Council set to hoist borrowing past $1 billion mark

The Dunedin City Council appears set to increase the amount of money it and its companies can borrow to $1.2 billion.

The council and its companies have operated under a group debt ceiling of $975 million since December 2019, but an increase would be needed to allow planned capital expenditure.

Spending needed by council company Aurora Energy to make its network safer and more reliable and by the council to improve infrastructure have been identified as the main drivers of a forecast increase in group debt.

The lion’s share is from increased council capital expenditure.

The spending has already been approved, but council borrowing arrangements require uncalled share capital from its companies to be greater than group debt, forcing an adjustment by the council.

Uncalled share capital provides security for debt across the council and its companies.

City councillors will consider a report about its collection of companies under the Dunedin City Holdings Ltd banner next week.

Council staff have recommended an increase in uncalled capital from $975 million to $1.2 billion.

This would align with what is considered necessary for group debt, which is forecast to be about $1.15 billion by July 2024.

Council staff said the increased share capital would not commit the council or Aurora to future debt levels - it would "simply enable the future debt to be available for the planned capital expenditure programmes".

The increase would allow some room between the uncalled share capital, which serves as a cap, and forecast debt.

City council debt, excluding company debt, is forecast to exceed $820 million by 2031, after a $1.5 billion capital spending programme.

Almost two-thirds of this work was aimed at renewing ageing infrastructure, at the same time as a revamped rubbish and recycling kerbside collection system was brought in, and "ensuring a just transition towards a safer climate future", the council commented in its 10-year plan.

Aurora historically underinvested in its network and it has been in catch-up mode to make its network safer and more reliable.

The lines company plans to invest more than $790 million in its Dunedin and Central Otago networks in the next decade.

Government reform of drinking water, stormwater and wastewater has created some uncertainty about council debt funding.

The Dunedin City Council’s level of uncalled capital is to be reviewed again in October 2023, when the effects of reform could be taken into account.

The council has budgeted $562 million in capital spending on drinking water, stormwater and wastewater in the next decade - more than a third of its overall capital programme.

A portion of debt is expected to be assumed by new regional water entities when they take over functions from councils.

grant.miller@odt.co.nz

 

Comments

Well SOMEONE has to pay for the rainbow crossings, polka dot paint and artwork that this council have deemed absolutely necessary!

 

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