The Dunedin City Council yesterday decided to ask the Local Government Funding Agency (LGFA) to extinguish a covenant relating to interest on group debt compared with rates.
The move could assist the council’s financial flexibility if a rates cap came in, it was suggested at a finance and performance committee meeting.
Three other lending metrics would remain, and they appeared to be more suitable and realistic, councillors agreed.
The council voted 8-4 to propose removal of the covenant that required group interest expenses to be less than 30% of annual rates income.
Lee Vandervis was one of the four councillors against, and he displayed an improvised chart depicting Loch Ness monsters to illustrate his ongoing concern about the growth of ‘‘debt monsters’’.
The council’s move was about making it easier to get more debt in different situations, he said.
‘‘We have far too much debt, as it is,’’ Cr Vandervis said.
Council debt and council companies’ debt were two extraordinary monsters, he said.
The council was a victim of excessive spending and existing covenants were ‘‘insufficiently constraining’’, he said.
Crs Russell Lund, Andrew Simms and Jo Galer also voted against.
Deputy mayor Cherry Lucas said much of the council’s group debt was for its companies.
A covenant about net interest to total revenue was more relevant, she said.
Cr Brent Weatherall said the request was about protecting financial flexibility for the council and its companies to borrow — ‘‘I hope prudently for infrastructure and strategic investment in an environment where future rate caps may be introduced’’.
Mayor Sophie Barker said the move was not about opening the floodgates to frivolous borrowing.
It should enable council companies to operate within more suitable parameters, she said.
The elected members who voted for were Ms Barker and Crs Lucas, Weatherall, John Chambers, Doug Hall, Mandy Mayhem, Mickey Treadwell and Steve Walker.
In reports for yesterday’s meeting, the council noted much of the group’s borrowing was for company debt, rather than council operations.
At the end of June last year, total council and company borrowings were almost $1.4 billion.
Of this, Aurora Energy had $573 million.
Group debt was forecast to reach $2.3b in 2034. Aurora’s share of that was forecast to be about $900m.
The council also discussed a draft policy yesterday about debt repayment.
Progress on this front was greeted with an exclamation of ‘‘hallelujah’’ from Cr Weatherall.
