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.