke and mirrors accounting. The fact is that rates will have to go up heaps, and Councils blowing money on inefficiencies and non-core duties is the big problem.

      This also is the covert reason that Councils love growth containment planning. This is because it gives them a new revenue source to pay for infrastructure renewal that they have failed to provide for. That is, every developer of an “intensification” project gets shaken down for fees that are actually illegal – because fees are supposed to be charged when a development is the CAUSE of NEW infrastructure spending being required. But Councils are trying to pay for existing system renewals this way.

      In the case of fringe development, the Council cannot “double dip”; the infrastructure actually IS new.

      The argument that people are sucked in by, that intensification is “more efficient because the infrastructure is already there”, is a fraudulent argument. The infrastructure is overdue for renewal anyway and ratepayers should be paying for it.

      The politicians and planners say repeatedly that “rates will have to rise if we allow more sprawl” – but it is fraudulent to imply, as they do, that rates rises will be to pay for the new infrastructure – developers pay for this anyway. The truth is that rates will have to rise to pay for renewal of existing infrastructure, if more developers head out to the fringes instead of doing intensification, and hence less shakedowns and double dipping by the Council.

  • GazzW

    So what do Aucklanders plan to do about Len? Fuck all because there is no credible mayoral candidate alternative to vote for. So we will all sit back for another three years and collectively take it up the arse from Len. What a prospect. We deserve shit leadership because of our apathy.

    FFS, vote for Palino and let’s give him the best possible set of councillors to back him. If Brown does get back make him a lame duck mayor.

    • philbest

      I was very impressed with Palino’s comments recently about the Auckland Plan.

      • Akl

        Just disappointed with his views for public transport and asset sales. That’s why i’m voting on Len, the only mayoral candidate with a real vision for the city.

        • philbest

          Not sure if you are a loyal Whale-Oiler being satirical, or sincere.

          The “vision” Len has, is of course maintaining Dorkland’s position as one of the world’s least affordable housing cities, one of the world’s worst traffic congestion cities, and one of the world’s worst fiscally busted-arse cities.
          Just like his models, London, Hong Kong, Vancouver and Melbourne.

          As with those cities, the only winners are in the FIRE sector. Lower income, less skilled, younger and disadvantaged people can go and eat coke. So can actual producers; parasites only are wanted, in the form of the FIRE sector and dependents on “social” housing.
          Give me Austin or Nashville or Raleigh or Salt Lake City any day, as policy models. Actually more relevant to Dorkland. What idiot who lives in a kind of “Second Life” dream world thinks any city anywhere can “be” London? Without Buckingham Palace, the BBC, Barclays Bank, etc etc? Without having had all Europe’s major finance families flee there during revolutions in Europe between 1790 and 1870? Without having been the capital city of the world’s most powerful imperial power for centuries?
          Oh, we just need to make the city more dense and have more public transport, and we will “be” London. DUH, DUH, DUH. This is like assuming we can all be high income film stars by dressing like George Clooney and Nicole Kidman and wearing the same make-up.
          There are actually several dozen cities in the UK that have policies that force higher density and conduct a war on car drivers. Guess what? None of them “are” London because of it. And what are the chances of Dorkland “being” London by adopting the same policies? Huh. Dorkland will more likely “be” Liverpool or Newcastle or Sunderland. Detroit with high density and unaffordable housing.

  • cows4me

    When you lot go tits up just remember New Zealand stops at the Bombay hills.

  • LabTested

    Is Chris Tremain that twat who constantly shouts out ‘that’s right’ during question time, interrupting ministers when they are making killer points. I wouldn’t expect him to do anything useful.

    I still remember Key slaughtering Clark in the house & that twat Tremain had his string pulled every 2nd sentence. Bloody annoying.

  • Orange

    http://www.stuff.co.nz/national/politics/local-body-elections/9153103/Auckland-mayors-plan-to-beat-traffic another 2.9 billion of debt incoming. And WHAT is with the claim that Auckland will be gridlocked without it? What the Bunny is he talking about?

  • Callum

    You can have internal loans short or long term wherever the hell you like, mainly because an internal loan is NOT debt. Seems a very pointless issue to me trying to wind up people with no knowledge of accountancy or basic common sense? Concentrate on the real story of external borrowings.
    If I have $20 in my bank account and borrow $20 from my bank account to put it in my wallet, I still have $20. This is what internal loans are and why the don’t show as debt.
    If I have $20 in my bank account but borrow $20 off you to put in my wallet I have an assets of $40 ($20 in bank and $20 in wallet) and a liability (the loan) to you of $20. This has to be show as debt and is the number that really matters.

    • Rat

      There’s no point trying to explain something so simple and basic to them …….

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