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Mayor defends council's finances

Published: 9:59AM Monday March 12, 2012 Source: Fairfax

  •  (Source: ONE News)
    Source: ONE News

South Taranaki Mayor Ross Dunlop is defending his council's finances after claims it has one of the worst debt burdens in the country.

Statistics rank the South Taranaki District as sixth on a list of councils owing money, with the debt at $2755 for every man, woman and child in the district.

A report in the Sunday Star-Times revealed the council with the greatest debt burden was Kaipara District with $4142 a person in 2010.

The New Plymouth District Council was 20th on the list with $1686 per person, while Stratford District Council debt equated to just $474 for each resident.

The latest report comes amid pressure from Local Government Minister Nick Smith for councils to curb spending, debt levels and rates increases.

He is concerned local government debt has ballooned from $1.5 billion to well over $8b in the past decade. At the same time rates had climbed an average seven per cent a year.

The Star-Times said he was set to introduce policies that will rein in local government.

Fine financial form

Both Dunlop and his New Plymouth counterpart Harry Duynhoven said their councils were in fine form financially.

"They're looking at just our debt and not the asset side of the council," Dunlop said, "and we have our Long Term Investment Fund (LTIF) which means that our net debt is very low.

"It's like having a mortgage but also having a whole lot of money in the bank as well.

"We work on about 26,000 residents so, per capita, we've got $3846 in the bank."

Dunlop said the South Taranaki District Council had made a conscious decision to borrow money for the upgrade of the Hawera water supply and other infrastructure rather than take the money from the LTIF and pay for it outright.

"We can borrow at very, very favourable rates because next to the Government we are the safest place to lend money to," he said.

Duynhoven said his council had been conservative and had used its investment fund from the sale of Powerco shares prudently to reduce the burden of debt on the ratepayer.

Ratepayer backlash

New Plymouth District Council is facing a ratepayer backlash over a plan to build a $28 million sports stadium and increase rates over the next 10 years by an average of 5.5% a year.

And a backlash from Smith, who wants to make elected representatives take more responsibility for wage bills.

Reforms he is working on will pare back the scope of local government functions so they only will have control of essential local services such as waste, water, roads, libraries and consents.

They will also require authorities to be more "prudent" in event management.

It follows David Beckham's 2009 football game which lost Auckland Regional Council $1.79m and the saga of the V8 Supercar races which cost Hamilton ratepayers more than $40m.

Smith believes the debt blowout stems from 2002 legislation that widened councils' responsibilities.

"[Councils] can do anything they like. In the Auckland plan they have set targets for NCEA pass rates by 2020 ... nothing to do with the council. Councils have got targets around improvements in child abuse - a really important issue - but the proper agency is one that we all pay for as taxpayers through Child, Youth and Family. "

However, he did not want to "micro-manage" local authority.

Rather than cap rates or staff numbers or regulate pay bands, Smith will instead offer incentives to councils to keep their bills - and the burden on ratepayers - down.

Lawrence Yule, president of Local Government New Zealand, said his organisation would work constructively with the minister but councils were "uncomfortable" with some of the proposals.

The sector doesn't believe debt is a problem, he said.

"The debt servicing costs sit at about 5.8% of the income level of councils. The world best-practice model says it should be under 10%. Most of that debt is in infrastructure. It's not frilly things, it's in water systems, waste-water systems and some big roading projects that are going to last 50 years."

He rejected the idea that council functions are too broad. "Most things that local government do that aren't part of core services we do generally because the private sector or government has failed."