The Dunedin City Council and its companies are about to reach
the top of a $600 million debt mountain and start down the
However, it was likely to be years before there was room on
the council's books for any major new projects, potentially
leaving the council exposed if "something untoward came
along", Mayor Dave Cull said.
Council figures showed consolidated debt - spread across the
council and its companies - had risen to $616 million by the
end of the 2011-12 financial year on June 30, including core
council debt of $216 million.
Overall debt was expected to peak in the next eight months,
but would then begin a gradual decline as two decades of
major capital projects and upgrades came to an end.
The details are contained in the council's latest annual
report, for the year to June 30, to be considered at today's
full council meeting.
Core council debt paid for upgrades to the Tahuna wastewater
treatment plant, the Toitu Otago Settlers Museum and Dunedin
Town Hall, among other projects, the report said.
Overall debt also included $146.6 million of stadium debt
transferred to Dunedin Venues Ltd this year, and debt spread
across the council-owned Dunedin City Holdings Ltd group of
However, Mr Cull and council chief executive Paul Orders said
overall debt would begin a steady decline in the 2013-14
financial year, helped by a "stringent" programme of debt
"For the first time in recent years, the council will be
repaying more debt annually than it is drawing down," they
said in the annual report.
It was expected to take a decade to reduce debt to a more
acceptable level, but Mr Cull said last night the turnaround
was "really significant".
"I think it's about a different attitude to debt." His
comments came after unease at local authority debt levels
prompted the Government this year to unveil plans to reform
the sector and tackle the problem.
Mr Orders' appointment last year had added fuel to
cost-cutting efforts under way within the council, and helped
slash this year's possible 11.9% rates rise to 4.9% by the
time budgets were confirmed. Deferring some major capital
spending plans - such as a new Mosgiel pool - had also helped
ease debt demands, as had the decision to increase stadium
debt repayments by $1 million a year.
That reduced the loan term from 40 to 23 years and would save
about $100 million in interest payments. Mr Cull said those
kinds of changes helped reduce overall debt faster than
expected, and meant consolidated debt would be about $40
million lower than expected by 2014-15.
The council had, this term, realised the need for more
"headroom" in its budgets, to respond to any unforeseen
demand for spending.
A period of consolidation was likely to last five or six
years before there was room for major new projects, if
The council would have to rely more on partnerships and other
ways of funding projects such as those identified in the
city's new economic development strategy.
"The city can't afford to just stand still," Mr Cull said.
Cr Syd Brown, finance, strategy and development committee
chairman, believed recent spending meant the city entered
consolidation with upgraded facilities that met modern
requirements. He would like to see core council debt drop to
about $150 million, in line with the council's budget to
There was no pressing community demand for major spending, or
spending required by new government legislation, but
predicting the future was "crystal ball-gazing", Cr Brown
Audit New Zealand warned this year the council might be
forced to take on more debt if a major natural disaster
struck, given the city's $1.5 billion network of above- and
below-ground assets was uninsured. Mr Cull said yesterday all
councils were in the same boat, but Dunedin "could be"
exposed if "something untoward came along".
"I would like to get the city into a more comfortable