Tauranga's credit rating near the bottom

Senior reporter, Bay of Plenty Times·Bay of Plenty Times·

29 Mar, 2016 10:30 PM3 mins to read

Tauranga City Council was scored A+ by Standard and Poor's, placing it at the bottom of a list of 22 councils ranked by the agencies.

Tauranga City Council is in the bottom quarter of the New Zealand councils assessed by international credit rating agencies.

The council has been scored A+ by Standard and Poor's, joining earthquake-hit Christchurch, Horowhenua, Kapiti Coast and South Taranaki at the bottom of a list of 22 councils ranked by the agencies.

Less than a third of the country's 78 councils opted to be assessed, but they include all the big cities and many of the smaller city-based councils. Twelve councils including Auckland, Wellington and Dunedin topped the table with AA ratings.

Western Bay of Plenty District Council was one of four councils ranked AA-, along with the Hamilton, Whangarei and Whanganui. This meant that Western Bay was ranked one step above Tauranga.

Details of the rating were in papers presented to yesterday's meeting of the council's finance committee. The Western Bay council was upgraded from A+ to AA- in 2014, with no councils downgraded from 2013-15.

The council's chief financial officer Paul Davidson told the Bay of Plenty Times after the meeting that Tauranga's credit rating was because it was a growth city and growth councils had higher levels of debt.

Quizzed why Auckland was two steps higher than Tauranga, he said Auckland was different in terms of scale and size, with different structures.

"Some of the double As have different levels of investment."

Councils opted to be rated because it increased their ability to utilise funds. Loan interest costs were also higher for un-rated councils that borrowed through the Local Government Funding Agency, he said.

Council treasurer Mohan de Mel said Tauranga had never had an AA- rating and stepping up from A+ would save 0.05 per cent in interest costs.

Deputy mayor Kelvin Clout said that it seemed hard to believe that 20 New Zealand councils had no net debt at June 2015. He said a lot of the regional councils had no debt, together with some of the smaller councils.

Papamoa councillor Steve Morris said Napier City Council had no debt, but that was because Tauranga's population had grown by more than 62,000 people since 1981, whereas Napier had grown by 8000 and was forecasted to go up by only another 800 before it entered decline. The reason for the debt was simply growth and providing hard infrastructure in the ground, he said.

All but two of the ratings were by Standard and Poor's with Invercargill's AA and Hamilton's AA- assessed by Fitch. Auckland was also assessed as Aa2 by Moodys.

By the numbers:

Tauranga's key financial indicators for eight months to February 29

* Rates revenue: $92.1m ($600,000 favourable)

* Operating expenditure: $122.8m ($1m unfavourable)

* Debt forecast: $315m ($39.9m favourable)

* Debt/revenue ratio forecast: 172 per cent (26% favourable)

Source: Tauranga City Council

Credit Ratings for New Zealand's biggest urban areas:

* Auckland: AA

* Christchurch: A+

* Wellington City: AA

* Hamilton: AA-