Council finance committee deputy chairwoman Gail McIntosh. Photo/file
Council finance committee deputy chairwoman Gail McIntosh. Photo/file
Tauranga's rapid growth has kept city debt on an upwards trend, despite the council's balance sheet getting a $61 million reprieve from selling the Route K toll road last year.
Council finance committee deputy chairwoman Gail McIntosh, part of the new-look council swept into power three years ago on the back of community fears about debt, has defended debt levels.
She said there was good debt and bad debt, with good debt being the investments in growth infrastructure that was ultimately repaid from development contributions.
The council had no choice but to front up with growth infrastructure such as roads and water. The secret was in the timing and being able to react quickly to market signals so projects could be put on the slow burner, she said.
Cr McIntosh said the council had got on top of the so-called bad or sloppy debt. She highlighted the big picture trend in the council's pre-election report that showed a $165 million decline in rate-funded debt to 2024-25's figure of $107 million.
Big spending infrastructure items included completing the Southern Pipeline and building a new water supply plant on the Waiari River to service Papamoa and Mount Maunganui.
Cr McIntosh said the council had been quite good at keeping an eye on stuff that was not essential infrastructure, such as picking the least costly option for the downtown waterfront upgrade.
''We still have to provide things that people expect of us, like supporting events.'' She said that debt had not gone down, although $61 million from the sale of Route K had come off the balance sheet.
''We are spending more on infrastructure, capital projects, and it is no use pretending that it won't carry on - as long as we can react quickly and put the brakes on if there is an economic downturn.''
Part of the problem with reacting quickly was that with infrastructure projects, the council often had to enter into long-term contracts. ''There is an absolute balance going on all the time.''
Cr McIntosh said she recognised that with development contributions, the council could never over-recover contributions but they sometimes under-recovered, and the difference fell back on ratepayers.
Mayor Stuart Crosby said the total numbers had come down from the sale of Route K and property sales, while development revenue had gone up because of growth. The raw data was that council debt would go up to just under $500 million at 2021.
But whereas the debt to revenue ratio had hovered on 250 per cent before the last election, it was now under 200 per cent and would rise to about 225 per cent.
''It is never a risk to the community because Tauranga has a growing rating base to repay debt.''
Tauranga City Council external debt Debt for last two years: $304m and $297m Debt projection this year: $391m Indicative debt next two years: $427m and $465m
We asked Tauranga's mayoral candidates for their view on debt. This is what they said:
Doug Owens: ''The published figures need reviewing as my understanding is that the council's debt at the beginning of 2015 was $450m. Subsequently, council undertook to liquidate some assets and shift the debt burden of Route K. If debt is on its way up again, then ratepayers should consider that the current council may be committing a new council to plans that it will not be able to change. If elected mayor, a full review of all council's finances would be undertaken and the books laid bare for all to see so we can fully consider the best way forward.''
Greg Brownless: ''Debt is always a concern because it has to be repaid and that repayment comes mainly from ratepayers. While interest rates are low, debt may not be as concerning but that can change rapidly. Even small increases to interest rates can mean council has to find significantly more money to service the debt, let alone repay anything. The use of debt has to be for essential infrastructure and services. The debt problem highlights the importance of seeking funding from all sources such as Government and the Regional Council.
Max Mason: ''A reasonable level of debt is fine as long as the council is balancing the community's long term needs within a sensible financial envelope. My strong view is the council needs to focus on alternative forms of funding. The Bay of Plenty Regional Council has a billion dollar balance sheet, our three iwi will have treaty settlements approaching $190m, entrepreneurs are keen to explore public/private partnerships and philanthropists want to work with council. Offshore opportunities beckon and charities are keen to contribute to the community.''
Noel Peterson: ''I was fortunate enough to study financial management as part of my horticultural training and have a good understanding of matters financial, albeit from the perspective of an ordinary citizen paying rates. All may be buoyant now, but an economic downturn or major catastrophes like earthquakes and tsunami could ruin us financially if we overburden the city with debt. Drainage is likely to be a major area we will need to invest in the future. The effects of water intrusion will be a major problem in the future due to sea level rise.''
Steve Morris: ''One of the first acts of the new council in 2013 was to cancel a planned $40m of additional borrowing by the previous council. This plus the $60m sale of Route K and the $10m sale of the Zespri site helped right the ship. The failure of previous councils to maintain the most basic of assets (the civic building, the computer system and Tauranga sea walls) were a nasty booby trap that was left to the current group to fund and put right so that the next council doesn't have to deal with it. Debt is still an issue, and always will be so long as we have to keep putting new infrastructure in the ground to pay for growth. Unfortunately we aren't allowed to charge developers the cost of this growth up front.''
Larry Baldock: ''Council must focus on resorting to debt funding primarily for the important things like the three waters, our roading network and vital civic amenities - in that order. The debt reduction of $80m was largely attributable to the sale of Route K, higher development contributions and the sale of land to Zespri for $10.1m million. Golden years you might say.''
Murray Guy: ''It is debt payment, not total debt, that impacts on ratepayers. Debt focus, while critical, is used as a distraction from the reality of crippling rate increases. A responsible council would recognise that, with the inevitable increase in interest rates and slow down of the economy, will see greater rate increase pressure. Our council should be taking advantage of, not abusing, this period of low interest and high growth to reduce debt and freeze rates - not inflame them.''
Graeme Purches: ''I do not consider council debt to be an issue at all. By local government standards Tauranga City Council is conservatively geared. Unlike households or businesses, which can suffer downturns in income, councils have a very secure income. Properties owners always have to pay rates, the number of properties increases, and in growth phases like we are in now there is higher than usual income from development levies and building impact fees. The figures you refer to are worst case scenarios.''
Hori Bop: ''Debt tends to be a fluid beast and there are few dynamics involved with a growing city like Tauranga. We should be vigilant on what our absolute vital future spending will be, clearly mark our priorities astutely, set our upper debt limit acceptance going forward, and then religiously stick to it.''
Kelvin Clout: ''When I came into council in 2013 debt was rightfully a major issue. This council has successfully offloaded the major accumulated debt on Route K for $62m and embarked on a sensible sale programme of surplus council land, including the lucrative Zespri site. The major uplift in building activity has led to development contributions being approximately $10m ahead of budget. I now feel comfortable with our current base debt. Moving forward the majority of debt is purely growth related and will largely be covered by those new suburbs and developments. Nobody likes to carry debt, but, with an influx of residents and a growing business and ratepayer base, I believe our long term plan strikes a healthy balance between ambition and affordability.''
STREETVIEW: How much weight do you give to council debt in your decision making when you come to vote in the local body elections?
"I hadn't thought about it but it doesn't factor in my decision-making. There are other more important issues such as the amount of building development in the city."
