Auckland Council debt at the limit, time to sack the Treasurer

brownhonest

The rot at Auckland Council continues unabated with more news about just how perilously close to trouble the Council is in financially.

Council is already tapping the lit of it’s borrowing capacity. Currently net debt sits at or close to 14.9% of revenue. The limit is 15%.

Which means Len Brown (as treasurer) has spent so loosely in the last two years that Council cannot borrow any more money.

The only way that Council can borrow more – is to increase it’s rates. Raising the rates by 2.5% as noted on this table will increase borrowing capacity by 3%.

Mayor Brown is talking up closure of services – libraries, inorganic rubbish and so on to trick ratepayers into believing things are tough and, to justify breaking his election promises with a significant rates increase. He is already signalling that he is likely to break that promise.  

Ratepayers are about to be mauled with savage increases. Big increases because the promised spending is big.

So hungry is Len’s appetite to spend up large that he has drained the coffers and pushed Auckland a Council to its debt ceiling. It is reckless and if you or I were to have spent personally beyond our means like this we’d be close to bankruptcy with the kids missing out on all manner of things. The debt will take generations to repay.

How did Council get into this state? How can it operate into the future? These are the serious questions that need to be asked.

Auckland Council has very little assets of real value. It doesn’t have $55 billion of assets because they are intangible things like roads and pipes and sewer plants that you can’t actually buy or get a return from that are depreciated to a book value of zip. The assets of any value are the ones that can be sold – like land and buildings. Tangible things.

Council’s ability to borrow from banks is off the back of it’s ability to mandate rates onto people. And the banks love Auckland Council because it has an appetite to borrow that’s Aiken to heroin addict. They know ratepayers ultimately will have to pay the costs.

Len is sure to stiff ratepayers with massive rates increases. And as sure is night follows day – he will be straight to negotiate an increase to the Council debt. It is reckless spending.

 

Av Rate Increase <4.9% 2.5% 4.9% 4.9% 4.0% 4.4% 4.6% 4.4% 4.5%
Net Debt as % of revenue 275% 195% 198% 202% 211% 220% 234% 242% 239%
Net interest as % of total income 15% 11% 11% 12% 12% 13% 13% 14% 14%
Net interest as % of rates income 25% 19% 20% 20% 21% 22% 23% 24% 24%
Year 2015 2016 2017 2018 2019 2020 2021 2022
Limit

 

 


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